Trade-in programme drives China’s RAC stock efficiency advancement and cuts summer electricity use

By offering incentives to replace older and less-efficient systems, the programme promotes sales of RACs and steers consumer choices towards energy efficiency improvement.

This could accelerate the annual energy efficiency improvement rate of China’s RAC stock to 5.0-6.1% in 2025, which is 40-70% higher than the recent average. As a result, the more efficient RAC stock has the potential to lower summer cooling electricity consumption by 3.4% to 4.1% compared to a baseline without efficiency improvement – a tangible impact from just one year of RAC sales – saving energy amid rising temperatures and reducing consumer electricity bills by up to $943 million in 2025.

Impact of the trade-in programme on RAC stock energy efficiency improvement and electricity use

Understanding the impact

The trade-in programme is a lever for improving the energy efficiency of China’s overall room air conditioner (RAC) stock. As of the end of 2023, China’s average RAC penetration stood at 145.9 units per 100 households, underscoring the market’s maturity and relative saturation. In this context, new RAC sales are predominantly driven by the replacement of existing appliances rather than first-time purchases.

The programme supports this replacement cycle by offering subsidies for new, efficient models while also facilitating the scrapping and recycling of obsolete units. This helps encourage the replacement of older, less efficient systems with new purchases.

As outlined earlier, the policy design favours Grade 1 RACs by offering higher subsidy levels. This creates a market signal that encourages consumers to choose more efficient models. As a result, RAC sales in 2025 are projected to increase not only in volume but also in Grade 1 model market share.

To track trends in RAC ownership and overall RAC stock efficiency in China, we integrated data on RAC household penetration, monthly sales, and annual sales by efficiency classification. This approach allows us to estimate the evolving size and efficiency of the installed RAC stock on a monthly basis.

To assess the programme’s impact on cooling-related electricity use, we modelled residential electricity consumption. The model incorporates consumer expenditure, temperature-based indicators for heating and cooling needs, and RAC usage adjusted for ownership levels and average energy efficiency. This provides a basis for analysing how efficiency improvements may shift electricity use trajectories.

Outlook 2025: RAC trade-in and residential cooling electricity consumption

Even within the current one-year window of the trade-in programme, the impact on electricity use is already meaningful.

If the trade-in programme pushes total RAC sales in 2025 to 110 million units with a 50% Grade 1 market share, matching the 2023 Grade 1 market share, residential cooling electricity consumption for the month of June to September could fall by an average of 2.8% compared to a scenario where stock efficiency remains at their 2024 levels.

If the programme successfully shifts consumer preferences and raises Grade 1 market share to 70%, China’s RAC stock efficiency is projected to increase by 5.0% year-on-year by the end of 2025. This would be 40% higher than the average annual improvement over the previous six years. This could yield 3.4% of summer residential cooling electricity savings.

Under an accelerated scenario, where all 2025 RAC sales are Grade 1 units, to illustrate the upper bound of the potential under the current minimum energy performance standards (MEPS), the strong consumer choice shift will further push overall RAC stock efficiency to a 6.1% year-on-year improvement, 70% higher than the recent historical average. In this case, residential cooling electricity consumption could decline by 4.1% during summer months.

Derived from the results of just a single year of trade-ins, these gains demonstrate that the intervention with energy efficiency targets can deliver rapid impacts. Given the long lifespan of RAC units, continued improvements in efficiency present a long-term contribution to energy saving and advancing China’s broader efforts in decarbonisation.

The absolute electricity savings will depend on weather conditions during the summer of 2025. In a summer even hotter than 2024, RAC trade-ins are likely to bring in greater savings. Ember’s analysis shows that with an optimised shift towards the most efficient RAC models available, the trade-in programme could reduce consumer electricity bills by up to $943 million USD in 2025.