Senior Policy Advisory Council Meeting & Forum on Implementing China’s 2010 20-Percent Energy Intensity Reduction Target
One year ago, senior ministers serving on the CSEP Senior Policy Advisory Council asked our program to help implement the centerpiece of China’s 11th Five-Year Plan (2006-2010)—a national 20-Percent Energy Intensity Improvement Target (“20-Percent Target”), and to report on progress during this year’s PAC Council events. Arguably the world’s most ambitious global warming pollution reduction program, the 20-Percent Target aims to cut the amount of energy consumed per dollar of economic output by 20-percent by 2010—equivalent to cutting 1.5 billion tons of carbon dioxide emissions a year in 2010, and removing 234 large (1,000-MW) coal-fired power plants.
Achieving this 20-Percent Target will be hard, but is possible: China achieved a similar target between 1980 and 2000 (4.1 percent energy intensity improvement every year). The challenge today is achieving a similar target under competitive market conditions (as opposed to the previous target achieved under command economy conditions).
a. Forum on Implementing China’s 2010 20-Percent Energy Intensity Reduction Target—November 9, 2006
Hosts the National People’s Congress Environment and Resources Committee, and the State Council Development Research Center, invited the directors of provincial economic commissions and development reform commissions, as well as several Provincial People's Congress members to attend; 28 of 31 provinces attended, and thus we had a truly national meeting of nearly all provinces. These directors run China’s economy, and will personally author the plans for the 20-Percent Target in their provinces, including overseeing implementation and enforcement.
The central government’s lead office overseeing the 20-Percent Target—NDRC’s Department of Resource Conservation and Environment Protection, represented by Director-General He Bingguan—emphasized the crucial importance of every province cutting its energy use from 2005 levels. Meeting the target will be hard: GDP is rising much faster than anticipated, and could hit 10.7 percent in 2006 (3.2 percent faster than the baseline used in establishing the national target). Both NDRC and Feng Fei of the State Council Development Research Center (DRC) outlined the main strategies available to provinces for implementing the target:
Structural adjustment: Shift investment from heavy to light industry;
Technology improvement: Cut energy waste by investing in more modern and energy efficient technologies;
Improve energy management: Reinvigorate provincial energy management offices to provide demand-side energy services and training to the top-1,000 industrial enterprises. The central government has established a new National Energy Conservation Center to oversee provincial counterparts;
Implement the Energy Conservation Law: Step up energy pricing reforms, establish a national fund for energy efficiency, and adopt tax incentives for energy efficiency investment.
The Forum confirmed that China’s overwhelming challenge is administrative and political. CSEP grantees have successfully introduced international best practice policies; many of these are now either adopted at the central level or demonstrated in various provincial pilots. Harder is generating local political will for local implementation.
The Forum outlined a clear path ahead. CSEP and its grantees aim to work with the lead provinces where comprehensive implementation of policies to achieve the 20-Percent Target will (1) save the most carbon, and (2) are most likely to succeed. We intend to focus our grants on helping research institutes affiliated with these provinces’ economic commissions to:
1. Develop province-wide implementation plans. The plans will outline the immediate policies needed to catalyze efficiency technology investments in top industrial enterprises, utilities, buildings, transportation, and renewable energy in order to rapidly achieve the 20-Percent Target;
2. Assist with implementing the Top-1,000 Enterprises Program in 2-3 lead provinces in order to demonstrate international best practices in energy auditing, benchmarking, financial and tax incentives, and evaluation procedures;
3. Work with provincial finance bureaus and banks to develop incentive policies to achieve technology upgrades for industries and buildings;
4. Assess whether pairing provinces—for example, pairing a rich eastern province to trade energy intensity credits with a relatively poor western province—could help expedite implementation of the 20-Percent Target.
b. Senior Policy Advisory Council (PAC) Meeting—November 10, 2006
This year’s PAC event, chaired by Cole Wilbur (the Packard Foundation), focused on the NPC’s energy legislation agenda.
CSEP encourages international best practice energy efficiency and renewable energy policies. To get robust implementation, however, we encourage rule of law developments in China, including comparisons of international best practice energy and environmental laws and institutional practices. We heard presentations on (1) Implementation of the Renewable Energy Law, (2) Amendments to the Energy Conservation Law, and (3) Developing a National Energy Law (which could establish a much-needed Ministry of Energy.
CSEP also presented an “Energy Vision for 2050”—a look at the long-term global warming prospect and the daunting challenge of keeping the global concentration of atmospheric carbon dioxide below 450 parts per million (ppm). Staff emphasized that China’s energy planning needs to adapt to global ecological constraints, and that China’s adoption of various energy efficiency and renewable energy laws and policies to date (many with CSEP support) is a positive step in the right direction.
China’s various energy laws are progressing quickly. Presenters recommended various implementation policies to the Renewable Energy Law and, various amendments, including establishment of an energy efficiency fund to finance energy efficient technology upgrades nationwide, to the Energy Conservation Law. Most encouraging is the rapid progress in drafting a major, comprehensive National Energy Law that could be completed as early as 2008. That Law could establish a much-needed Ministry of Energy to serve as a central coordinator of sustainable energy policy.
Of greater challenge will be local implementation and enforcement of these laws. CSEP staff submitted policy recommendations to the PAC that include reforming the State Environmental Protection Administration (SEPA) and provincial Environmental Protection Bureaus (EPBs), and called for stepping up local accountability for implementation and enforcement. There is promise: Local officials increasingly must demonstrate environmental performance improvement during annual job performance reviews.