Government Lowers Energy Efficiency Goals

An analysis by Michael Lelyveld
china-electricity-may-2013.jpg High-voltage power lines transmit electricity in Shanghai, May 11, 2013.

China has set lower targets for improving its energy efficiency by the end of 2020 after claiming it made major gains last year.

In their annual reports to the National People's Congress (NPC) on March 5, Premier Li Keqiang and his top planning agency cited big advances in energy saving for 2015 and the previous four years.

Under the 12th Five-Year Plan starting in 2011, China's energy use per unit of gross domestic product fell 18.2 percent, including a huge 5.6-percent cut last year, the largest in over a decade.

Although China's total energy consumption continues to grow, the per-unit-of-GDP "energy intensity" index is seen as a key measure of its campaign to curb waste, carbon emissions, and smog.

China has steadily increased its efficiency over the years, but it remains far behind other major economies. In 2011, for example, China's energy intensity was 5.4 times higher than Japan's, according to U.S. Department of Energy (DOE) data.

Analysts say that China performed especially well last year because of the downturn in the coal-fired heavy industrial sector, where power use fell 1.9 percent.

While GDP growth of 6.9 percent was the slowest in 25 years, total energy consumption edged up only 0.9 percent, the National Bureau of Statistics (NBS) said.

The big efficiency gain in 2015 boosted China's five-year performance well past the 16-percent target set out in the 12th Five-Year Plan, according to government calculations.

Lowered goals

Curiously, Premier Li and the National Development and Reform Commission (NDRC) planning agency made no reference to meeting the five-year target in their NPC reports.

But the government has apparently responded to its statistical over-achievement by lowering goals for efficiency under the 13th Five-Year Plan, aiming for a 3.4-percent gain this year and a 15-percent improvement by 2020.

The reductions follow a pattern set after the government narrowly missed its targeted cut of 20 percent under the 11th Five-Year Plan ending in 2010, despite imposing power brownouts and blackouts on some factories and homes in a desperate attempt to reach the goal.

The 15-percent target for the 2016-2020 period reflects tougher challenges in the future to make big efficiency gains without crimping the economy, but also the possibility that the government may have to resume stimulus measures to revive sagging GDP rates.

"I think they are being conservative with a 15-percent figure for the 13th Five-Year Plan simply because of the economic uncertainty," said David Fridley, staff scientist for the China Energy Group at the DOE's Lawrence Berkeley National Laboratory in California.

After the 5.6-percent improvement in 2015, the government seems likely to have little trouble in lowering energy intensity by 3.4 percent this year unless wasteful infrastructure spending picks up dramatically.

Gains questioned

The relatively low GDP growth last year raises the question of whether the high efficiency gain was the result of a temporary industrial slump that may be reversed or more significant long-term restructuring.

In the pattern of previous five-year periods, efficiency gains have also tended to drop after major goals are achieved.

In its report, the NDRC listed annual energy intensity reductions of 4.8 percent in 2014, 3.7 percent in 2013, 3.6 percent in 2012, and 2.0 percent in 2011.

But the challenge is more than just a case of percentage points in an arcane index, since efficiency is a leading factor in China's pledges on pollution and climate change.

The five-year energy targets are seen as a key to meeting China's commitment to reduce carbon dioxide (CO2) intensity by 40-45 percent from 2005 levels by 2020.

The government has also promised to reach a peak in energy-related carbon emissions by 2030.

At the same time, China is pushing ahead with plans for economic growth, calling for GDP to rise by 6.5 to 7 percent this year in keeping with Communist Party promises to double GDP and per capita income by 2020 compared with 2010.

Balancing act

Taken together, the economic and environmental goals are both a balancing act and a statistical feat.

In his report, Li also targeted an 18-percent cut in CO2 intensity for the next five years in support of the pollution pledges.

Last week, the Paris-based International Energy Agency (IEA) gave China high marks for reducing CO2 releases by 1.5 percent in 2015, helping to keep global emissions flat for the second year in a row, according to preliminary reports.

The IEA credited China's higher reliance on renewable energy sources, noting that coal provided less than 70 percent of the country's power last year, dropping 10 percentage points since 2011.

But the government's apparent reticence with regard to achieving its 2015 efficiency targets may raise doubts about whether it has confidence in the energy intensity results.

Some economists have questioned whether the official GDP figures for last year were overstated, considering that energy consumption rose only 0.9 percent.

A downward adjustment of the economic figures would alter the intensity index, but the final revisions may take another year to complete. In the meantime, the government has released few supporting statistics for its efficiency calculations.

Sketchy data

Despite promises to promote transparency, official data has grown increasingly sketchy. Annual work reports, which once teemed with numbers, now omit important details.

In February, the NBS reported a 3.7-percent decline in coal consumption last year without a corresponding tonnage figure. But a Reuters report on March 4, citing the NBS, said the decline was 2.2 percent.

Last November, The New York Times reported that the agency had been under-reporting annual coal consumption by 17 percent for years.

In its report, the NDRC said China produced 3.75 billion metric tons of coal without giving a growth figure. Both production and consumption are believed to have fallen for the second year in a row as power demand waned.

Based on formulas that China uses for the energy content of "standard coal," the country may have burned over 3.8 billion tons of raw coal last year.

But without better data on coal, which now reportedly provides 64 percent of China's energy, it may be impossible to gauge the accuracy of efficiency or emissions claims.

NBS reports on industrial production are frequently inconsistent with previous data, undermining credibility in GDP figures. Provincial estimates have also been adjusted with undisclosed formulas to mesh with national totals.

"When you go around and meet state-owned industry people, everybody laughs at the national statistics, so I don't know why foreigners believe them," one analyst recently told The New York Times.

Leadership changes

Confidence in official data has been further eroded by frequent leadership changes at the NBS.

In February, the cabinet-level State Council announced the removal of Wang Baoan from his post as NBS director, one month after he was placed under investigation for "severe disciplinary violation" and after only nine months on the job.

On March 4, just before the start of China's annual "two sessions" legislative meetings, the council said Wang, a former vice minister of finance, would be replaced by Ning Jizhe, who also serves as deputy head of the NDRC, the official Xinhua news agency reported.


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