Newsy tidbits on green developments in China, sans analysis.
Super eco-cities? The unstoppable drive in China towards increased urbanization in the midst of the massive scale of rural-to-urban migration is well known. A report by McKinsey, the prestigious global consulting firm, advocates that China undertakes a more concentrated form of urbanization by building 15 “supercities” each with populations of 25 million each, in order to facilitate the massive scale of rural-urban migration. This is in contrast to the more dispersed approach of developing dozens of smaller cities, and the development of the rural western inland regions of the country.
As stated in the press release announcing the report:
MGI [McKinsey Global Institute] finds that concentrated urban growth scenarios could produce 20 percent higher per capita GDP than that yielded by China’s current urbanization path, would have higher energy consumption but also higher energy efficiency, and would contain the loss of arable land. Concentrated urbanization would also have the advantage of clustering the most skilled workers in urban centers that would be engines of economic growth, enabling China to move more rapidly to higher-value-added activities.
Rule of Law. Earlier, I lamented about the need to improve environmental governance at the provincial and local levels. The head of the newly-named Ministry of Environmental Protection is vowing to tighten up enforcement of environmental laws.
Increased Government Investment. The government plans to pump in 41.8 billion yuan (about US$5.9 billion) this year to help meet its 2010 environmental targets, which include reducing energy intensity by 20% compared to 2005 levels. According to Xinhua News, 7.5 billion yuan would be invested in ten energy-saving programs, 4 billion yuan in closing inefficient coal-fired power units and outmoded steel plants, and 5 billion yuan to tackle water pollution.
Government White Papers. Charlie McElwee of China Environmental Law blog breaks down the National 11th Five-Year Environmental Protection Plan (2006-2011), the English version of which has only be been released earlier this month. While I’m at, I should mention the official white paper on China’s energy policy, available in English here.
Recyling Auto Parts. As part of China’s Circular Economy initiative, the National Development and Reform Commission has signed and agreement with three auto makers and 11 parts manufacturers letters of commitment to set up a pilot auto parts recovery program. As the New York Times reports, China is becoming a big player in the auto parts industry.
The wind energy industry in China is booming. Whereas global installed wind power capacity has averaged 28% per year over the past few years, China experienced a 100% increase in such capacity (1.3 GW) in 2006, and another 156% (3.4 GW) increase in 2007 over 2006, for a total installed capacity of 6.0 GW at the end of 2007. This accounts for 6.4% of the world’s capacity. China has set an ambitious target of installing 30 GW of wind capacity by 2020. Given the prolific growth rate experienced in 2007, and the progressive Renewable Energy Law of 2006 that provide favorable incentives for wind power development, the Global Wind Energy Council (GWEC) believes that such target can be easily exceeded, reaching up to 120 GW with the right mix of aggressive policies. Read GWEC’s full 2007 report on the China wind industry here.
The Roaring40s, a renewable energy company based in Tasmania, Australia, is shaping up to be a key player in wind farm development in China. This twelve-minute video features R40s’ forays into the Chinese wind development market. They currently have seven wind project sites across China, one of them which is already operational in Shuangliao in Jilin province. The capacity of most of these projects are just under 50 MW, presumably to avoid the wind tendering process that applies to wind projects that are 50 MW or above. Even its landmark project in Xiangyang, Jilin province, which will become one of the largest wind farms in the world with an aggregate capacity of 1,000 MW, is being constructed in 50 MW (I’m guessing it will be just under 50 MW) stages. Based on its website, R40s uses turbines from Gamesa, Suzlon and Nordex for its China wind farm projects.
Yesterday, the National People’s Congress announced moves to reorganize the central government by creating five so-called superministries, including one responsible for environmental protection via the upgrading of the State Environmental Protection Administration (SEPA) to ministry status. But the NPC stopped short of creating a unified organ to oversee the contentious issue of energy policy.
The government streamlining, the sixth in three decades, is aimed at increasing bureaucratic efficiency and reducing the overlap of responsibilities among various agencies (i.e. reducing the turf wars). The elevation of SEPA to ministry status, in particular, is viewed as the increased importance that the central government places on environmental protection in the face of China’s growing economic strength.
While optimists are hopeful that the new Ministry of the Environment will be the beneficiary of an increased budget or staff capacity, others, like Charlie McElwee at China Environmental Law are more skeptical about the immediate impacts:
SEPA will not be wresting any environmental powers away from other ministries such as the National Development and Reform Commission or Ministry of Construction, but the existing patchwork of agencies with environmental portfolios does not differ significantly from many other countries. This move will have little immediate effect on the environmental enforcement ground game; SEPA is not slated to receive any greater control over local Environmental Protection Bureaus (EPBs).
Until a greater alignment of governance among the new SEPA and the local EPBs is realized, I agree that we will see few positive effects. The problem with environmental governance in China is not the lack of laws and regulations, for indeed there are dozens of comprehensive pieces of environmental legislation, but their lack of enforcement and administration.
In that regard, the recent white paper on Rule of Law offers promise that the central government is serious about building the necessary institutional capacity across its judicial and administrative ranks. Only with the necessary Rule of Law can the local officials be held accountable to the central government for local environmental performance, or harmed citizens seek recourse against polluting enterprises, or foreign companies fully protect the intellectual property of the green technologies that they bring into China.
Though it is difficult to eliminate any overlap of environmental governance amongst the various agencies, I am hopeful that clout of the new SEPA will grow and Rule of Law will take hold in meaningful and positive ways. However, any such gains would be undermined without cooperation with a more cohesive energy policy regulator.
Will Two Become One?
Contrary to earlier speculation, no new single energy ministry was formed. As I’ve made reference in an earlier blog posting, there have been indications from the government that such a move would not be imminent. Instead, the plan is to divide authority on energy matters amongst a new “high level” energy commission would develop national energy strategies, on the one hand, and an energy bureau under the central planning agency would control administration and oversight of the energy sector, on the other hand.
Such a division of authority is viewed simply as a political compromise, rather than any deliberate strategy, remarked Yang Fuqiang, director of the China Sustainable Energy Program, a Beijing-based think tank, to the New York Times. Indeed, I have read reports in the print edition of today’s Straits Times (ST 3/12/08 “China holds back on bureaucracy reforms“) that pressure by two major oil and gas state owned enterprises–Sinopec and PetroChina–has something to do with it. This piece by Forbes also paints the cast of disparate political actors in the China energy landscape. According to the New York Times, Yang predicts that the two energy agencies will eventually be merged into a full ministry in a few more years.
There are few industries as complex as the energy industry. Because the public goods nature of energy in the role of society is unquestioned, it is imperative that a competent, transparent and clear-visioned administrator is able to shepard the industry along and address any market failures and inefficiencies. However, as long as energy regulators continue to be beholden by the interests of the likes of fossil-fuel giants like Sinopec and PetroChina, I am concerned about the ability for clean and renewable energy in making the necessary inroads to propel China on its Green Leap Forward. All the (think) tanks and (green) technologies alone cannot put a green grid together.
The central government, with Pan Yue (潘岳) of China’s State Environmental Protection Administration (SEPA) as its fearless green leader, has enacted a cyclone of green policies dubbed the “Green Whirlwinds”, coinciding with the “peaceful rise” of SEPA to a ministry-level administrative organ. Here’s a brief summary of the green credit, green insurance, green securities and green trade policies that constitute the Green Whirlwinds:
Green Credit. Environmental performance is now a criteria for Chinese companies to obtain bank loans according to a framework developed by SEPA and the China Banking Regulatory Commission. SEPA will also collaborate with the International Finance Corporation to develop an environmental evaluation framework akin to the Equator Principles. What is remarkable about this policy is the ex-post facto nature of this policy. Back in last November, it was reported that 12 heavy polluting enterprises had their loans rejected, suspended and/or even recalled. Recently, however, there have been some concerns that the green credit policy is facing some resistance in implementation.
Green Insurance. In order to introduce an environmental insurance regime that is already commonplace in other developed countries, SEPA and the China Insurance Regulatory Commission will jointly set up pilot projects in establishing an environmental pollution liability insurance system. Enterprises in specified industries especially prone to environmental accidents (e.g. transport of hazardous waste) will be required to buy insurance from insurance companies on the basis of their environmental risk profile. The basics idea here is to spread the risks of environmental damage, facilitate fair and timely compensation to environmental victims, while adding additional pressure points (i.e. the insurers) on companies to improve their environmental performance.
Green Securities. Under this scheme, which was developed jointly with the China Securities Regulatory Commission, companies across 13 identified heavy industries (including those in electric power, cement and steel) seeking an initial public offering on the Chinese stock markets must meet certain environmental criteria, and already listed companies in certain heavy polluting industries will be made to provide minimum levels of disclosures on environmental and energy performance (see previous post). SEPA recently completed a review of 37 companies seeking to raise funds on the capital markets and delayed the listing approval of 10 of them found to be in major violation of environmental standards.
Green Trade. Under this recently announced policy, SEPA has blacklisted 141 products as being “highly polluting and environmentally dangerous”. SEPA is proposing that for 39 of such products in particular, tax refunds and access to processing and trade privileges should be eliminated.
Green Taxation. The details of this final pillar of Green Whirlwind policies are forthcoming.
The Green Whirlwinds represents the ongoing green shift towards market based policy tools and the recognition that the administrative burdens of being “green policy” is too onerous for the government alone to bear.
Less discussed, I believe that the Green Whirlwinds represents an opportunistic policy move by Pan Yue and SEPA to take advantage of the central government’s concern of an overheating economy to design green policies that also help put some breaks on the hitherto unobstructed flow of easy capital to heavy polluting industries. An opportunistic policy move in the right direction, I’d say.