John Garnaut
The Age
September 8, 2010
AN ABRUPT command from Beijing to follow through with ”iron-fisted” energy and carbon emission cuts has thrown China’s industrial heartland into chaos.
Steel factories across the country are slashing production – implying a rocky outlook for key Australian commodities such as iron ore – while smaller Chinese plants have been arbitrarily plunged into darkness.
”We had no water to flush the toilet, we couldn’t use the fridge and of course production stopped,” said an office manager at Wanxing wire mesh factory in Anping, Hebei province.
He said he had struggled through 10 days of randomly imposed blackouts – some as long as 22 hours – and the water supply and electrical appliances had just come back on. ”We often didn’t hear the power cut notices, partly because we couldn’t watch TV,” he said.
This energy-efficiency drive reflects Beijing’s last-minute lunge to make good on a pledge to reduce energy use per unit of economic output by 20 per cent over the five years ending this December.
More than a quarter of that improvement has to be achieved in the last months of this year, after earlier energy-efficiency gains were blown by Beijing's successful economic stimulus program.
Chinese advisers say achieving the widely publicised energy target is seen as crucial for maintaining the government's policy credibility, as well as China's longer-term pledge to reduce the intensity of carbon emissions by 40-45 per cent per unit of GDP by 2020.
But Pan Jiahua, a climate change policy expert who directly advised the Politburo earlier this year, told The Age that this was not an efficient way to achieve the goal of energy efficiency.
''The 20 per cent target is compulsory, so the central government mandated the provincial governments to have their energy cuts, and the provincial governments passed this requirement to county level governments, and local government officials have no choice but to implement,'' said Professor Pan, who heads the Urban Development and Environment Centre at the Chinese Academy of Social Sciences.
''It's crazy,'' he said, referring to the absence of any flexibility or adjustments for local conditions.
Attention in China is now shifting to the next five-year plan, the contents of which are being furiously debated behind closed doors before being presented to next month's annual meeting of the Communist Party Central Committee.
Last month a senior Ministry of Finance official floated the possibility of a carbon tax.
''I haven't heard anything about a carbon emissions tax,'' Joshua Chen, chief financial office of China's biggest energy consumer, Chalco, told The Age in an interview. ''But there will be strict carbon emissions quotas for new projects.''
He added that the controls for new aluminium plants would be ''very strict''.
Professor Pan told The Age that future targets needed to be achieved ''democratically'', rather than arbitrarily, via the market.
He said everybody should be given a base level of electricity, with heavy users having the option of paying a ''penalty'' price for usage above their quotas.
He said neither the mechanism nor targets had yet been set, but a carbon tax was unlikely.
