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Gov't Strives to Bring Local Authorities into Line on Energy Efficiency
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Premier Wen Jiabao made no mention of energy saving goals for this year in the government work report delivered to the 12-day session of the National People's Congress, China's top legislature, which opened on Monday.

But in the report, Wen said goals for reducing energy consumption and reducing pollutant emissions will not be altered and called for steadfast efforts to realize these goals.

The statement was seen as further demonstration of the government's determination to reduce energy consumption and control pollution, but achieving the goals will be a challenge for both central and local governments, observers believe.

According to the government's 11th Five-Year Plan (2006-2010), China's energy consumption for every 10,000-yuan (US$1,298) of gross domestic product (GDP) should be reduced by 20 percent by the end of the period. Meanwhile, the discharge of sulfur dioxide and chemical oxygen demand (COD) should drop by 10 percent.

However, as the government work report said, last year China failed to reduce per-unit energy consumption by four percent and discharge of major pollutants by two percent, targets set at the beginning of the year.

Zhou Shengxian, head of the State Environmental Protection Administration (SEPA), said the failure was mainly a result of weak supervision and insufficient investment by his administration.

Reasons behind the failure, as cited in the government work report, included slow progress in industrial restructuring and fast growth in sectors that consumed more energy and discharged more pollutants. It said, "Some local governments and enterprises did not strictly abide by laws and rules on environmental protection and energy saving and did not meet related criteria."

In 2006, the concept of policy execution was written in the annual government work report for the first time, and a year later, the work report included "to enhance policy execution" again.

"In the past, policy enforcement relied on political conviction and the authority and power of the central government. But now, things have changed. Local governments and enterprises put interests first," says Wang Xiaoguang, head of the economic operation and development section of the Research Institute of Economy under the National Development and Reform Commission (NDRC).

The central government has long required local governments to pay more attention to the quality rather than the quantity of GDP. However, there still exists a "GDP complex" and "competition in GDP growth" among local governments. Over the past few years, the government has waged two campaigns of macro economic regulation to constrain the overheating of some industries, the real estate sector in particular. But housing prices ran away, which was seen by analysts as a result of dysfunction between the central and local governments.

Zhou Dadi, a senior researcher with the NDRC Research Institute of Energy, says some local governments, including both coastal and hinterland regions, blindly launched big budget projects to realize rapid economic growth.

In the first half of 2006, northern China's Inner Mongolia Autonomous Region recorded a year-on-year economic growth of 18.2 percent, 7.3 percentage points higher than the national average, and a 43.5-percent growth in fixed assets investment, 12.3 percentage points higher.

In eastern Shandong Province, 14 out of 17 prefecture-level cities posted an economic growth of more than 17 percent in the six-month period.

The rapid economic growth in Inner Mongolia was a result of both large investment and high energy consumption.

In 2005, the autonomous region's energy consumption for every 10,000 yuan of GDP averaged 2.48 tons of standard coal, nearly 100 percent higher than the national average of 1.26 tons. The situation was similar in some other regions.

Media reports said that though local government leaders frequently spoke of the "concept of scientific development" and "changing economic growth pattern", they continued to give priority to quantitative GDP growth.

As far as institutional arrangements were concerned, analysts noted, the "GDP worship" mainly stemmed from the fact that after China opened up to the outside world and began to reform, the interests of local governments have been separated by a certain degree from those of the central government and the local governments have become relatively independent stakeholders, making them more conscious of revenues.

Meanwhile, production factors such as land and labor were yet to be further commercialized, which made it easier for local governments to increase income through price leveraging, according to analysts.

The SEPA has unveiled a blacklist of 82 projects that seriously violated environmental protection assessment rules. Involving combined investment of 1.12 trillion yuan (US$145.8 billion), the big budget projects were protected by local governments as they were cash cows.

Environmental protection agencies and other departments had imposed penalties on some projects, but the penalties were not executed due to local protection.

Wang Xiaoguang says, "Given the current political and economic regimes yet to be improved and different interests yet to be unified, such dysfunction between central and local governments will remain for some time to come."

However, some analysts point out that some local governments have performed well. They cited southern Guangdong Province.

In late 1990s, Guangdong began to accelerate industrial restructuring and put energy-efficient services and new and high-tech sectors high on its development agendas.

In the first half of 2006, the service sector accounted for approximately 60 percent of the province's total fixed assets investment.

Meanwhile, Guangdong phased out outmoded production facilities. In 2005, more than 390 small businesses that failed to meet industrial standards were shut down. The same year saw Guangdong's energy consumption for every 10,000 yuan of GDP stand at 0.79 tons of standard coal, the lowest in China and an equivalent of 65.8 percent of the national average.

In the first half of 2006, the national per-unit energy consumption went up 0.8 percent on average, but the indicator in Guangdong went down 2.5 percent. Analysts accredited these achievements to efficient policy execution by the provincial government.

Since 2006, the central government has signed accountability documents on energy saving with local governments and major enterprises.

Li Zhong, a national legislator and general manager of a subsidiary of Huaneng Power Group in southern Hainan Province, says the parent company has assigned specific, annual energy saving tasks to him. If he fails, the parent company will ignore all of his other achievements this year.

(Xinhua News Agency March 9, 2007)

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