China Puts Forth Energy Intensity, Carbon Intensity and Total Energy Consumption Targets in Twelfth Five Year Plan in Effort to Tackle "Unsustainable Economic Growth"

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China’s annual parliamentary session opened Saturday morning, with 3,000 National People’s Congress members and 2,000 members of the Chinese People’s Political Consultative Conference (CPPCC) gathered in the Great Hall of the People to hear Premier Wen Jiabao deliver the annual report reviewing the work of the government in 2010 and looking forward to the Twelfth Five Year Plan, including key targets of the Twelfth Five Year Plan.  The key targets for energy and climate are a 16 percent energy intensity reduction target, a 17 percent carbon intensity reduction target, and a target to increase non-fossil energy sources to 11.4 percent of primary energy consumption from the current 8.3 percent.  (The Wall Street Journal has uploaded  the Report on the Work of the Government delivered by Premier Wen, which sets out the main objectives of the Twelfth Five Year Plan, as well as the National Development and Reform Commission’s report on implementation of 2010 goals and plans for 2011.)

In addition, in an interview on Friday, former National Energy Administration head Zhang Guobao, who is a member of the Standing Committee of the CPPCC, stated that a cap on total energy use of 4 billion tons of coal equivalent would also be included in the Twelfth Five Year Plan (see also the longer Chinese version of Zhang’s interview about the Twelfth Five Year Plan  and the New York Times article on the plan’s energy targets).  Zhang cites both insecure oil imports as well as the need to promote cleaner energy sources as key reasons for implementing the cap.  In the Chinese version of the article, Zhang also notes that the 11.3 percent non-fossil energy target is a mandatory target (?????). 

However, the Chinese version of Zhang’s interview, unlike the English articles, is much less clear as to how “mandatory” the total energy consumption target will be in the Twelfth Five Year Plan, and it is unclear whether the target will be included as one of the Twelfth Five Year Plan’s “key targets” (????) in the way that the carbon intensity and energy intensity targets will.  Indeed, the carbon intensity targets and energy intensity targets are listed in the annual work report delivered by Premier Wen, while the total energy consumption target is not.  One should also remember that the Eleventh Five Year Plan’s Energy Development Plan (Chinese) also set a target of limiting total energy consumption to 2.7 billion tce in 2010, from a base of 2.25 billion tce in 2006, a target which was easily exceeded.

If the total energy consumption target is to be a mandatory one that would be enforced, this would be the first time that China has set a cap on its absolute energy consumption, as opposed to an energy intensity target, and as such would have important implications.  Total energy consumption in 2010 was 3.25 billion tce, an increase of 5.9 percent from 2009.  Setting a target of 4 billion tce by 2015 would limit total energy consumption growth to an average of 4.24 percent per year. 

Setting a 4 billion tce energy consumption target also would have implications for China’s ability to achieve its 16 percent energy intensity reduction target.   With the cap, the higher the rate of economic growth, the greater the improvements in energy efficiency that will be needed to meet the energy intensity target.  The Twelfth Five Year Plan will lower the target GDP growth rate to 7 percent per year, from 7.5 percent in the Eleventh Five Year Plan, in order to encourage more sustainable economic growth.  However, China’s actual economic growth rates have always exceeded targeted growth rates: average GDP growth in the Eleventh Five Year Plan was 11 percent, even though the targeted growth rate was 7.5 percent.  

If GDP growth were limited to the targeted 7 percent per year in the Twelfth Five Year Plan, then a 4 billion tce energy consumption cap would translate to an energy intensity reduction of only 12.3 percent.  However, if China’s GDP grows at a more realistic 10 percent per year, then the 4 billion tce cap translates to an energy intensity reduction of 23.6 percent, far exceeding the proposed 16 percent energy intensity reduction target.

This points to the important role that the absolute energy consumption target could play in the Twelfth Five Year Plan.  Despite the central government’s best efforts to rein in the pace of growth and encourage more sustainable development, local and provincial development always exceeds national GDP growth targets.  Setting a cap on total energy consumption and allocating this target in an appropriate manner would place additional pressure on local officials and enterprises to develop in more efficient and sustainable ways, including pursuing economic restructuring to move towards less energy-intensive forms of economic development.  An absolute target would also provide local officials with a clearer target, given the challenge of coordinating energy consumption and GDP growth to meet a specific energy intensity target.

Similarly, while the 16 percent energy intensity and 17 percent carbon intensity reduction targets are in line with China’s goal to reduce its carbon intensity by 40-45 percent from 2005 levels by 2020, WWF has called for the Twelfth Five Year Plan to maintain a 20 percent energy intensity reduction target, noting that a higher target is achievable given the momentum that China has gained through implementing energy efficiency programs during the Eleventh Five Year Plan, and necessary in order to provide a target ambitious enough to guide economic restructuring and boost China’s energy security.

As Premier Wen Jiabao warned of in an online chat with citizens last Sunday (Chinese):

We can no longer sacrifice the environment for the sake of rapid development and rash construction; this will only lead to production over-capacity, increased pressure on environmental resources and unsustainable economic growth.

Setting a meaningful target for total energy consumption in the Twelfth Five Year Plan, as well as setting ambitious energy intensity, carbon intensity, and non-fossil energy targets, would provide the guidance needed to push China’s provinces, cities, industries and enterprises to a more sustainable development path.  

This post was coauthored with NRDC China Climate and Energy Policy Director Alvin Lin and NRDC China Climate Fellow Michael Davidson.

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