China Failing to Meet Energy Use Targets

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China must feel like its damned if it does and damned if it doesn’t. What are we talking about? – green technologies and environmental responsibility. Five years ago in the last plan, China committed to reducing the country’s energy intensity the energy consumed per unit of output by 20% according to a FT report. The target looks unlikely to be achieved, but even so China came under considerable criticism at the time because it was not seeking to cut outright emissions, only the intensity.

These two graphs from the FT illustrate the problem vividly. China has been growing strongly since 2000, but so has energy use even as energy intensity has been falling. To be fair, when the economy is growing at 10%+ per year how can you realistically aim to cut outright emissions five years into the future when the level of economic activity will be not be far off of double what it is today?

This year as the five year plan comes to a close, Beijing has been pulling levers all over the economy in a last minute attempt to meet the targets. If they claim to have done so it will be a farce. Although China’s energy intensity fell by 15.6% from 2005 to 2009 it rose by 3.2% in the first quarter of this year and the biggest culprits are the protected state industrial enterprises that consume 70% of the energy and generate 70% of the emissions. Local officials have been playing high profile lip service to the cut backs in energy supply, extending enforcement to the extremes of imposing a five days open, ten days closed regime on small private enterprises in Zhejiang province, but largely turning a blind eye to major enterprises from where the provincial revenues flow and who are the major local employers. Much fuss and bother was made about cutting power to aluminum smelters but production has barely been affected suggesting smelters have found ways around the headline announcements.

At the same time as trying to cut energy intensity, China has been trying develop a domestic green energy industry to roll out emission free technologies for power generation in the future. But the United Steelworkers fear subsidies given to the wind turbine and solar industries are going to create a global competitor to domestic US equipment manufacturers and have petitioned an investigation in to whether such subsidies are against WTO rules. The probe extends beyond just wind and solar to include support for advanced batteries and energy efficient vehicles. One can’t help but wonder how the US will be able to pursue this case with a straight face when they have poured billions into support for the same industries back home – a point that was not lost on an indignant Zhang Guobao, China’s top energy official according to the FT when he recently defended his country’s conduct saying the US spent $4.6bn in the first nine months of this year in subsidies to new energy enterprises. Most accept the current criticism has more to do with mid term elections than anything else.

Nevertheless even China could admit it has a monumental challenge ahead of it. Energy use will continue to grow with the economy and yet the environmental impact and cost to import energy products are both huge.   Indeed energy efficiency and environmental impact may be China’s biggest challenge in the next five year plan.

–Stuart Burns

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