Olympics Delay Energy Reforms

China's government has put the Olympics ahead of key energy and environmental reforms, experts say. Officials are promising changes after the Games end.
By Michael Lelyveld
2008-08-13
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BOSTON--China's government has delayed several key measures during the run-up to the Olympics, costing precious time in implementing energy and environmental reforms, analysts say.

"In a sense, I think they've lost a year on policy reform in many, many areas," said Mikkal Herberg, research director for energy security at the Seattle-based National Bureau of Asian Research.

In an interview with Radio Free Asia, Herberg said the government has slowed progress on a host of initiatives, arguing that "the Olympics are too important to allow anything else to intervene and get in the way."

While the country has put energy-saving technologies on display at Olympic venues in Beijing, it has fallen far short of meeting national efficiency targets, according to official media reports.

Last week, government agencies announced that China's energy efficiency had improved by 2.88 percent in the first half of 2008 from the year-earlier period.

Although the country lowered its energy consumption per unit of gross domestic product, the rate was less than the annual 4-percent annual goal set by Premier Wen Jiabao in 2005. It was also below the 3.66-percent improvement for all of last year, suggesting that the efficiency drive has slowed down.

The figures released jointly by the National Bureau of Statistics (NBS), the National Development and Reform Commission (NDRC), and the new National Energy Administration are the latest sign that China will not meet Wen's target of cutting 20 percent of its energy waste by 2010.

The country has yet to reach the 4-percent annual goal during any period since it was set.

Consumption soars

Even with slight savings in energy use per unit of GDP, China's consumption continues to soar because GDP has been growing steadily by 10 percent or more per year.

This week, the Finance Ministry and State Administration of Taxation unveiled a new measure to take effect on Sept. 1 that would double the tax rate on the largest cars to 40 percent. Taxes will rise from 15 to 25 percent for cars with engines of 3 to 4 liters displacement, the official China Daily said.

The move follows Wen's call for the government to "take more responsibility for saving electricity and fuel," the state-run paper reported, citing a July 23 meeting of the State Council.

Several reports suggested that reforms have been delayed by preparations for the Olympics due to concerns for maintaining order and the status quo.

On Aug. 3, an official of the Ministry of Environmental Protection said the agency would begin regular monitoring next year of ozone levels and fine particulates, or soot particles, the official Xinhua news service reported. The decision follows criticism that China has no air pollution standards in those categories, despite safety limits established by the World Health Organization.

On Aug. 10, a leading official said the government would intervene to order mergers of large state-owned enterprises (SOEs), which are among the most wasteful and highly subsidized companies in China. Li Rongrong, chairman of the State-owned Assets Supervision and Administration Commission (SASAC), said the move would take place "after the Olympics"
because voluntary mergers were moving too slowly, Xinhua reported.

Post-Olympic economic measures are also expected to deal with energy and environmental problems.

Prices jump

This week, the NBS announced that producer prices in July jumped 10 percent from a year earlier, hitting a 12-year high. Although consumer prices rose by a milder 6.3 percent, experts pointed to a 34-percent producer increase in the mining sector, largely to due to high costs for coal.

Herberg said the government has failed to coordinate cost controls for coal and electricity with growing demand, leading to losses and shortages in the power sector.

"It's a function of a whole set of conflicting policies," he said. "The only answers to this are going to be allowing power prices to rise and reducing the rate of growth of electricity."

Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washington, said China's leaders may have been faced with a choice between mobilizing all their resources for the Olympics and enforcing the reform policies that they pledged to pursue.

"I don't think they could do both," Ebel said.

The question is whether the government will meet the same resistance to energy-saving and environmental programs in the provinces after the Olympics as before. Local support for large construction projects and subsidized production has been blamed for much of the country's energy waste.

Ebel said conflicts between pro-growth forces and environmental reformers are likely to continue despite government initiatives.

"I think Beijing realizes that one of their key problems is that they can't control the country as a whole," said Ebel. "The farther away you get from the capital, the less control you have."

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