By Julian Wong Feb.4.2010
In: governance
2 comments

The National Energy Commission: Myth-busting the "New Energy Super Ministry"

Updated Feb 9

The “new energy super ministry” announced last week is neither new, nor a super ministry.  Let’s discuss.

First, the raw facts.

On January 22, the State Council announced the formation of the National Energy Commission, whose purpose would be to:

To study and formulate national energy development strategy, to consider the major issues of energy security and energy development, to coordinate domestic energy development and important matters of international cooperation. (“负责研究拟订国家能源发展战略,审议能源安全和能源发展中的重大问题,统筹协调国内能源开发和能源国际合作的重大事项。”)

The NEC consists of 23 members made up of:

Director: Premier Wen Jiabao
Vice-Director: Li Keqiang, Vice Premier of the State Council
Members:
You Quan, Deputy Secretary-General of the State Council
Zhu Zhixin, Director of the Central Finance Office
Yang Jiechi, Minister of Foreign Affairs
Zhang Ping, Director of National Development and Reform Commission
Wan Gang, Minister of Science and Technology
Li Yizhong, Minister of Industrial and Information Technology
Geng Huichang, Minister of Security
Xie Xuren, Minister of FinanceXu Shaoshi , Minister of Land and Resources
Zhou Shengxian, Minister of Environmental Protection
Li Shenglin, Minister of Transport Minister
Chen Lei, Minister of Water Resources Minister
Chen Deming, Minister of Commerce
Zhou Xiaochuan, Governor of the People’s Bank of China
Li Rongrong, Director of SASAC
Xiao Jie, Secretary of the State Administration of Taxation
Luo Lin, Secretary of the Safety Supervision Bureau
Liu Mingkang, Chairman of China Banking Regulatory Commission
Wang Xudong, Chairman of State Electricity Regulatory Commission
Zhang Qinsheng, Deputy Chief of General Staff
Zhang Guobao, Deputy Director of the National Development and Reform Commission, and Director of the National Energy Administration (NEA).

While Premier Wen Jiabao and Vice Premier Li Keqiang are titular leaders of the NEC, Zhang Ping, Director of the NDRC, will be in charge of the day-to-day management of the NEC, with Zhang Guobao, Zhang Ping’s deputy at the NDRC and director of the NEA, second-in-charge.

Now, let’s really discuss.

Is the NEC new?  When I fist saw the announcement, I had to do a double-take, because I was pretty sure such an institution was in existence.   Turns out, I was right, but not quite for the right reason.

What I was thinking about was the National Climate Change Leading Group, an inter-ministry group organized in 2007 along similar lines to specifically address the climate change issue (see page 6 of this).  The NEC is clearly something distinct from this, but there are some notable differences.  For instance, the National Bureau of Statistics, represented in the NCCLG, is not in the NEC.  This is quite a glaring omission-if there is one thing that Chinese energy governance needs to urgently reform, it is the way they collect, process and report energy data.  That omission is puzzling to me.

The NEC, it turns out, is not exactly new–it was already almost two years in the making.  In March 2008, in the wake of the big bureaucracy reshuffle (see previous post “Bureaucratic Streamlining and Rule of Law“), the State Council already authorized the formation of the NEC (Chinese only).  In that circular, it was made clear that the NEA would carry out the specific work of the NEC (“具体工作由国家能源局承担”), thus suggesting that the NEA would subordinate to the authority of the NEC.

In fact, the NEC was born at the same time as the NEA (at one point also referred to as the National Energy Bureau, or NEB), and it was a bit unclear back then what the relationship of the NEC was to the NEA.  But I think Erica Downs of Brookings got it right when she formulated the following chart:

In essence, the NEA now finds itself in the awkward position of serving two distinct masters, the NDRC, where it officially sits, and the NEC, for which it is not carrying out the “specific work” for.  Perhaps this may not turn out to be a big deal, both the NDRC and NEA seem to be the driving forces of the NEC with Zhang Ping (of the NDRC) and Zhang Guobao (of the NEA, which sits in the NDRC), as the hands-on managers of the NEC.   It will be interesting to see how this arrangement works out.

In fact, the NEC was formed to replace what used to be the National Energy Leading Group, which was established in 2005 to serve as an advisory and coordination body under the State Council and was also then headed by Premier Wen.  It is observed (Chinese only) that unlike the NELG, the membership of the NEC includes representation from the Ministry of Transport, Ministry of Water Resources, and some less obvious stakeholders such as the central bank, the State Administration of Taxation, the Chinese Banking Regulatory Commission and others.  Indeed, some 19 different agencies are represented in the NEC to 13 in the NELG.  This suggests the State Council’s more comprehensive engagement on energy policy then every before.

It seems more likely than not that playing the role of a coordinator for the nearly two dozen or so agencies and bureaus that have a direct or indirect role in influencing the energy sector will be a primary function.  A Chinese op-ed likens energy management in China to the chaotic drama of the Three Kingdoms-energy prices are set by the NDRC, but the wholesale of refined oil products are overseen by the Ministry of Commerce, even while the state-owned oil companies are supervised by SASAC, the State-owned Assets and Supervision Commission of the State Council.  (Of course as the membership of the NEC shows, much more than three agencies have a say on  different aspects of energy policy in China.)

In an interview with media (Chinese only), Zhang Guobao, director of the NEA, confirms as much-high-level guidance and coordination  is what the NEC is all about, and that the “routine work” of the NEC will in fact be carried out by the NEA.  Li Junfeng, deputy director of the Energy Research Institute, the energy think tank under NDRC, makes very similar observations (Chinese only).

If coordination is all its doing, and if the heavy lifting continues to be carried out by the NDRC and NEA, then the NEC is hardly a “super ministry” as China Daily would have you believe.  There is still a lot that the NEC by itself has no power to Viagra do.  It is worth pointing out that the all-powerful NDRC, a true super ministry, still retains the authority to price energy through its Pricing Bureau.  But at least one report is suggesting that the NEC will take on the ambitious task of formulating a twenty-year plan for energy development.  This would be consistent with the first part of the stated mission of the NEC, but the opacity of how the NELG and NCCLG have worked in the past provide little clues as to how effectively the NEC will work.  If the NEC is truly tasked to undertake long-term energy planning, and does so in way that is truly collaborative among its diverse members, what may result is a robust, integrated energy plan.

It will be interesting to see if the NEC, or any future unified Ministry of Energy, of which the NEC is most likely a pre-cursor to, makes any headway in overcoming the web of “competing interests” and “splintered institutions” governing China’s energy use that Ed Cunningham describes in his influential 2007 essay.   The NEC does begin to being these competing interests and splintered institutions to the same table, but there is little so far to make one believe that coordination alone will quell the turf battles between energy stakeholders that have gone on for decades.

As Erica Downs said to me, this could all turn out to be “old wine in a new bottle.”  We’ll just have to see how all this pans out.

UPDATE(Feb 9): Since putting up this post, I’ve had some fruitful exchanges with the China energy community and gleaned new perspectives that I would like to share. The first interesting aspect is the subtle shift in the mandate of the NEC vis-a-vis the NELG. We’ve pointed out the mission of the NEC above. The NELG’s mandate seems quite similar:

To research the nation’s energy development strategy and planning; to research energy development and conservation, energy security and emergency response, international energy cooperation and other major policies, and provide recommendations to the State Council.(“研究国家能源发展战略和规划;研究能源开发与节约、能源安全与应急、能源对外合作等重大政策,向国务院提出建议”)

Hard to say if the omission of concepts like “energy conservation” and “emergency response” in the mandate of the NEC is meaningful or not.  On the one hand, it doesn’t seem like both those issues are any less pressing now compared to 2005–if anything they are more urgent.  But as Damien Ma of the Eurasia Group told me, “if there’s one thing that’s certain about the Chinese, subtle language shifts can sometimes become titanic shifts in policy orientation.”

Another interesting aspect is the role of the state-owned energy companies (like Sinopec, PetroChina, CNOOC, etc.)…or lack thereof. The State Council makes explicit that the NELG could invite the large energy companies to participate in meetings (“领导小组可根据需要请…大型能源及相关企业主要负责人列席会议”). Such language is missing in the announcement of the NEC. Now one might argue that the state-owned energy companies are represented by proxy by Li Rongrong, the director of SASAC, which is the sole shareholder of these state-owned energy companies. But that was also true of the NELG, in which Li Rongrong was also at the table, in addition to having the explicit authority to call in specific representatives of the national energy companies. Is this a sign of the gradual marginalization of the national energy companies from the energy policy making sphere? This would be a very interesting development indeed, for in times past, these national energy companies have been very influential in shaping energy policy direction. I quote again Erica Downs:

These firms are powerful and relatively autonomous actors. Their influence stems from their full and vice ministerial ranking, membership of key executives in the Central Committee of the Chinese Communist Party (CCP), industry expertise, internationally listed subsidiaries, and profitability. More often than not, it is China’s energy firms that initiate major energy projects and policies, such as the West-East Gas Pipeline and the acquisition of foreign energy assets, that are later embraced by the government. Yet energy companies sometimes advance corporate interests at the expense of national ones. For example, oil and power generating companies have periodically reduced their output to pressure the government to raise state-set prices of refined products and electricity, which have not kept pace with market prices of crude oil and coal. Similarly, China’s national oil companies have ignored guidance from the central government about where they should invest overseas. China National Petroleum Corp. (CNPC) acquired more assets in Sudan even after NDRC in 2007 excluded Sudan from a list of countries in which Chinese oil companies were encouraged to invest.

And finally, it is worth taking a closer look at specific personalities. Vice Premier Li Keqiang’s increasing prominence in energy policy and national affairs is underscored by his Vice-directorship here. It is worth noting that he led the largest Chinese delegation ever at the recently concluded World Economic Forum in Davos, Switzerland. Li is commonly believed to be next in line to succeed Premier Wen, or even President Hu. Zhang Guobao, once believed to be heading into retirement, sees his leadership role at the NEA enhanced, at least for now, with this new deputy position for the day-to-day management of the NEC, suggesting we’ll see a lot more of Zhang in Chinese energy policy in the days ahead.

An interesting piece (hat tip to Joe Narus) by John Garnaut of the Sydney Morning Herald concludes that the make up of the NEC demonstrates that President Hu is consolidating his power as the NEC is now stacked with many of Hu’s liberally-oriented allies (like Li Kequang and “Li’s underling You Quan, leaders of the National Development and Reform Commission who work easily with Hu (Zhang Ping and Zhang Guobao) as well as market-oriented policy makers like Zhou Xiaochuan (head of the central bank) and Liu Mingkang (the banking regulator)”), at the expense of members of former President Jiang Zemin’s Shanghai-clique such as Huang Ju, who vice-director of the NELG but has since passed away. It is also pointed out that Xie Zhenhua, vice-minister of the NDRC and the chief international climate change negotiator is a glaring omission and perhaps at least partially a rebuke for his “finger-pointing outburst at Obama behind closed doors at Copenhagen.” Garnaut’s SMH article is worth reading in full.

Picture Credit:  HowStuffWorks

Comments (2)

  1. Michelle Chang Mar.2.2010@4:17 pm Reply

    Hi,

    Thank you for sharing so much insightful information.
    I am currently working towards a research paper on the NEC.
    Would you mind elaborating a little more on what convinced you that Zhang Ping and Zhao Guobao are actually controlling the NEC? Is there any document, sources, etc. that suggested this?

    Thank you very much!

    - Michelle Chang

  2. Michelle Chang Mar.2.2010@4:24 pm Reply

    actually, never mind, i just sent you an email.

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