China Revises Efficiency Targets as Energy Campaign Lags

An analysis by Michael Lelyveld
2013-11-11
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Smoke billows from a factory in Beijing, Jan. 14, 2013.
Smoke billows from a factory in Beijing, Jan. 14, 2013.
IMAGINECHINA

China has pledged greater improvements in energy efficiency after falling short of official targets over the past two years.

In a frank assessment, the official English-language China Daily called the country's record on energy use, the environment, and emissions "unsatisfactory."

"China might be on a steady course toward realizing its gross domestic product (GDP) growth target ..., but when it comes to saving energy, ... the government has cause for concern," the paper's website reported on Oct. 29.

While China's total energy consumption has grow along with its economy, the government has focused on the task of reducing energy use per unit of GDP, or total national output.

The index of efficiency, or energy intensity, is seen as crucial to curbing waste, pollution and climate effects.

Targets accelerated

But even by this per-unit measure, China's conservation efforts have not met its own goals.

Under the 12th Five-Year Plan, the government committed to reducing energy intensity by 16 percent from 2010 levels by the end of 2015.

But a National Development and Reform Commission (NDRC) official acknowledged that China had lagged behind the government's annual targets, achieving only a 5.5-percent efficiency gain in the plan's first two years.

After a midterm evaluation, the NDRC has reportedly ordered an acceleration in the annual targets from 3.5 to 3.84 percent for the remaining three years of the Five-Year Plan.

The report did not include year-to-date data for 2013.

Falling short

China's failure to meet efficiency targets is not unusual by itself.

Despite a crackdown on power use in 2010, the government also fell short of its previous five-year goal of a 20- percent efficiency gain compared with 2005, although it reported a substantial improvement of 19.1 percent.

This year, the stifling smog in China's cities has made the case that total energy use matters more than the per-unit-of-GDP index.

Last year, energy consumption climbed 3.9 percent as GDP rose 7.8 percent, while energy intensity fell 3.6 percent, according previous official reports.

Smog crisis

The smog crisis may account for the open discussion of the problems with the efficiency targets in the China Daily account.

The paper quoted China's National Business Daily as saying that the central government paid 170 billion yuan (U.S. $27.4 billion) for energy-saving and anti-pollution efforts last year, but many plants took the subsidies without putting new equipment to use.

Among other factors, China Daily also cited "local governments' ignorance" in prioritizing economic growth over environmental protection.

"It is also because a failure to realize energy targets does not invite severe punishment, while failure to realize GDP targets does," the paper said.

Focus

While local officials are often blamed, experts said the central government had also failed to focus on energy use problems, although the environmental consequences are now staring it in the face.

Mikkal Herberg, energy security research director for the Seattle-based National Bureau of Asian Research, said Beijing had been distracted by a series of pressing issues including the leadership transition, economic weakness, and the trial of Bo Xilai, the ruling Chinese Communist Party's former Chongqing chief.

"With everything else, the focus has gone off the specific issue of energy efficiency," said Herberg.

The government has also responded to urban air quality complaints with measures like closing all the coal-fired power plants in Beijing by 2015.

"All that's going to do is send those coal-fired plants somewhere else," Herberg said. "It's not a sensible way to try to reduce pollution overall."

China has relied on administrative mandates rather than promoting energy-saving by allowing market pricing reforms.

"They've been slow on energy price reforms, particularly on electricity," said Herberg.

Fuel switching

Official reports have raised expectations that this week's plenary session of the Communist Party Central Committee will push major pricing reforms. But Herberg and other analysts believe changes will be smaller and slower.

Simply switching from coal to natural gas may also do little for efficiency if growth in energy consumption remains unchanged.

"Fuel switching is fine and dandy, ... but it's not your fundamental solution on these things," Herberg said.

Local government limitations

David Fridley, staff scientist in the energy analysis program at Lawrence Berkeley National Laboratory in California, sees another set of problems with local governments and their ability to pursue energy efficiency improvements.

Fridley's program at the laboratory's China Energy Group has been charting and promoting efficiency efforts in the country for the past two decades.

The trouble is not only with the incentives given to local officials, he said.

"They don't know how to do it. They don't have the tools, the methods, the ways to prioritize what to do," said Fridley.

Among other efforts, the group has been working to develop a "best cities tool" that would give local officials benchmarks for assessing energy performance in 11 sectors, including buildings, transportation, power, and heat.

The tool helps to show cities how they rank in relation to other urban areas, giving them a sense of what efficiency gains are achievable.

Lacking authority, data

But local officials often lack the authority to make key improvements.

"In the case of electric power, they have virtually no authority except over how it's used, but not how it's generated," Fridley said.

Real authority over generation still rests with major state companies and entities like the State Grid.

Even with new tools and greater authority, local officials may also be challenged to improve efficiency because they lack detailed data.

"Localities don't know how energy is being used in their localities," said Fridley, since data has not been collected in formats that allow them to quantify the effects of new measures on consumption.

The multiple problems suggest that obstacles to improving efficiency go far beyond the reluctance of local officials, requiring years of top-to-bottom reforms to overcome.

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