Integrating energy efficiency targets with economic strategies

China’s consumer goods trade-in programme exemplifies this approach by encouraging the replacement of inefficient room air conditioners (RAC) with higher-efficiency models. By providing targeted support to narrow the cost gap, the policy aims to stimulate market activity while improving appliance efficiency and reducing energy use.

However, its effectiveness will depend on a range of factors including market dynamics, consumer confidence recovery, and behavioural factors, which may offset some expected gains.

Challenges to realise full energy efficiency gains

The effectiveness of the trade-in programme in driving energy efficiency improvements is tied to its ability to stimulate overall room air conditioner (RAC) sales and expand market activity.

Before the implementation of the trade-in programme, China’s RAC market was experiencing a slowdown. In 2024, extreme weather conditions and subdued domestic consumption contributed to weaker mid-year RAC sales. This downturn intensified competition in China’s RAC market, prompting manufacturers to revise pricing strategies and accelerate product innovation to respond to market pressures.

More broadly,  while the trade-in programme has the potential to bolster consumer confidence, its effectiveness could also be tempered if consumer caution persists. The OECD consumer opinion surveys, which provide a focussed measure of consumer confidence, show that although there have been recent improvements, sentiment in China has remained below the neutral benchmark since early 2022.

Continued structural reform and improvements to the enabling environment would be  essential. With boosting consumption as a top government priority, the government has introduced strategic action plans to systematically foster spending and strengthen consumer confidence, including the latest financial support measures from The People’s Bank of China.

The rollout of the consumer goods trade-in programme has undoubtedly injected optimism into China’s RAC market. Nevertheless, the longer-term impact of this intervention remains to be seen, especially on sustained market recovery, consumer preferences for efficiency levels, and energy-saving potential.

Policy implications

Given the typical 10-year service life advised by official regulations, continued sales of low-efficiency units risk locking in sustained power grid stress and elevated emissions well into the next decade. This highlights the urgency  of phasing out inefficient models to avoid long-term structural impacts.

To support sustained improvements in energy efficiency in a relatively saturated market, China’s ongoing policy guidance, especially standard improvement and the support for replacement, is essential. These efforts need to be complemented by active engagement with manufacturers and consumers to ensure clear market signals and to prevent inefficient market competition.

Ember’s analysis illustrates that by introducing targeted interventions, initiatives like the consumer goods trade-in programme have the potential to deliver co-benefits. These span across economic rebalancing, energy use reduction and decarbonisation.

In the context of China’s Dual Carbon goals and the ongoing efforts to expand domestic demand, the programme represents a powerful tool for aligning short-term government objectives with long-term structural reform.

Ultimately, continued progress towards energy saving and decarbonisation will depend on China’s efforts to further transform its economy towards a more sustainable and resilient model.