Development Jeopardizes Energy Goals

China has vowed to close inefficient factories, but new development may cause more energy waste.
By Michael Lelyveld
2010-08-16
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construction_305 Two workers walk past new apartment blocks under construction in Beijing on April 29, 2010.
AFP/Liu Jin

BOSTON—China's government is mounting a push to meet energy-saving targets by the end of 2010 despite concerns that development will drive up demand for years to come.

On July 8, China's Ministry of Industry and Information Technology (MIIT) ordered 2,087 companies to close outmoded production facilities by the end of September, the official Xinhua news agency reported.

The crackdown on cement, steel, and other inefficient industries comes as China nears the end of its five-year campaign to cut energy consumption per unit of GDP by 20 percent.

According to revised official figures, the country's efficiency index improved 15.69 percent by the end of last year but slipped back by 0.09 percent in the first half of 2010.

The five-year target has become a key test for China's leaders as the country climbs into the lead among energy-consuming nations.

"I think it's important for China to show on the record that it's prepared to hit that number," said Robert Ebel, senior adviser to the energy and national security program at the Center for Strategic and International Studies in Washington.

"They want to show the world that they are an advanced economy and can do the things that are necessary to increase energy efficiency," Ebel said.

Industries threatened

The new measures hit hard at the six sectors that account for 70 percent of industrial energy use including steel, construction materials, chemicals, oil, metallurgy, and electric power.

In 2007, the National Development and Reform Commission (NDRC) found that the six sectors produced one-third of China's industrial added value while consuming 64 percent of its electricity.

While the new order affects 18 industries ranging from copper smelting to leather production, it is particularly tough on sectors behind the construction boom. Nearly 45 percent of the companies on the government's shutdown list are cement and steel plants.

Although the government has threatened steps against wasteful producers before, it backed away from closures last year during its economic stimulus program. The result was felt in the first quarter of 2010 when energy efficiency dropped by 3.2 percent.

MIIT Minister Li Yizhong declared that the government is serious this time as the deadline for its 20-percent target approaches. Companies that fail to comply will lose waste discharge licenses and access to bank loans, Li said.

On July 2, the NDRC also ordered local governments in 22 provinces to cancel preferential power prices for energy-intensive industries. The move will deprive them of 15 billion yuan (U.S. $2.2 billion) in savings, the agency said.

Construction costs

But while the government cracks down on energy offenders before the end-of-year deadline, there are signs that the building boom may drive inefficiency back up again.

On Aug. 6, a senior researcher at the Ministry of Housing and Urban-Rural Development told Southern Metropolis Daily that over half of China's residential buildings will be replaced in the next 20 years.

Rapid development and poor construction are to blame, said researcher Chen Huai. "Only those homes built after 1999 are likely to be preserved in the longer term," he said.

The comments have sparked criticism of China's development model that has created shoddy buildings, even in newer construction.

In April, Housing Vice-Minister Qiu Baoxing said China's buildings are made to last only 25-30 years, China Daily reported. Many recent buildings are demolished to make way for new projects that produce profits and energy waste.

"It's high time local governments stopped committing crimes by demolishing houses and buildings in the name of urban development," said the official English-language paper.

More consumption likely

Philip Andrews-Speed, a China energy expert at Scotland's University of Dundee, said the fast-paced construction cycle means more energy consumption, even if better buildings are built with materials from more modern steel and cement plants.

"Total energy use in China is going to keep growing very fast with this sort of construction plan," said Andrews-Speed.

The scale of China's new development is massive, accounting for 40 percent of the world's cement and steel.

"Energy intensity will certainly continue to remain high even if they do have the most efficient steel, cement, and plate glass factories, because these are very energy intensive industries," Andrews-Speed said.

Although the government has recently taken steps to cool down the property sector, demand for new buildings may mean that China will meet its five-year target, only to see inefficiency shoot up again.

If China can break its wasteful cycle and create more durable and efficient buildings, it could reap the benefits of energy-saving in the long term, Andrews-Speed said.

"The end product in 20 or 30 years' time may be some wonderfully modern and energy efficient cities. But if you're looking between now and then, it's likely to be bad news."

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