China Vows Energy Crackdown

Premier Wen has warned officials who fail to meet energy-saving targets, but analysts blame the government for poor efficiency results.
By Michael Lelyveld
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BOSTON—Premier Wen Jiabao has threatened to fire officials for failing to meet China's energy efficiency targets, but the recent surge in power consumption is the government's fault, experts say.

Wen reacted sharply to reports that efficiency fell 3.2 percent in the first quarter as the government struggles to cut energy waste by 20 percent before the end of 2010.

"Areas that achieve their energy-saving targets must be rewarded," Wen said, according to the official Xinhua news agency.

"Those that haven't must make their main leaders and relevant leaders accountable, and they will be punished accordingly, and might even be dismissed," Wen warned after a State Council meeting on May 5.

But energy analysts say the latest setback in the government's five-year campaign to cut energy use per unit of GDP is a direct result of its massive stimulus spending to spur growth and stave off recession last year.

"The elite in China's government find themselves facing a problem that they themselves have caused," said Philip Andrews-Speed, a China energy expert at Scotland's University of Dundee in Edinburgh.

Stimulus blamed

Much of the backsliding in the efficiency campaign can be traced to the 4-trillion-yuan (U.S. $586 billion) stimulus program that the government announced in November 2008.

Although the economic rescue package raised spending for energy-saving technologies like windpower, it relied heavily on infrastructure projects that promoted energy-consuming industries like steel, aluminum, and cement.

The results can be seen in first-quarter power consumption, which soared 24 percent from a year earlier, according to the National Energy Administration (NEA). China burned 17 percent more coal during the period, the National Development and Reform Commission (NDRC) said.

Oil sales also climbed 24 percent in the first quarter, The New York Times reported. All major energy indexes grew faster than China's GDP, which rose 11.9 percent, driving the "energy intensity" of the economy higher.

In response, Wen said the government will crack down with an "iron hand" to close wasteful enterprises and see that the 20-percent goal would be met. Measures include previously announced plans to shut smaller power plants, steel mills, and cement manufacturers.

Wen pledged to meet the five-year target, although a commentary in the English-language China Daily called the chances "rather slim at best."

Broken pledge

According to official figures, China improved energy efficiency by 14.38 percent during the previous four years ending in 2009.

"We can never break our pledge, stagger our resolution or weaken our efforts, no matter how difficult it is," said Wen.

But analysts said that is exactly what the government did with its stimulus spending last year.

"Probably within this reversal of energy intensity there will be some lower-level officials and company leaders who have not been running their industries as might have been wished," said Andrews-Speed.

"But I'm sure the overall trend goes down to the economic stimulus package, driven from the very top."

Robert Ebel, senior adviser to the energy and national security program at the Washington-based Center for Strategic and International Studies, said China's leadership set the direction for both the energy campaign and the stimulus plan that worked against it.

"It had to come from the top," Ebel said. "Otherwise, it wouldn't bring any pressure to bear upon the consumers."

Construction, mining boom

While the government pushed its efficiency targets, it also financed a construction boom to drive economic growth and prompted coal mines to boost output by 12.7 percent to nearly 3 billion tons last year.

"The top has been telling the producers give us more of this, give us more of that," said Ebel. "They say, we can do that but it takes more energy. That's the way they've been going, producing these fantastic growth figures."

Andrews-Speed said the government's goal should be to show that it can get its efficiency program back on track rather than worry about meeting the five-year target exactly.

But if faced with another economic threat, China's leaders would probably compromise the energy efficiency campaign again, he said.

"If there were some other economic crisis or a resurgence of the current one, then they would most likely focus on the economy," said Andrews-Speed.

"But the challenge they face is the very crude nature of their economic controls, which is either full-on or full-off with respect to infrastructure."





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