Economy

Power grab

Why China’s officials are shutting down businesses

Beijing’s damaging emissions

The battle for the moral high ground can be a fractious one.

Climate negotiations in Copenhagen late last year ended in stalemate. US and European negotiators want the Chinese ­– now the largest emitter – to do more to curtail carbon emissions. But the Chinese think the expectations are unfair, given their own stage of economic development, and that their emissions are much lower in per capita terms.

Instead, they point to the major efforts being made to make the country more energy-efficient. One key promise: to cut the amount of energy used for each dollar of GDP generated. By the end of 2010, China was supposed to be 20% more energy-efficient than it was in 2005.

The commitment was made five years ago, and has been trumpeted repeatedly since. Until recently, it seemed that the goal was well on track to being met. The official figures said China had improved its energy-efficiency by nearly 16% up to last year. “It’s a legally binding target,” explained Xie Zhenhua, deputy director of the National Development and Reform Commission (NDRC). “To meet it, we have to adopt active measures, including phasing out obsolete equipment and upgrading facilities.”

But that final 4% has proved elusive. The problem is that last year’s economic stimulus put a lot of ‘obsolete equipment’ back to work. In March, energy-efficiency had actually fallen 3.2%, and was down 0.1% overall for the first six months of this year.

China’s leaders didn’t take the news lightly, unaccustomed as they are to missing their own targets (­or, at least, to admitting so publicly).

Premier Wen Jiabao put it bluntly earlier in the year, warning that he would use an “iron fist” to make sure the goal was met. Provincial governments were told to make that happen by shuttering out-of-date plants in energy-intense industries like steel and cement.

That is not always easy: opposition often comes from bureaucrats with a direct economic interest in the companies under their jurisdiction (see WiC74). “There may be some resistance by companies against cutting emissions,” warns economist Chen Siwei, “but if they fail to meet the target, they will be shut down and the CEOs will face punishment.”

Critics say that leaders inprovinces that haven’t reached their target are panicking. Some are taking matters into their own hands by ordering electricity blackouts for the factories within their jurisdiction.

That’s how the situation is being read by Hebei-based Chengde Iron and Steel. Power cuts have forced two of its production lines to shut down since early September. It meant 5 million tonnes less of welded pipe and steel bar last month, a situation that a Chengde source called “unreasonable”.

The state-owned company says it was already doing its bit (it pulled the plug on one of its blast furnaces in July). But that wasn’t enough to satisfy the environmental directives. “The city government was very concerned that the targets set by Beijing] had been met – and sometimes exceeded – by other cities,” a source inside the company explained to the Economic Observer. “If Chengde City alone fails, local officials could be criticised, which would seriously affect their chances for promotion.”

Spare a little sympathy for those officials. As the Economic Observer points out, trying to meet energy-efficiency targets can also undercut efforts to meet the sacrosanct goal of 8% GDP growth. That must lead to some pretty serious shouting matches at local government meetings around the country.

Shutting off the electricity may prove a quick fix in massaging the stats a little closer to target. But most experts think that China won’t hit its year-end goal. Even if it does, the task will only get harder next time around. The next goal: making the economy 40% more energy efficient by 2020.


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