China: Racing Toward the Finish Line on its Energy and Environmental Targets
Posted October 7, 2010
I am in Tianjin this week for the climate talks, and the mood, compared to Copenhagen, has been subdued. In contrast, all around China government officials and factory owners are working themselves into a frenzy to meet their share of China’s 20 percent energy intensity reduction target.
The headlines have been stunning. Across the country, a massive effort has been mobilized to eliminate backwards production capacity, control growth in energy intensive industries (like steel and cement), and a variety of other efforts. In August, China released a list of over 2,000 factories with outdated equipment that had to be shut down by the end of September. Anping County in Hebei Province cut power to hospitals, schools and homes for 10 days in an effort to save energy. The process has not been polished in all respects. And reactions, like the forced blackouts, are clearly unintended outcomes. But, China’s process is no doubt rushing forward at breakneck pace on an unprecedented scale. And, despite the unintended consequences, it is hard to argue that this is not a serious effort that is having significant impact.
What is going on here?
If you have been following China’s climate and environment efforts, you know that China instituted two major environmental targets in the current 2006-2010 11th Five-Year Plan: the 20 percent energy intensity target, and a 10 percent pollution reduction target. What you may not know is that this marked an unprecedented elevation of environmental and energy targets in China. While China had started to experiment with evaluating government officials and factory owners on the basis of environmental criteria in the 1990s on a pilot basis, in 2006, China for the first time designated its environmental and energy targets as so-called veto targets, the highest level government targets previously reserved for factors such as GDP growth and few other targets. In theory, this means that government officials who do not meet these targets will lose their jobs, receive no bonuses and face other consequences.
To outside observers, this “target responsibility system” may seem quite unfamiliar as a governance tool. It is more commonly found, say, in the management of large corporations. Think of GE issuing profit targets to its business units and basing promotion and bonus decisions on this performance. China has already announced that this is the system it will have at the core of its efforts to implement its carbon intensity targets in the 12th Five-Year Plan and onward.
These governance systems with Chinese characteristics clearly motivate behavior.
Over the last four plus years, China has embarked on a massive effort to establish a governance framework to implement its jieneng jianpai (节能减排energy efficiency, pollution reduction) targets. This has included a detailed series of regulations, and a variety of other mechanisms (see here for more information). The result has been that, as of the end of 2009, China had reduced its energy intensity by 15.61% from 2005 levels. However, in the first quarter of 2010, energy intensity rose (by 3.2 percent) for the first time since 2006. In response, in May 2010, China’s Premier Wen Jiabao announced that China would redouble its efforts to reduce its energy intensity with an “iron hand” (Green Leap Forward has a nice blog on this).
In the wake of this announcement, we have seen some unintended consequences (see here). But China’s NDRC has reacted quickly by setting forth clearer rules (English version) on how to implement the energy and environment targets, including banning forced blackouts. Expect continued efforts to work out these kinks as China heads into the 12th Five-Year plan and begins to implement its carbon intensity target. China also has an opportunity here to show the world its good work, as my colleague Barbara Finamore notes.
Stay tuned for what happens over the next five or six months in China as we head toward the end of the 11th Five-Year Plan and accounts are settled across the country. It’s going to be a wild finish.
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