ENERGY CONSERVATION IN
ACTION: A CASE STUDY OF THE
IRON AND STEEL INDUSTRY
The results of our structural decomposition analysis indicate that energy- efficiency improvements--reductions in direct energy input coefficients of individual production sectors--accounted for most of the energy savings and were primarily responsible for the decline in China's energy intensity between 1981 and 1987. In this chapter, we conduct a case study of energy-efficiency increases in China's iron and steel industry to determine what one industry actually did to conserve energy and what motivated it to adopt more energy-efficient production technologies. 1 We choose the iron and steel industry for two main reasons. First, it was one of the largest consumers of energy, accounting for about 17 percent of China's total end-use energy consumption in 1981 and 19 percent in 1987 (see chapter 2). Second, the industry experienced significant increases in energy efficiency in the 1980s. Energy consumption per tonne of crude steel, a main indicator of the overall energy intensity of iron and steel production, fell every year between 1981 and 1987. We estimate that the increased energy efficiency in the iron and steel industry saved China about 25 million tsce of energy in 1987, which was almost 5 percent of the total energy consumption in 1981 (see chapter 5).
We realize that the iron and steel industry has some unique characteristics and that its pattern of technological changes may be different from that of other industries. Iron and steel, for example, is a typical continuous-process industry, producing a large volume of relatively homogeneous goods through several closely linked sequential processes. The continuity of production processes means that an improvement in one part of the production chain will bring about pressure for corresponding improvements in other parts in order to break production "bottlenecks." This internal pressure for technological improvements is much less important in discontinuous "batch" production industries in which a large variety of nonhomogeneous goods are produced on a workshop or "batch"