GOVERNMENT’S MEASURES NEEDED FOR PROMOTING BUILDING ENERGY EFFICIENCY (BEE) IN CHINA 1 Queena K. QIAN1* and Edwin H.W. CHAN2 1 PhD candidate, Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong E-mail:queena.qian@polyu.edu.hk *Visiting Researcher, Lawrence Berkeley National Laboratory, California E-mail:kqian@lbl.gov 2 Professor, Department of Building and Real Estate, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong E-mail: bsedchan@inet.polyu.edu.hk *Corresponding author. Tel.: +852-27665800; fax: +852-23623979 E-mail address: queena.qian@polyu.edu.hk 1 This paper intends to stimulate discussion on the Building and Real Estate workshop at The Hong Kong Polytechnic University on 28Jan 2010. The content and preliminary findings in this paper are part of the first author’s PhD study and not yet published, should thus not be referred to or quoted without permission from the authors. 1 ABSTRACT Purpose Investigate the major differences in China on the governments’ roles in BEE promotion with comparison to developed countries; and to understand the market’s expectation of the most effective measures needed from the Chinese government for furthering BEE development in China. Approach • establish a framework for critical comparative study; • compare and assess the BEE promotion measures available from governments of the United States, Canada and the United Kingdom and China; • survey the BEE market expectation with the building design professionals’ to understand the favourable factors that the Chinese government is called for to further promote BEE; and • triangulate the findings of the comparative study and the questionnaire survey to develop recommendations for BEE promotion in Mainland China. Findings It points out economic incentives are important for BEE promotion at the current stage, but these are lacking in China. Government active interventions, such as adjusting energy pricing and setting legislative BEE requirements, are needed in China to create an economic viable and efficient situation for BEE promotion. Research limitations 2 Due to limited resources, the questionnaire survey could not every parts of China. Further study can be extended to larger parts of China and to a wider coverage of stakeholders. Practical implications It provides better understanding the market expectations so that the corresponding government’s measure for BEE promotion can be equitable and effective to the industry and consumers. Originality The originality of this study include developing a theoretical framework to understand the government roles and using first-hand data collected from industry to verify the expectations in the market for government measures to promote BEE in China KEYWORDS: Building Energy Efficiency (BEE), China, Government’s roles, measures, comparative study 3 INTRODUCTION Climate change and sustainability are given more attention around the world than at any time in the last 15 years since the UNFCCC (United Nations Framework Convention on Climate Change, 2007) brought the issue to the attention of governments in 2007. A symbol of this was the Nobel Peace Prize shared by Al Gore, who helped publicise the issue with his movie, “An Inconvenient Truth”, and the Intergovernmental Panel on Climate Change (http://www.ipcc.ch/), which generated a consensus on the scientific basis of the issue. Building industry has a great influence on the use of resources and the environment (Chan and Lau, 2005; OECD, 2003; Qian et al, 2006; Zhang, 2004). Buildings in the United States account for 39% of total energy use, 12% of the total water consumption, 68% of total electricity consumption and 38% of the carbon dioxide emissions (EPA GB, 2004). While in China, due to its rapid industrialization and urbanization, energy consumption related to the building accounts for 44.2% that of the whole society and takes the lead among all industries regarding the total energy consumption of whole society (Tang, 2001, Wu and Liu, 2007). Over 60% of energy consumed in buildings comes directly from fossil fuel combustion. Buildings are responsible for 17% of China’s overall CO2 emissions. Improving the efficiency of energy use in the building industry has become a well-recognized contribution to meet national objectives, such as increasing energy efficient investments, improving the 4 security of energy supply, enhancing productivity and competitiveness, reducing release of greenhouse gases as well as local environmental costs associated with energy supply and use. At an international level, energy efficiency promotion is required to mitigate climate change, decrease global warming and improve the situation of air pollution (Meyers, 1998). To help the promotion, cooperation among countries and learning from each other through open and critical comparative studies are imperative. Recently, China and the United States governments have just signed the Memorandum of Understanding to Enhance Cooperation on Climate Change, Energy and the Environment (US Department of State at http://www.state.gov/secretary/rm/2009a/july/126575.htm), which will be a long term bilateral cooperation on climate change, clean and efficient energy and environmental protection through a range of mechanisms by these two governments. Many developed countries have set good examples for BEE promotion. Mainland China could critically compare and contrast her current measures with the international experiences to explore effective ways to suit her own national situation. For examples, the United Kingdom (UK), the United States (US) and Canada, governments have set a series of public policies on BEE promotion, which have been enhancing the efficiency of building energy consumption. Currently in Mainland China, the building use nearly four times less energy per square meter than buildings in the US or Japan (CCICED, 2008), if the consumption pattern follow the developed world, annual building emissions and energy consumption will increase substantially 5 in the future. Thus, it is imperative to take urgent measures to change the situation. A report ‘The Chance for Promoting BEE in China’, issued by the World Bank, indicates that the period of 2000 to 2015 is a crucial stage for the development of the construction industry in Mainland China. This is the golden opportunity for Mainland China to campaign for BEE in order to reduce energy waste in the future (Wang, 2005). The Chinese government’s benefit in the campaign is not only to sustain its remarkable economic growth, but also to improve its positive image in the world community by contributing to energy conservation as well as environmental protection. Many studies suggest that government’s involvement in promoting BEE is one of the essential and effective ways (Atsusaka, 2003; Qian and Chan, 2007a, b; Varone and Aebischer, 2000). They opined that the most cost-effective ways to promote BEE is to impose mandatory responsibilities for market stakeholders as well as to set agile incentive policies to encourage private investment on BEE. Will these apply to China’s situation and be welcome by the market stakeholders? Over the last two decades of economic restructuring in China, researchers opined that to meet market expectations, the market-based incentives as well as forward-looking energy policy are required to complement each other in order to improve energy conservation and environmental protection (Chan et al, 2009; Qian et al, 2006; Qian and Chan, 2007a; Sun, 2004; Wang and Zeng, 2005). With a clear national public policy for energy efficiency, the executing governments are required to design appropriate 6 implementation measures that meet market’s needs to ensure the most efficient way to solve inefficiency problems on energy use. Although previous research has touched on these issues, there is still plenty of room to review the roles of governments and to explore the possible measures from governments to initiate BEE promotion, particularly for the situation in Mainland China. Aim and Objectives This study aims to investigate any major difference in China on the governments’ roles in BEE promotion with comparison to developed countries; and to understand the market’s expectation of the most effective measures needed from the Chinese government for furthering BEE development in China. The objectives are: • review governments’ roles in promoting BEE and establish a framework for critical comparative study; • compare and assess the BEE promotion measures available from governments of the United States, Canada and the United Kingdom (UK) and China; • survey the BEE market expectation with the building design professionals’ to understand the favourable factors that the Chinese government is called for to further promote green building and energy efficiency; and • triangulate the findings of the comparative study and the questionnaire survey to develop recommendations for BEE promotion in Mainland China. 7 METHODOLOGY This study comprises four major exercises. The first exercise is a theoretical review of government’s roles in promoting BEE. This provides the framework to carry out the second exercise- critical review of available government measures for BEE promotion through an international comparative study between China and other developed countries. The third exercise is an opinion survey with market stakeholders to look for data support to echo the major findings from the abovementioned comparative study. Finally, triangulating analysis is carried out to develop overall results and recommendations from the findings of the comparative study and questionnaire survey. Triangulating strategy by integrating survey and fieldwork, and combining quantitative and qualitative research approaches have been used as early as 1950s in particular for research on policy issues (Chan 1997; Chan 2002; Shapiro 1955). The method is said to have reaped the “best of both world” (Csete and Albrecht 1994). Triangulation can be used for within-method (cross checking) and between-method (validity checking of qualitative results and quantitative data analysis) (Webb 1966; Weber 1933). In this study, questionnaire quantitative method is used to embellish a primarily qualitative comparative study, which is one of the 4 models suggested by Steckler (1992) for triangulating strategy. Literature review on classification of government’s roles provides a well-grounded framework for critical comparative study between China and other developed countries on available government measures for BEE promotion. The United States, 8 Canada and the United Kingdom (UK) are chosen to compare with China because the three countries are large economies comparable to China. They are economic developed countries which are relatively advance with BEE promotion and their green building standards, such as the UKBEAM, LEED, EnerGuide, etc. are world recognised that provide common grounds for comparison. Details of the questionnaire survey with the active building design professionals in major cities in China are presented in later sections. For the focus of this paper, statistical analysis is carried out to show the favourable government measures expected by the market to help understanding future BEE promotion in China. The last part of the paper will be based on the results triangulated from the findings of the comparative study and questionnaire survey to discuss any unusual observations and make recommendations on strategic measures for Chinese government to improve its BEE promotion. LITERATURE REVIEW Green Building (GB), BEE Climate change, clean and efficient energy and environmental protection are among the greatest challenges facing the world. Since the publication of Our Common Future (WCED, 1987) by World Commission on Environment and Development, sustainability has gained much attention in all nations. Environmentally, the building sector is responsible for high energy consumption, solid waste generation, global greenhouse gas emissions, external and internal pollution, environmental damage, and 9 resource depletion (CICA, 2002; Melcher, 2007; Ortiz et al., 2009; Zimmermann et al., 2005). As the environmental impacts of building activities become more apparent, a movement called "green building (GB)" is gaining momentum. Green, or sustainable building, is the practice of creating and using healthier and more resourceefficient models of construction, renovation, operation, maintenance and demolition (US EPA Green Building, 2008). As energy consumption in the building sector is one of the main components of the total energy consumption in most countries (Chan and Lau, 2005; OECD, 2003; Qian et al, 2006; Zhang, 2004), BEE becomes an important theme of GB, which brings together a vast array of practices and techniques to reduce the impacts of buildings on energy consumption, environment and human health. The BEE development today, however, still faces challenges in its market penetration. BEE is often perceived as having higher initial design and construction costs than conventional building; and the energy efficient mechanical and electrical system may have a higher capital cost more than its counterpart used in conventional buildings (OECD, 2003). It is argued that the extra costs will gradually be reduced when the new practices and technologies are developed and accepted by the market. However, this comparably higher initial costs and thus extra risks still cause hesitation to the stakeholders from voluntarily entering into the new market. A push from the government is necessary for the market to be self-motivated in order to realize this transform (Atsusaka, 2003; Qian and Chan, 2007a, b; Varone & Aebischer, 2000). 10 Government control in China The Ministry of Housing and Urban-Rural Construction (MHURC) of China has set up a series of policies and regulations to meliorate this situation since the 1980s. However, in an economy transforming from centrally planned to market orientated in China, many of the measures still retain the characteristics of a planned economy, and some of them are suspended due to the market transformation. Since the year 2002, energy demand in China passed its GDP growth first time in the last two decades, the continuation of this trend through 2005 raised the alarms of the Chinese government and the rest of the world (China Energy Group Brochure, 2009). Total floor space in China has grown by 6% per year since 2000, reaching 40 billion square meters by 2006, more than the US, Western Europe and Japan combined. Floor space growth has been accompanied by a 10% increase in energy consumption and 3% increase in water consumption in buildings in China. The potentials for improving the BEE situation in China are huge and the key to it is to establish supportive policies. The roles of government should be clearly understood to meet the needs of market stakeholders. Different roles of Government for BEE Promotion Government plays a key role in promoting BEE, but the extent of direct involved is unsettled (Golove and Eto, 1996, Convery (Editor), 1998, Jaffe et al, 1999, Andersen and Sprenger (Editors), 2000, Varone and Aebischer, 2000, Chan and Yung, 2002, OECD, 2003, Lee and Yik, 2004, Su and Chen, 2005, Dennis 2006, Qian and Chan, 11 2007b). Energy analysts consider that the deficiency of BEE development, such as insufficient market information between the end-users and real estate developers, financial disincentives for the landlords, fragmentation of on-line production, etc., lead to market failure, and thus the public intervention is essential to rectify the situation (Varone and Aebischer, 2000). Due to the market failure, Dennis (2006) believes that achieving optimal investment in energy efficiency requires innovative policy intervention from governments. Even free market economists advocate using appropriate public actions to overcome these obstacles is necessary (Anthony and Rothkopf, 1989; Sutherland, 1991). Furthermore, most energy analysts and economists have reached consensus that governments should play a certain role in the promotion of BEE (Atsusaka, 2003; Qian and Chan, 2007a, b; Varone and Aebischer, 2000). A series of policy instruments has been suggested to address the problems arising from the market failure (Golove and Eto, 1996). Nowadays, more and more authors note that with the help of government, the market-based incentives as well as forward-looking energy policy can address the problems from market failure as well as the “non-market” ones for BEE development (Dennis, 2006). Literature reviews lead to classify the government’s roles on BEE promotion into four aspects: Law & Policy maker, Incentive motivator, Financing hub and Advocator (Golove and Eto, 1996, Convery (Editor), 1998, Jaffe et al, 1999, Andersen and Sprenger (Editors), 2000, Varone and Aebischer, 2000, Chan and Yung, 2002, OECD, 2003, Sinto et al, 2005, Liang et al, 2007, Qian and Chan, 2008). Under each of the 12 roles, we identify the functions and related items involved in each role. The review result is summarised in a pattern shown in Fig. 1. The function of each government role is: • Law & Policy maker — Government’s role is to set legislation, mandatory standard and regulation to define the boundaries of market activities, in order to make sure that energy efficient buildings perform well in the market. Examples include setting mandatory minimum energy efficiency standards, enforcing financial penalties, etc. • Incentive motivator — Government’s role is to provide economic incentives to the market stakeholders who invest in BEE and stimulate the BEE market by partially paying off or compensating the extra effort caused by BEE. Examples are, setting an optimal price for energy, tax deduction programs for energy efficient products, subsidy and rebate programs, etc. • Financing hub — Government’s role is to offer financial support directly or indirectly to socially and environmentally preferred BEE options through investment incentives and low-cost loans, and special funding for BEE programmes. • Advocator — Government‘s role is to advocate sustainable energy through education, information publication and through activities such as product rating and labelling, energy audit and government procurement programmes. Take in Fig. 1 13 The above classification of government’s roles in Fig. 1 provides an insight and a clear picture of the generic roles government involved in BEE promotion, and it makes our later comparative study much easier and more systematic. As for the four different roles played by governments on BEE promotion, this study is not simply identifying market failures relating to BEE and then choosing single or certain instrument to rectify it. Energy efficiency for buildings, which is also a public good, requires a workable and accountable system for distributing benefits among all stakeholders in society. Governments are expected to set mandatory regulations as well as provide voluntary economic incentives for the whole energy consumption system to meet economic and social goals. The case varies in countries due to the consideration of multiple factors, such as, political perspective, economic development, administrative resources, implementation agencies and specific institutional procedures. Experience gained from some economically developed countries with free competitive market, shows the effectiveness of market forces in delivering higher energy efficiency, even in the absence of rising energy prices (Meyers, 1998). The signal shows that once the market is mature, BEE could be fitted into it with less effort. The argument would be the government needs more incentive policies than mandatory ones to direct the market towards the right track for BEE development. However, the situation may not be the same in countries where market forces operate relatively weak. In addition, a government needs to compare and evaluate the cost effectiveness of its policy design before setting up a policy package. From the perspective of economic efficiency, it is also important to make sure the cost 14 Comparative study on BEE promotion measures by governments After clarifying the four key roles that the government generally is involved in BEE promotion, we are able to make a systematic comparison and critical review of the BEE policies exist before and available currently between Mainland China and some developed countries. Table 1 shows a summary of the comparison of different measures and policies related to BEE in the four different countries, including the US, Canada, the UK and Mainland China. We compare the governments’ roles in BEE promotion under four aspects: law & policy maker, incentive motivator, financing hub and advocator. In Table 1, it shows that government’s involvement and policy activities in different countries all fall into the four roles. Although the measures adopted by different countries varied in certain ways due to the time frame or their national situations, the government’s approaches to tackle with BEE problems are more or less the same in the broad policy typology. Table 2 summarises our remarks on the findings from the comparative study of these four countries. The summary indicates that the developed countries have more mature and successful experiences on BEE promotion. It could be a good reference for developing countries for BEE promotion with due recognition of their national situation and local practical problems. The following are the key differences on BEE government measures from China’s perspective and they will be further verified in the questionnaire exercise, 15 o In China, the government’s role as an incentive motivator performs inadequately since later 1990s. o Up to now, there is little national financial assistance in support of BEE and interest loan for BEE had been suspended since 1994. o The funding for new technology and R&D to improve energy efficiency in building is limited in China. o Up to time of conducting the survey, there are no well-established voluntary assessment schemes and information publication systems for BEE in China. o Sufficiency and effectiveness of legal controls and enforcement for energy efficiency in China are unclear which needs verification with the local market. 16 Table 1 Comparative Study of Government’s Role on BEE promotion in the US, Canada, the UK and China Countries z US Canada UK Incentive motivator Law & Policy maker z z z z z z California Warren- Alquist Energy Resources Conservation and Development Act,1974 Energy Policy and Conservation Act (EPCA), 1975, 1992 National Appliance Energy Conservation Act (NAECA), 1987 Energy Policy Act, 1992, 2004 Model Energy Code (NEC), 1993 International Energy Conservation Code (IECC2000) ASHRAE/IESNA Standard 90.1,1989 z z z z z z z z z Energy Efficiency Act, 1993 Energy efficiency standards, 1995 Mandatory labeling (1978) Residential Energy efficiency standard, 1997 Model National Energy Code for Buildings (MNECB),1999 C-2000 Program Efficiency and Alternative Energy (EAE) Program Renewable Energy Strategy, 1996 Renewable Energy Deployment Initiative was set up in 1998 z z z z z z Two British Standards relevant to BEE (1985, 1995) Building Regulations Part L, 1995,2002,2005 CIBSE building energy code and technical memorandum Energy Efficiency Commitment, 2002-05, 2005-08, 2008-11 Home Energy Efficiency Scheme/Warm Front Energy Saving Standard of Performance z z Energy Conservation Law, 1997 Energy conservation design standard on building envelope and air conditioning for tourist hotel, GB 50189-93, 1993 Energy conservation design standard for new heating residential building, JGJ26-95,1996 Energy conservation design standard for severe cold zone, hotsummer-cold-winter zone, hot-summer-warm-winter zone and public buildings z China z z z z z z Subsidy plan and turn-in programs Tax incentive schemes Green Building Tax Credit Program Market-based DSM programs Weatherization Assistance Program Financing hub z z z z z z z z z z z z z Discount loan and Mortgage loan for BEE Low-Income Home Energy Assistance Program R&D funding for new BEE technology Rebate System benefits charge z z Commercial Buildings Incentive Program Subsidy and rebate program Tax incentive schemes Energy innovators initiative(EII) Industrial building incentive program(IBIP) Canadian Home Insulation Program (CHIP) Mortgage loan for BEE R&D funding for new BEE technology (Zhang, 2004; Huang et al, 2008, Varone and Aebischer, 2000,Climate Change Plan for Canada, 2002, ) Subsidy and rebate program Tax incentive schemes z Provide low interest subsidies to enterprises to undertake “technical renovation” for the purpose of energy conservation, which was phased out by 1998. z Tax benefits for energy conservation projects, which was eliminated in the late 1990’s. (Jiang, 2007,, Meyers, 1998, Yao et al, 2005.) R&D funding for new BEE technology z low-cost loans ((Defra, 2006; Chan & Lau 2005) z Special funding for new wall material z Low interest loans to state firms on energy efficiency projects by China conservation Investment Corporation in early 1980s, which was eliminated by 1994. (Jiang, 2007, Meyers, 1998, Yao et al, 2005.) Advocator z Voluntary assessment schemes: LEED, CHEERS and Green Building Programs z Energy Star Program z Home Energy Rating System; Builder Option Packages z Voluntary products labeling (Jiang, 2007,; Horowitz M, 1996; Gillingham, 2004; Zhang, 2004; Meyers, 1998; Chan & Lau 2005) z New Home Warranty Program z Building rehabilitation program by EnerGuide z EnerGuide for appliance, equipment and houses z R&D, market-based research and demonstration projects to provide information z Voluntary products labeling z z z z Voluntary assessment scheme: BREEAM Energy Efficiency Accreditation Scheme,1993 Energy Matters Program Voluntary products labeling z Voluntary energy efficiency labelling, 1998. z Certification of Energy Conservation Product z Mandatory energy information labelling, 2005. (Zhou, 2008) 17 Table 2 Remarks on the Comparative Study of the Government’s Involvement on BEE in Practice Incentive motivator Law & Policy maker Key common items: z Different governments coincidentally cast concern on implementing and perfecting legislation, mandatory standardsegulations. z All include energy eff and riciency acts, standards, and codes. Key differences: z The enforcement, time and effects of different acts, standards and codes vary according to different situation of the compared countries. Not easier to appreciate their effectiveness. z The degree and extent for mandatory implementation differ, for example, the mandatory standards for the scale of categories or appliances, the minimum levels of energy performance of products of energy consumption, etc. z Flexibility and update frequency for the act, standards and codes are different. Characteristics for each government: US-States would first set new standards on unregulated appliances after negotiation between industry and energy efficiency advocates. Congress would set pre-emptive national standards afterward. Canada-Major strategy measures for encouraging investment to tap from renewable energy sources include regulatory strategies and government mandate, economic incentives, R&D support, and market development. UK- The laws related to BEE in Britain are divided into two groups: supplier-led measures and government-led initiatives. China- The energy conservation building design standards are divided into three categories according to the weather and temperature. Key common items: z All the four compared countries deem incentive motivator as an important role for government involvement. z Tax incentive schemes, subsidy and rebate programs are the common policy tools. z US, Canada and UK governments have all reported satisfactory and cost-effective results through the implementation of incentive tools. Financing hub Advocator Key common items: z Government’s role as financing hub provides loans and funding for BEE promotion. z Governments in different countries all prefer to set a R&D funding for new technology. z US, Canada and UK governments have all got mature and well-functioned financing systems for BEE promotion. The financing system, with a high credit and influence, penetrates well in the BEE market. Key commons items: z All compared governments serve as an advocator to deal with market barrier. z Voluntary assessment schemes, voluntary products labeling, education and information publication are the main functions for government’s involvement in developed countries. z The impact of these government involvements is cost-effective. Key differences: Key differences: z z z In China, the government’s role as an incentive motivator performs inadequately since later 1990s. Up to now, there is little national financial government spending in support of BEE at a national level in China. z z Chinese government’s role of financing hub still has a long way to go. Since the interest loan for BEE had been suspended in 1994, there is no such program in China nationwide. The funding for new technology is limited to new wall material in China. Key differences: z z z US, Canada and UK governments have their own schemes to serve as advocators to promote BEE, though the purpose of each tool is similar. The enforcement of this role varies according to technology development, BEE education, etc. Up to now, there is no wellestablished voluntary assessment schemes and information publication systems for BEE in China. 18 MARKET PERCEPTIONS OF FAVAOURABLE MAESURES NEEDED To support the findings of the above comparative study, data from a questionnaire survey were applied and analysed for better understanding the market expectation on government’s measures that furthering green building thus BEE development. The survey aims to find out from the market stakeholders the favaourable factors for furthering green building development. The findings on their wishes for favourable factors will give a good indication that the certain abovementioned government measures should be emphasized to meet the need of the market. Target respondents and sample selection This part of the study benefits from the collaboration with BCI Group of Companies to use their collected raw data of a market survey in 2007. The questionnaires are designed to solicit perceptions from building design professionals on the issues of green building market in mainland China. As one of the main thrusts in green building is concerning implementing energy efficiency and environmentally friendliness in building industry, most questions are mainly focused on energy efficiency in buildings. China is a large country but the economic active and modern cities are mainly those along the coastal line and hence it is not necessary to cover all regions in China for a survey concerning latest development of green and energy efficiency concept and innovative technology in building. There are many participants in the building market, who might be the potential stakeholders involved in BEE projects. Some stakeholders, such as contractors or developers, may have their interests focused on one aspect of BEE, for example developer focusing on profit margin and contractor aiming at effective construction process. This study is carried out from the perspective of building design 19 professionals who deal with developers, contractors, government regulatory bodies and public. Their roles and business interests in creating and delivering green buildings and energy efficiency are relatively neutral; thus providing a link amongst the end-users, government and the market with a more objective view. The targeted respondents, mainly building design professionals and architects, were extracted from the BCI database with senior professionals of active practice in the construction industry of Mainland China. BCI promotes green building products and runs an annual sustainable building award for Asia region including China/Hong Kong, which attracts all the active building design professionals in China to interact with BCI. Hence, BCI database of contacts should include most of those building design professionals who are active, international and interested in the latest green building issues. They cover the major prosperous cities along the coastal region of mainland China, including Beijing, Shanghai, Jiangsu, Tianjin, Shenzhen, Guangzhou and industrialised cities of Guangdong, and big cities in Fujian and Zhejiang province. 2000 questionnaires were sent out to practicing professionals, who or whose company have a contact with BCI and are active in industry. The numbers of questionnaires returned were 169, with the valid returned rates of 8.45%. Design of the questionnaire The questionnaires are designed to solicit views from building designers on the business reasons to be involved in green building market in Mainland China. The main question we focus for this paper is “favourable factors that attract the business”. It means to explore the market expectations and problems in green building and energy efficiency- BEE. By the way of asking the favourable factors needed, the under-lying queries to be confirmed in the 20 question include: FF1 - rising energy costs ; FF2 - superior performance of green building; FF3 - client demand; FF4 - industry rating system: e.g. LEED, Green Star, Green Mark, etc.; FF5 - government regulations/ building code; FF6 - lower lifecycle costs of green building; FF7 - worsening environmental conditions; FF8 - competitive advantage of green projects; FF9 - higher tenant satisfaction and productivity in green building; FF10 increased education on green building; FF11 - greater availability and affordability of green building technology. The perceptions of building design professionals as neutral professional service providers will be an important reference for government policy making, and a good guidance and reflection to other stakeholders. It provides a good reflection of the market expectation on the particular measures that government should emphasize on the BEE promotion. Data analysis and findings The data were analysed with the aid of Microsoft Excel spreadsheet and the Statistical Package for Social Sciences (SPSS) computer software (Kirkpatrick and Feeney, 2001). The Cochran Q Test The Cochran Q Test for k related samples provides a method for testing whether three or more matched sets of frequencies or proportions differ significantly among themselves (Siegel and Castellan, 1998). Cochran (1950) showed that, with the null hypothesis that the proportion (or frequency) of responses of a particular kind is the same in each column except for chance differences, if the number of cases is not too small, the statistic is distributed approximately as χ 2 with df=k-1. The Cochran Q test is particularly suitable when the data are categorical or are dichotomized ordinal observations, e.g. (1, 0) = (yes, no). 21 − k k (k − 1)∑ (G j − G ) 2 j =1 Q= N N i =1 i =1 k ∑ Li − ∑ Li Where 2 G j = total number of “yes” in the jth column − G = mean of the G j Li = total number of “yes” in the ith row k = number of related items, in this study is the number of 11 proposed favourable factors N = number of cases, in this study is the number of valid responses Table 3 Multiple Response for FF1-11 Labels- Favorable Factors Rising energy costs Superior performance of green building Client demand Industry rating system Government regulations/ building code Lower lifecycle costs of green building Worsening environmental conditions Competitive advantage of green projects Higher tenant satisfaction and productivity Increased education on green building Availability & affordability of GB technology name FF1 FF2 FF3 FF4 FF5 FF6 FF7 FF8 FF9 FF10 FF11 count 0 1 55 66 119 128 74 88 86 103 112 118 115 108 97 44 35 89 75 77 60 51 45 48 ---Total responses response% cases% 1064 14.8 13.3 6.0 4.8 12.2 10.3 10.6 8.2 7.0 6.2 6.6 ------- ----729 66.3 59.5 27.0 21.5 54.6 46.0 47.2 36.8 31.3 27.6 29.4 ----- 100.0 447.2 21 missing cases; 163 valid cases Table 3 shows the multiple responses result from the respondents. The Cochran’s Q is 170.92. As the valid response number to this question is 163, the sampling distribution of 2 Q in this study is approximated by the χ distribution with df =k-1. It reveals that Q≥ 170.92 has probability of occurrence when H0 is true of p≤.001 at df =10. This probability is smaller than the significance level, α =.01. Thus the value of Q is in the region of rejection. H0 - “the probability of “yes” is the same for all the items of favorable factors” is rejected in favor of H1. That is to say the respondents have diverse opinions on the various 22 items about favorable factors, which is a positive indication on a random sampling and non-overlapping designed question items. Favorable factors that further the development of green building market Take in Fig. 2 Fig. 2 shows that more than 50% of the building designers agreed that the top three favorable factors furthering green building market are “Rising energy costs” (65%), “Superior performance of green building” (59%) and “Government regulation/ building code” (53%). While “Client demand” (25%) and “Industry rating systems” (20%) are deemed least favorable factors, comparing to the other factors. OBSERVATIONS AND DISCUSSIONS Findings of the comparative study From the comparative study, we note that according to each category of government’s roles, governments of the four countries may choose different policy instruments at different period of time in accordance with its own national situation. Government actions and regulatory controls In Table 1, for government’s role as Law & Policy maker, the governments of the three western countries coincidentally put a lot of emphasis on implementing and improving legislation, mandatory standards and regulations. The governments of these three countries all pay more attention to the flexibility and updating frequency of their laws and policies in response to the feedbacks to adjust the new enforcement of law and policies. However, the situation is not so optimistic in Mainland China. Their legal controls are either not 23 appropriate or not properly enforced which are not helping the BEE market. For example, due to the lack of mandatory and penalty provisions, the execution of the Energy Conservation Law is not satisfactory. A survey carried out by government (Yao et al 2005) shows that in China, only 5.7% of the building design implemented the standards in the Law. Chinese government’s action or non-action contributes to the low energy price. Mainland China’s expense on end-use electricity amounts to 9% of its GDP, compared to 2.5% in the US. China is spending more and more of its GDP to pay for electric bill and this large amount of payment can be equated to an unnecessary taxing on Mainland China’s economy (Lin, 2007). Economic incentives The Chinese government, in serving as incentive motivator, financing hub and advocator, lags far behind the other three countries in instigating economic incentive policies. At the moment, in Mainland China, there is a severe lack of market-driven policies and market incentive mechanisms on promoting BEE and renewable energy in the building industry. Its direct public financial support for energy efficiency is weak. There are almost no energy efficiency activities for buildings sponsored by utility enterprises nowadays. At the national level, some financial incentives, such as tax benefits and low interests subsidies existed in the 1990’s, no longer remain. It is estimated that the amount of national government annual expense on supporting energy efficiency is about 1 billion RMB in recent years (Lu, 2003, 2004). Based on this data, it is estimated that total public expense on energy efficiency deployment is roughly 0.15% of the electric revenue in China in 2002. Taking the US for comparison, the corresponding figure is about 0.8%, if both the expenses by utilities and Department of Energy (DOE) are taken into account. Therefore, there is a large gap (greater than 5 times) for energy efficiency promotion between the US 24 and China. The large funding gap partially explains the fact that there are few voluntary sponsors, utilities or government to finance BEE activities in Mainland China. Lacking green building standards Many valuable and practical examples are available in the three developed countries for promoting BEE. They include the US’s well-known Energy Star Program and LEED, Canada’s famous Energy Renewable Strategy, and the UK’s BEAM and well-run R&D funding for new BEE technology, etc. Although in recent years, several organisations, such as the Green Building Council for promoting green buildings and BEE have been set up in China, China still has a huge potential to develop this area,. Findings of the questionnaire survey Expected action from government As set out in our literature review, economic force and government interventions are the strong forces to bring interest to BEE building market. These views are supported by the findings of the questionnaire that “rising energy costs” will create such an economic reality that people will have to take part in BEE for their own economical benefit. And in China, it is only the government can control or adjust the energy price. “Government regulations or building code” will create mandatory push for people to take part in green building and energy efficiency. The two findings both point to the need of active participation of the Chinese government to control the market price for energy and to set legislative standards in order to promote BEE. Also, these two factors both lie in the role of “law & policy maker” which a government is supposed to play in BEE promotion. It gives a good indication that in the current situation in China, government’s direct involvement as a law & policy maker in BEE is required. 25 Improving performance of green building and energy efficiency The survey findings shows the stakeholders agree that to promote and benefit from green building, “superior performance of green building” and “lower lifecycle costs of green building” are among the most important factors. As a new industry, such performance improvement needs technological innovation and substantial R&D. In other countries, financial assistances and economic incentive schemes are available to help the industry on exploration and innovation. From the comparative study, it highlights that economic incentive schemes are lacking in China. In order to meet the market expectation of improving performance of green building, Chinese government is expected to design financial assistance programmes and incentive schemes to help BEE promotion. Unclear functions of standards and rating systems It is surprising to find from the survey findings that the rating systems are not, as would be expected, the main favorable factors that motivate the green building and energy efficiency market from the views of building designers. Industry rating systems, such as LEED, are gaining a wide recognition as a useful tool for green building development. It may be that this area of development or success has not been widely promulgated or well implemented in China. Alternatively, it could be that this area of support has been developed to a mature stage that practitioners do not consider these are the critical factor for furthering green building at the current situation. These unclear indications need to be further investigated. Lack of public awareness in BEE “Client demand for BEE” is also ranked the least favourable factor. Only when the clients are knowledgeable about the benefits of green building, then they will request for green 26 building products. It indicates the public awareness of the benefits from on BEE is still weak. Under such situation, the traditional building market is far more prosperous than the new market. RECOMMENDATION OF GOVERNMENT MEASURES The above observations and discussions are resulted from the triangulating analysis of the findings of the comparative study and questionnaire. The analysis lead to suggest the following measures to be considered by the Chinese government for further BEE promotion: • Active intervention from government is required for two major aspects: First, regulate energy price to meet the actual need of the building industry. It may require different energy pricing level for different industries. Second, mandatory standards should be established for energy efficiency buildings and implemented through legislation. It clarifies the legal liability for the parties involved and provides a level playing field for all players. • Subsidize the industry to improve the performance of green building as an attraction to users. Government should provide economic incentive schemes and financial support for industry to carry out technological innovation and R&D projects to support the continuous improvement of BEE. • Create demand and appreciation of BEE products: Make available BEE-education programs for building professionals as well as the public. Widely promote and supervise labelling programs, publication of BEE products information as well as assessment schemes on energy efficiency building. The agreed common standards lead professionals to strive for excellence in order to capture their market share and 27 allow consumers to differentiate the genuine products. Only when the consumers appreciate the benefits of energy efficiency building then they will create a demand for the BEE products. FURTHER STUDY The study provides critical remarks on the current situations of promoting BEE by a comparative study between Mainland China and her developed counterparts with the support from statistical analysis of a questionnaire survey. Due to limited resources, the questionnaire survey could not every parts of China. Further study can be extended to larger parts of China and to a wider coverage of stakeholders including other construction professionals and employer representatives to reinforce the views from the building market. This study provide groundwork for further study to investigate how and why economic incentives for BEE could work in Mainland China as it works well in other developed countries. What are the well-established models for promoting BEE in other countries? How could they be assessed and optimized for implementation in the Chinese situation? CONCLUSION This paper discusses the government’s role to enhance BEE control from four aspects: law & policy maker, incentive motivator, financing hub and advocator. Under such framework, comparison of the BEE promotion measures adopted in Mainland China and some developed countries, (the US, Canada and the UK) were carried out. It highlights the current situation relating to government’s measures on BEE promotion in Mainland China. Some of the findings were further tested by the statistical analysis of a market survey. Triangulating analysis of the findings provide more concrete results leading to recommendations for measures to be adopted by the Chinese government for BE 28 promotion. Government, whose role is agreed to be utmost important in BEE promotion, takes the lead to develop policy and guidance for the BEE market and the public. This paper demonstrates that government of different countries plays different important roles in promoting BEE due to their own national situations. It is important to understand the market expectations so that the corresponding government’s measure for BEE promotion can be equitable and effective to the industry and consumers. This area of research on BEE policies provide fertile ground for further study to explore ways forward contributing to sustainable development. . Note: [1] BCI Group of Companies, the leading construction media group in Asia Pacific. With BCI Asia and BCI Australia, the group operates more than 20 offices in Southeast Asia, Greater China and Australia. BCI is a community organizer for the region’s construction industries, providing magazines, information systems, events, project leads and consultancy services. Dr. Matthias Krups is Chairman and CEO of the BCI group. ACKNOWLEDGEMENT This paper is developed from a study which is funded by a research grant of The Hong Kong Polytechnic University (PolyU). The authors are grateful to the funding provided by NIUS (project code: ZV4Q) at PolyU and Ronald Coase Institute, who support the author to attend Ronald Coase workshop in Xiamen in Dec, 2009. Thanks are due to Dr. Matthias Krups, the Chairman and CEO of the BCI for the data support for this study. The authors would also like to thank Mr. Peter Rolshoven on his help on clarifying the data. Appreciations are also due to all those participants who shared their views in this questionnaire survey. 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(2005). “Benchmarks for Sustainable Construction – a Contribution to Develop a Standard.” Energy Build 37 (11), 1147–1157. 34 List of Figures Fig.1 government’s role on BEE promotion Fig. 2: Favorable Factors (FF) furthering green building development 35 Financing hub Law & Policy-maker - Minimum efficiency standards - Building energy codes - Implementation of further marketbased incentives - Ensure prices reflecting energy goals - Voluntary commitment and recognition - Taxation incentives - Subsidy Advocator - Product rating and labeling - Marketing and consumer education - Information systems and database - R&D and decision support tools - Best practice guidelines - Energy Audits Advocatory incentives Regulatory instruments Incentive motivator Economic incentives - Setting the responsibilities and boundaries of market activities through price signals, laws and enforced financial penalties The roles of government on BEE promotion - Better enforcement of existing standards - Investment incentives - Low-cost loans - Leasing - Performance contracting - Special-purposed funds - Government procurement programs Incentive instruments Fig.1 government’s role on BEE promotion (Qian and Chan, 2007a) 36 Percentage 70 60 50 40 30 20 10 0 FF1 FF2 FF3 FF4 FF5 FF6 FF7 FF8 FF9 FF10 FF11 Favorable Factors (FF) Figure 2: Favorable Factors (FF) furthering green building development Where: FF1 - rising energy costs ; FF2 - superior performance of green building; FF3 - client demand; FF4 - industry rating system: e.g. LEED, Green Star, Green Mark, etc.; FF5 - government regulations/ building code; FF6 lower lifecycle costs of green building; FF7 - worsening environmental conditions; FF8 - competitive advantage of green projects; FF9 - higher tenant satisfaction and productivity in green building; FF10 increased education on green building; FF11 - greater availability and affordability of green building technology 37