Is China making empty threats on energy targets?

China’s premier Wen Jiabao delivered a big speech on Wednesday urging all levels of government to work with an ‘iron hand’ to improve energy efficiency. This came after official data showed the country’s energy intensity actually increased in the first quarter of the year — by 3.2 per cent — despite its pledge to reduce energy intensity by 20 per cent between 2006 and 2010.

China’s new ranking as the biggest greenhouse gas emitter, and its reluctance to commit to binding carbon emissions targets, make its ability to meet its own energy targets extremely important. And so far, the showing is not good — despite the praise heaped on China in the lead up to Copenhagen. 

According to a China Daily article, Wen said in March that country’s energy fell by 14.38 per cent  between 2005 and 2009. If they have risen already this year, that makes achieving the target by the end of this year look rather challenging. So, Wen reportedly announced new measures on Wednesday. From China Daily:

To that effect, he laid out new targets to shut down the outdated 10 GW capacity of small thermal power plants, 25 million tons of iron smelting, 6 million tons of steel production, 50 million tons of cement, 330,000 tons of aluminum, 6 million containers of glass sheets and 530,000 tons of paper production within this year.

The new targets should be distributed to local governments and enterprises by the end of this month. All the enterprises should also be closed down by the end of the third quarter.

And if they don’t? As the newspaper continued:

Local officials and executives of enterprises will be taken to task if their specific energy-efficiency targets are not met by the end of the year.

If only it was so straightforward.

A McKinsey paper titled ‘China’s Green Revolution’ has postulated that the country could reduce its energy intensity by 17 – 18 per cent every five years. China’s economy is extremely energy-intensive, so that was the paper’s baseline scenario, but even that remains a tall order:

One the one hand, it will require the rigorous enforcement and implementation of the government policies mentioned above. On the other hand, it depends on the country’s ability to establish a streamlined market-incentive system to mobilize corporations and individuals.

Clearly, this hasn’t happened so far. As Council on Foreign Relations fellow Elizabeth Economy wrote in November, China “lacks the political and economic incentives necessary to make clean energy technologies worthwhile to use”. She cites the very low compliance with laws to introduce desulfurisation equipment into new coal-fired power plants, plus the poor utilisation of installed wind power capacity; about 20 per cent of it was unconnected to the grid last year.

As her rather gloomy conclusion stated:

These developments have led me to a central conclusion about the way the Chinese system works: when a policy appeals to the entrepreneurial spirit of the Chinese people, success is guaranteed; however, when a policy is designed to provide a public good, often with an economic cost attached, the policy’s failure is almost always assured.

The failure to meet the energy intensity targets doesn’t inspire much confidence in China’s carbon intensity targets – a related, but rather more important measure in mitigating climate change, and in international climate change talks.

Just before the Copenhagen conference last year, China unveiled a pledge to reduce its carbon intensity by 40 – 45 per cent by 2020. While carbon intensity is different from energy intensity, the two are fairly closely related; and if China is struggling to reach its own goals, it does not bode well for international climate change efforts — or negotiations.

So, what if Wen’s promise of firm action turns out to be an empty threat? That’s the key test.

Related links:

Will China’s environmental problems constrain its growth? FT Energy Source
Q&A on China’s carbon intensity target (Reuters Alertnet, 25/09/09)
Obama goes to Copenhagen and offers an emissions cut (FT Energy Source, 25/11/09)

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