China Struggles to Curb Energy Growth Amid Smog Crisis

An analysis by Michael Lelyveld
2014-03-17
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A tourist wearing a face mask visits the Tiananmen Rostrum in heavy smog in Beijing, March 3, 2014.
Imaginechina

China has raised its energy conservation targets for the second time in five months, acknowledging that it fell short of its goal last year.

In his annual work report on March 5 to the National People's Congress, the country's rubber stamp parliament, Premier Li Keqiang said the government has "tried hard to conserve energy, reduce emissions and ... control pollution," but China's smog crisis contradicts any credible claim to success.

The government has been trying to control pollution by setting targets for "energy intensity," an index of energy use per unit of gross domestic product (GDP) or economic output.

The targets are a key factor in the anti-smog battle because China met 65.7 percent of its energy demand with high-polluting coal last year, according to Reuters and China's state-owned Economic Information Daily.

While total energy consumption keeps rising as the economy expands, China has partially mitigated the effect by reducing energy waste per unit of GDP year after year.

But China's thick smog and new energy intensity targets suggest that the environmental effort has been losing ground.

Substantial increase

In his report, Li said the government would seek to improve energy efficiency this year by 3.9 percent, a substantial increase over the 3.5-percent annual target originally set under the current five-year plan.

Under the plan, China pledged to cut per-unit energy use in 2015 by 16 percent from 2010 levels.

In order to fulfill the five-year commitment, the government must raise its annual targets because it failed to meet them for the first two years, said Zhou Dadi, vice chairman of the China Energy Research Society, according to the official English-language China Daily.

Most of the trouble stems from 2011, when total energy use soared 7 percent while energy efficiency improved only 2.01 percent.

Last October, the National Development and Reform Commission (NDRC), China's administrative ministry, issued a "special document" ordering an increase in annual targets to 3.84 percent.

In a report to the NPC, the NDRC said it had "basically attained" the goal last year with an improvement of 3.7 percent, although the performance fell short of the mark.

Behind the energy numbers lie a host of connections to major challenges facing China, including efforts to transform the economy, set a sustainable growth course, cut industrial overcapacity, reduce reliance on construction and infrastructure investment, and get pollution under control.

Not doing enough

The smog crisis suggests that the government is not doing enough by simply setting new targets to make up for failing to meet old ones, since total energy use is still growing at about 3.9 percent annually, based on official figures. The result has been more smog as GDP rose 7.7 percent last year.

"It's a numbers chase," said Derek Scissors, an economist and resident scholar at the American Enterprise Institute in Washington.

While China is taking positive steps by improving efficiency, it is unclear whether its intensity targets have
had any effect on smog.

In January, Han Jun, deputy director of the State Council Development Research Center, said China's energy intensity remains more than twice the global average, Reuters reported.

Philip Andrews-Speed, a China energy expert at National University of Singapore, said energy intensity is only indirectly linked to air quality.

"The pollution arises mostly as a result of total energy use and the energy mix," Andrews-Speed said.

"Total energy use continues to rise and the share of coal in the energy mix can only change slowly. Add this to the growing number of vehicles and, in recent weeks, some unusually persistent weather patterns, and you have a problem which continues to get worse before it will get better," he said.

Little sign

Despite enthusiastic responses to Li's work report cited by China's official media, Scissors sees little sign that the government is ready to "declare war against pollution," as the premier said.

Li's report appeared to be a letdown from the reform agenda laid out in November at the Third Plenary Session of the ruling Chinese Communist Party's Central Committee, said Scissors.

Instead, the report steered a conservative course, renewing last year's GDP growth and inflation targets of 7.5 percent and 3.5 percent respectively.

Scissors said the boilerplate report was reminiscent of those given by Li's predecessor, Wen Jiabao.

"This sounds like it could have been delivered by Wen Jiabao three years ago," he said.

Much will depend on how fast and how fully the government follows through on the report's promises of steps like energy pricing reforms, environmental taxes, property taxes and overcapacity cuts. Some tasks have been promised for this year, but most come with no set timelines.

Scissors suggested that the government may have been forced to adjust its energy efficiency targets because it expected higher GDP growth last year, which would have produced a better per-unit result.

The recent prevalence of smog raises the question of whether the efficiency targets will have any visible effect as long as they are lower than consumption growth.

Ultimately, residents can expect little relief from air pollution if total energy use keeps rising at current rates,
regardless of per-unit reductions.

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