China's Energy Efficiency Goal "Near-Impossible"
By Erik Dahl
09 Feb 2006 at 09:22 AM EST
BEIJING (Interfax-China) -- China's goal to reduce energy intensity (energy consumption per unit of GDP) by 20% before 2010 is "near-impossible" using the government's official statistics, a new report from the World Bank states.
"To meet the 20% reduction in only five years could require pretty tough policies that might hurt growth," Louis Kuijs, senior economist for the World Bank in China, told Interfax.
Aflease
The World Bank also has concerns about the policies suggested by the National Development and Reform Commission (NDRC) including the classification of industries into ones that should be encouraged, discouraged or banned, said Kuijs.
Adjusting energy prices is a more appropriate and market-friendly method, Kuijs said.
"China has been adjusting energy prices for a long time, and indications are that helped improve the energy intensity. There is still a lot of scope for raising energy prices," said Kuijs.
Higher prices are also likely to eliminate the occasional shortages of gasoline that have hit the country in recent months, according to the report.
From 2001 to 2004, energy intensity has skyrocketed, with growth in energy use exceeding GDP growth, according to official data, which some experts have questioned.
Some have suggested that the official data is not correct, and the situation has not actually been deteriorating.
Policies in the 1990s aimed at closing small mines may have resulted in them being taken off the books instead of being closed. They therefore may have disappeared from the statistics, leading to a rapid apparent decline in energy intensity. If the "closed" mines are included in the data, the decline has been smooth and the recent spike is eliminated.
"Even with the better numbers, the 20% reduction in only five years is still an ambitions target," said Kuijs.
According to these estimates, elasticity has been 0.5 over the last five years, which means that every 10% increase in GDP required a 5% increase in energy use.
Assuming 7.5% growth, enough to reach China's target of doubling GDP between 2000 and 2010, energy elasticity would have to be 0.34, with every 10% increase in GDP requiring a 3.4% increase in energy use.
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