China Reportedly Plans Strict Goals to Save Energy

                                                                                                                                        Wu Hong/European Pressphoto Agency

Any energy policy moves by Beijing holds global implications, given that China is the world’s biggest consumer of energy and largest emitter of greenhouse gases. A Sinopec plant refines oil in Shandong Province.

By KEITH BRADSHER

Published: March 4, 2011

HONG KONG — With oil prices at their highest level in more than two years because of unrest in North Africa and the Middle East, the Chinese government plans to announce strict five-year goals for energy conservation in the next two weeks, China energy specialists said Friday. 

Bejing’s emphasis on saving energy reflects concerns about national security and the effects of high fuel costs on inflation, China’s export competitiveness and the country’s pollution problems.
Any energy policy moves by Beijing hold global implications, given that China is the world’s biggest consumer of energy and largest emitter of greenhouse gases. And even the new efficiency goals assume that China’s overall energy consumption will grow, to meet the needs of the nation’s 1.3 billion people and its rapidly expanding economy.

As a net importer of oil, China tends to view its energy needs as a matter of national security. And so, even as Beijing tries to quell any signs of the Arab world’s social unrest striking a political chord with Chinese citizens, the government is also intent on not letting similar upheaval impinge on its energy needs.
Zhang Guobao, who was China’s longtime energy czar until his retirement in January and is still a power broker on energy issues, said Friday that China must undertake an “arduous” task to protect its security. “Oil security is the most important part of achieving energy security,” Mr. Zhang told the official Xinhua news agency. “Preparations for alternative energies should be made as soon as possible.

China has placed a big bet on renewable energy, emerging as the world’s biggest and lowest-cost manufacturer of wind turbines and solar panels. But the country remains heavily reliant on coal for its electricity. And its oil imports are surging after auto sales have surpassed the American market in each of the last two years.

China has also moved ahead of the United States as the biggest buyer of oil and natural gas from Saudi Arabia, which has so far avoided social upheaval but is on Mideast analysts’ watch lists. That oil is shipped in tankers that travel along sea lanes controlled by India and the United States, which adds to Beijing’s jitters.

Iran, hardly a bastion of stability, is another large supplier of crude oil to China.

And while Russia in the current geopolitical context is looking like a relatively secure supplier of energy, a large pipeline to China from Russia, completed this winter, so far supplies only 3 percent of China’s crude oil.

An important feature of the five-year plan is its call to double the share of natural gas in Chinese energy consumption, to 8 percent in 2015 from 4 percent last year, according to Fatih Birol, the chief economist of the multilateral International Energy Agency in Paris. This will make China a natural buyer of large quantities of Russian gas, making it a competitor to Europe, which already relies heavily on gas from Russia.

According to an estimate by Wood Mackenzie, a global energy consulting firm, China imports nearly two-thirds of its oil and is on track to pass the United States in the percentage of imported oil this year. China was a net exporter as recently as 1992, before the demands of its economic boom created an insatiable energy appetite at home.

As part of its effort to curb oil demand, the Chinese government has already been pursuing an aggressive program to develop electric cars, although these would run at least initially on a national grid that still relies heavily on coal.

China aims to limit energy consumption in 2015 to four billion metric tons of coal or its equivalent in other fuels, Mr. Zhang said. An energy specialist in Beijing said that he had also been told the same figure by several people.

Even a goal of four billion metric tons of coal or its equivalent represents an annual increase of 4.24 percent from last year’s consumption of a little more than 3.2 billion tons.

No decisions have been made yet on how the almost entirely state-owned energy sector would allocate the limits by city, province or electric utility. This is already causing considerable anxiety within China, said the specialist, who insisted on anonymity because of the government’s sensitivity about goals that have not yet been announced.

“It’s a political target, it’s being taken without a lot of internal consultation,” he said, before adding a Chinese proverb to describe the unhappy reaction of power producers and users already briefed on the new policy: “It’s like a whole lot of ants are being thrown in a hot wok.”

The Chinese economy has repeatedly grown considerably faster than government forecasts. But the government has come much closer to its energy goals because it owns all of the electricity distribution systems. And it has controlling stakes in the oil, gas and electricity companies and many coal mining companies.

The last five year-plan, which ended on Dec. 31, called for the country to reduce by 20 percent the energy it used per renminbi of economic output in 2010, compared to 2005. To try meeting that goal, Beijing required the governments of every province and city to achieve 20 percent improvements. Local officials, in turn, set similar goals for the 200 largest companies in each province and city.

But China fell badly behind its goal in late 2009 and early last year. The government’s economic stimulus program, in response to the global financial crisis, produced huge spending on highways, high-speed rail lines and other infrastructure that required lots of steel and cement, which are energy-intensive to produce.

Premier Wen Jiabao responded last May by starting a national campaign to improve energy efficiency and soon vowed an “iron hand”to enforce compliance. By September, the government was ordering production lines to close at 2,000 factories.

The campaign reached extremes last autumn and early winter, with some town officials shutting off electricity and heat to businesses, homes and even hospitals in desperate bids to avoid censure for missing their goals.

Despite the measures, the government fell slightly short. Senior officials initially said in January that the country had “basically” met the 20 percent goal. But statistics issued since then show an improvement of only 19.1 percent over the last five years.

Meeting the new target of no more than four billion metric tons of coal or its equivalent will require further improvements in efficiency if the economy expands 7 percent a year in the coming years.

Much greater efficiency gains would be needed if the economy grows even faster, as most economists predict. The Chinese economy expanded 10.3 percent last year.

Mr. Wen and others for years have resisted setting total energy consumption goals and have only issued efficiency goals — precisely because overall consumption goals could require drastic measures to meet if the economy surges.

There was no immediate explanation available on Friday, other than troubles in the Arab world, for why the government had now decided to embrace an overall target.

The goals in China’s new five-year plan are consistent with the International Energy Agency’s “new policies” plan for climate change, a middle course that represents an improvement from current policies, Mr. Birol said. But he noted that the Chinese goals did not go far enough to meet what the agency considers necessary to prevent world temperatures from rising by more than 2 degrees Celsius, an increase that many scientists fear as potentially leading to very broad environmental changes.

Mr. Zhang and other Chinese officials have made little mention of climate change, which has ranked far behind energy security as a priority in Chinese policy making.

Zhou Yongkang, one of the nine members of the Politburo Standing Committee that runs China and the top law enforcement official of the Chinese Communist Party, is an oil engineer who spent most of his career rising to the top of the country’s oil industry. He retains considerable influence over energy policy even though his job now is crushing internal dissent.

Most recently, Mr. Zhou has overseen efforts to round up dissidents and make sure that the “Jasmine Revolution” does not spread from the Arab region to China. Premier Wen and other top officials have also warned recently that rising prices for many commodities pose a threat to social stability.