China Update

China Update

11th January 2007

China Misses Energy Saving Goal, but Cracks Down

BEIJING - China missed its energy saving target last year, a top official said on Wednesday, but Beijing is cracking down on major companies that ignored environmental rules as sustainable development moves up the government agenda.

Four of the country's top power firms will not get environmental approval for any new projects until they resolve problems with existing plants, said Pan Yue, deputy head of the State Environmental Protection Administration (SEPA).

Without this permit construction cannot legally go ahead. Officials at Hong Kong listed Datang International Power Generation Co., and state owned Huadian Corp., Huaneng Group and China Guodian Corp. should also be held responsible for the violations, the watchdog said in an unusually strong statement posted on its Web site (www.sepa.gov.cn).

"SEPA is being given more power and is starting to flex its muscles in what is the early stages of a political shift away from the big polluting industries towards a more clean and green mentality," said Anthony Wilkinson, Head of Research at the Clean Resources Asia fund.

But after years of promoting economic growth at almost any cost, Beijing is still struggling to change official attitudes, despite a raft of new policies including tying civil servants' career prospects to their energy saving achievements.

"2006 has been the most grim year for China's environmental situation," the SEPA statement quoted Pan saying.

"The goals set out by the cabinet at the start of the year, of cutting energy intensity by 4 percent and emissions of pollutants by 2 percent have absolutely not been achieved."

The failure will be a blow to top officials worried about China's economic vulnerability as its demand for oil outpaces domestic production capacity.

The country gets nearly half its crude from abroad, and while it has vast coal reserves, use of the dirty-burning fuel creates other problems from acid rain to deadly smog.

Pan did not say by how much China missed the goals, but in the first half of the year, energy consumption per unit of gross domestic product actually rose 0.8 percent. Figures are not yet available for the second half of the year.

GREENER FUTURE

Only Beijing and five other regions, out of the country's 31 provinces and self-governing cities, managed to meet the state-set goals, the official China Daily reported, without citing a source or naming the other success stories.

However, as the target was only set in March, and the first government measures to enforce it unveiled later, more provinces may fall in line during 2007, particularly as leaders are pushing hard for more sustainable growth.

"This is not a case of China becoming suddenly altruistic towards the rest of the world, but the penny is dropping in Beijing that they can't continue to grow at 9 percent a year in the same unsustainable highly energy-consuming way of the past," Wilkinson added.

In what could be a sign of growing power, SEPA, which has usually targeted smaller enterprises, included large steel makers along with the big power firms on its list of 82 projects which violated environmental rules.

It covered plants opened by Laiwu Iron and Steel Group, China's eighth-biggest steelmaker, and rapidly-expanding Baotou Iron and Steel Group, the twelfth. The statement also singled out steel projects clustered in the city of Tangshan, which it said accounted for one-tenth of the country's output of the metal. (Additional reporting by Lucy Hornby)

Story by Emma Graham-Harrison

REUTERS NEWS SERVICE