Energy was in the headlines this week as the draft of China's first energy law continued its slow progress through government. The law was supposed to be finalized by the end of last year and it can’t come soon enough.
The lack of progress mirrors the lack of progress China has made on a disparate raft of new energy regulations and targets introduced over the last several years, partiulalry its overarching energy goal of cutting energy consumption per unit of gross domestic product by 20% by 2010 (but see further down for encouraging progress on renewables).
Dilly-dallying is perhaps not surprising given that the government's energy policies are currently regulated by several agencies, including the energy bureau of the National Development and Reform Commission, the State Electricity Regulatory Commission, the State Administration of Coal Mine Safety, the Ministry of Water Resources and the Ministry of Land and Resources. Further hindering progress, provincial level governments still have an unhealthy fixation on the growth-at-all-cost model of economic development – as initially formulated by late former premier Deng Xiaoping – despite repeated urgings from central government to move towards a more sustainable, or scientific, model of development.
Guangdong governor Huang Huahua’s self-congratulatory announcement at the 2007 International Seminar on Guangdong Economic Growth this week is a case in point. Huang said the province’s economy grew 14.7% year-on-year in the first ten months and is expected to be worth over US$390 billion for the whole year, surpassing the size of Taiwan’s economy. Deng famously exhorted the southern Chinese province to emulate and then outgrow the Four Asian Tigers of Taiwan, Singapore, Hong Kong, and South Korea, and the province has not given up on its quest. Guangdong overtook GDP in Singapore in 1998 and in Hong Kong in 2003. Only South Korea remains. The ghost of Deng evidently carries more weight than the repeated mutterings of the party poopers currently ensconced in Beijing who wish to drag growth down to around 8%.
Deng and Guangdong aside, experts said the creation of a single central government ministry will help Beijing reach its energy goals, but the recent billion dollar IPOs of energy giants Shenhua and PetroChina show that investors don’t share the experts' optimism. They also benchmark the size of the mountain the new ministry must drag the country up and over, as does a new report released Wednesday by the International Energy Agency (IEA).
The report said China was likely to overtake the US as the world’s largest energy consumer soon after 2010 and forecast that China's primary energy demand would more than double from 1,742 million tonnes of oil equivalent to 3,819 million tonnes by 2030. China was “by far the biggest contributor” to an expected 57% increase in global energy-related CO2 emissions between 2005 and 2030, the IEA said.
However, in another report released Wednesday, the Worldwatch Institute said China was on target to meet or exceed an ambitious renewable energy goal announced in September to nearly double the proportion of renewables in its overall energy mix from 8% in 2006 to 15% in 2020. I think the targets are very realistic or even conservative based on what they have done thus far,” Eric Martinot, lead author of the study on the future of renewables in China, told the Financial Times.
China will invest more than US$10 billion in additional renewable power capacity, including wind, solar, hydropower, biomass, and biofuels, this year, twice the amount invested by the US in 2006. Only Germany is investing more – over US$11 billion in 2006.
The country has also created a fund to invest revenues from carbon reduction in new environmentally focused projects. The CDM Fund will invest US$3 billion of the US$15 billion in revenue expected to be generated by the sale of carbon credits issued by the 885 carbon-reduction projects approved by Beijing in the last two years. However, although 60% of the world's carbon-reduction projects are located in China, only 60 out of the 885 approved projects have actually been registered to issue carbon credits under the UN's Clean Development Mechanism to date.
China’s draft energy law and optimism over renewables is taking shape against continuing international discussions about what to do when the decomposing corpse that is the Kyoto protocol is finally buried in 2012. The government has made it clear that it will not be dictated to. Officials told the European parliament's climate change committee last week ahead of a beyond-Kyoto summit in Bali in December that China would not be tied to set targets for the reduction of greenhouse gas emissions. China believes the burden of reducing emissions should lie with the developed countries who have made the biggest historic and per capita contributions to global warming. Emissions reductions should not stand in the way of development, it argues, although it has not ruled out committing itself to anti-climate change action along with other developing countries.
Expect the debate to heat up, and probably even faster than the world's environment.