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While major improvements in energy efficiency can buy time, massive substitution of cleaner sources of energy for coal is ultimately required to meet growing energy demands in an environmentally sustainable way. 5 sustained over the three decades of 1991-2020. For further description of the baseline scenario described in this paragraph, see China: Issues and Options in Greenhouse Gas Emissions Control: Summary Report. (Report of a Joint Study Team from the National Environmental Protection Agency of China, State Planning Commission of China, UNDP and the World Bank, December 1994).

Page 6 · Achievement of Scale Economies. Transition from pilot to larger-scale applications and from small-scale, often customized, production to mass-production technologies are expected to yield substantial cost reductions in the future. , solar PVs), and increasing the scale of implementation. · Technological Advancement. Often coupled with increasing scale economies, technology improvements also have been and are expected to continue to be a key source of unit cost reduction. For China, technology advancement involves a combination of transfer from abroad, often through joint-venture arrangements, and well targeted domestic R&D for certain technologies.

However, the demand-based approach does mean that: · Strong support should be given for the development of the niche markets where applications are economically viable now with technology readily available. · Public incentives to spur commercialization should be designed to expand demand for targeted renewable energy technologies. Rather than providing direct incentives to technology suppliers to expand production, demand-based incentives should expand Page 9 the market for which suppliers compete.

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