China’s expanded home appliance trade-in programme is set to accelerate the country’s energy efficiency gains in room air conditioners (RACs) by up to 70 percent in 2025, potentially saving households up to $943 million USD in electricity bills this year, according to a new report by energy think tank Ember.
Launched in July 2024 and significantly expanded in 2025 with CNY 300 billion ($41.7 billion USD) in government funding, the programme offers financial incentives for consumers to replace outdated appliances with newer, more efficient models. While aimed at boosting domestic consumption, the initiative is also delivering substantial energy savings by promoting the purchase of top-rated Grade 1 appliances — particularly RACs.
From January to May 2025, 77.6 million home appliances were traded in across 12 categories, with the RAC market seeing a significant revival. The programme reversed sluggish RAC sales following a muted 2024 summer season, and sales rebounded to positive year-on-year growth by August 2024. In the first half of 2025, this growth continued, aided by the launch of more energy-efficient RAC models by manufacturers.
According to Ember, the initiative could accelerate the annual energy efficiency improvement rate of RAC stock to between 5.0 percent and 6.1 percent — 40 percent to 70 percent higher than recent trends. These improvements could cut residential cooling electricity use by up to 4.1 percent in the summer of 2025, equivalent to $943 million USD in savings for households.
The policy also aims to steer consumers toward high-efficiency appliances. Grade 1 RACs, which offer up to 50 percent more efficiency than Grade 5 models, are eligible for subsidies covering 20 percent of the retail price. Grade 2 models receive a 15 percent subsidy. With Grade 2 options limited in the market, the scheme effectively pushes consumers toward the most efficient RAC models.
“China’s consumer goods trade-in programme targets more than boosting domestic consumption,” said Biqing Yang, Asia Analyst at Ember. “By incentivising households to replace outdated appliances with top-rated models, the programme supports both household spending and tangible energy saving.”
China’s RAC penetration is already the highest in the world, with 145.9 units per 100 households by the end of 2023 — rising to 171.7 units in urban areas. As a result, most new RAC sales now stem from replacements rather than first-time purchases. The programme supports this trend while also facilitating the recycling of scrapped units.
The backdrop to this policy is China’s 2024 experience of its hottest year on record, with residential electricity demand rising 10.6 percent year-on-year. During Q3 2024, when the country faced prolonged heatwaves, residential electricity use jumped by 17.8 percent, with space cooling alone accounting for 70 percent of that increase. The strain led to increased reliance on coal power to meet peak demand.
The Ember report emphasizes that long-term gains from the programme depend on continuous policy support, especially in a saturated market. Without ongoing upgrades and stricter performance standards, older, inefficient units could lock in high electricity consumption and carbon emissions for a decade or more.
China’s trade-in initiative aligns short-term stimulus with long-term climate goals. The government has initiated revisions to the Minimum Energy Performance Standards (MEPS) for RACs in 2025 to further elevate efficiency baselines, and the trade-in programme complements these efforts by actively directing consumer demand toward the best available technology.
Overall, the programme exemplifies how targeted policy tools can deliver dual dividends — stimulating economic activity while achieving significant energy and environmental outcomes. As China navigates rising energy demand and intensifying climate challenges, such integrated strategies are essential to fostering a more sustainable and resilient growth model.
Baburajan Kizhakedath