Demand-side energy efficient technology transfer is a significant opportunity for developing countries to leapfrog the typical energy intensive development trajectory and increase global competitiveness. China has had energy efficiency as a national policy since its 11th Five Year Plan (FYP) and has ambitiously targeted to further reduce its energy intensity by 15% by the 12th FYP. However, China’s demand-side energy efficiency still lags far behind the world. In fact, China’s energy intensity is two to three times the world average, which is in sharp contrast to the country’s success in supply-side clean energy technology transfer and innovation. In spite of this, little academic research explores the causes of China’s lag in industrial energy efficient technology transfer, which forms a serious theoretical gap (Wilson, et al. 2012; Gallagher, 2012; Sarkar and Singh, 2010; Okazaki and Yamaguchi, 2011).

This paper bridges this theoretical gap by analyzing the primary incentives for and barriers to industrial energy efficient technology transfer to China. Main research questions include the following: (1) what are the main strategies that foreign firms use to transfer their energy efficient technologies to China or that Chinese firms use to acquire these technologies from abroad? (2) What are the main incentives and barriers on both foreign and Chinese sides in the technology transfer process? (3) What kinds of policy instruments could be implemented to promote energy efficient technology transfer? (4) Finally, is there any theoretical difference among demand-side and supply-side clean energy technology transfers?

We hypothesize that  four key barriers hinder industrial energy efficiency technology transfer: (i) firms’ inner organizational structure and decision making behavior, (ii) high cost and financial shortage, (iii) poor policy incentives, and (iv) poor support of multinational companies. On the other hand, the drivers for energy efficient technology transfer mainly include cost reductions brought by energy-efficient technologies, threat of rising energy prices, public policy incentives, managers’ perception and commitment, international competition, and environmental pressure from local community, and establishing green image of corporation

This paper tests these hypotheses by examining energy efficient technology transfer in China’s iron and steel industry. The iron and steel industry is the top priority on China’s agenda of industrial energy efficiency improvement as it consumes 15% of China’s energy and contributes 12% of China’s green-house-gas emissions. I rely on quantitative metrics to describe the energy efficient technology acquiring strategies of eight Chinese iron and steel firms, using publicly available data from the firms themselves, as well as from the Chinese Iron and Steel Association Committee, the State Energy Bureau, the Ministry of Information and Industry, and the State Intellectual Property Office. I also rely on insights gained from semi-structured interviews of ten government officials, sixteen executives of Chinese iron and steel firms, ten executives of foreign energy efficient technology providers, and eight experts to clarify incentives and barriers during the main energy efficient technology transfer processes (that is, coke drying quenching, combined cycle power plant, advanced motor system, and direct reduction technology). The current empirical data confirms most of my hypothesis.