March 10, 2006

China Faces Uphill Energy-Saving Drive

By Emma Graham-Harrison

BEIJING -- To Bejing opera singer and law-maker Liu Changyu, the bright lights that Premier Wen Jiabao wants to dim are a sign of China's progress, and need to stay on.

More serious opposition to Wen's plan to reform the country's energy-guzzling ways will likely come from local officials and entrenched economic interests in affected sectors from steel smelting to real estate.

But Liu's reservations are a reminder of the complex obstacles facing leaders who are trying to back away from a mantra they have been promoting for nearly three decades -- of economic growth at almost any cost.

"The night-time skylines of some cities are very beautiful, and they should not become pitch dark just for the sake of saving energy," said Liu, representing China's well-lit capital at the annual 10-day session of parliament.

"Some consumption is necessary, or we would have to go back to the days when we relied on oil-lamps," she added, in a room illuminated by hundreds of light bulbs.

Beijing has pledged to rein in growth of energy-thirsty industries, develop cleaner sectors such as services, design more efficient housing and use pricing schemes to rein in consumption.

But Wen will need to change attitudes as well as the economy if he wants to meet the goal laid out for this year at the opening of parliament: a 4 percent cut in the energy used to generate each dollar of national income.

There is no question that there is room to slash energy use. China currently uses more than four times as much to generate a unit of output than the average Group of Seven developed country, the Asian Development Bank says.

"From an engineering perspective, the targets are very easy to hit. There is nothing technologically preventing it," said Robert Watson, director of the international energy program at the U.S.-based Natural Resources Defense Council.

More challenging will be giving all of China, from officials to builders, real incentives to sacrifice profits for efficiency.

Policy makers acknowledge they have set themselves a tough target, but they are driven by worries that a growing reliance on imported oil makes the country's economy vulnerable, while burning domestic coal reserves is devastating its environment.

A net exporter of oil until 1992, China now imports more than 40 percent of its needs. Acid rain falls in more than a third of the country and air pollution is linked to some 400,000 deaths a year.


Edicts handed down from Beijing are often ignored by grassroots officials, who mouth the leadership's slogans but carry on making money as rapidly as possible and as dirtily as suits them.

"This goal is achievable... (but) at the local level enforcement is a problem for current energy-efficiency policy," said Yang Fuqiang, head of the Energy Foundation in Beijing.

"A lot of local environment protection officials still agree with the local finance officials who think that development is the most important thing," he added.

Politicians preoccupied with social stability need to create around 9 million jobs a year to keep the growing population employed and manufacturing remains the base of the economy, much of it in such energy-thirsty sectors as steel and aluminum.

Urban growth has also spurred the rise of a prosperous middle-class that is buying up appliances from air-conditioners to washing machines, and taking to the roads, encouraged by state price caps that keep gasoline costs among the lowest in Asia.

Costlier energy could help rein in consumption, but officials are wary of fuelling inflation or aggravating hundreds of millions of poor Chinese already frustrated by corruption and a widening wealth gap.

Price reform may be the test of how much political capital the government is really willing to spend on efficiency.

"It will be interesting to see if China lets go of its price policy, which now has the largest ramification for what they want to do," said Watson. "People do get used to cheap energy."

(Additional reporting by Tamora Vidaillet)