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China scraps power sops for heavy users

By Wan Zhihong (China Daily)
Updated: 2010-08-07 09:10

Workers conducting maintenance work on power facilities in Huaibei, Anhui province. [Provided to China Daily]

Move to help China in energy conservation, emission reduction

BEIJING - China has canceled all preferential power tariffs for energy-intensive industries directed by local governments in 22 provinces as of July 14, to curb expansion in energy-guzzling and polluting industries, the National Development and Reform Commission (NDRC) said on Friday.

The move, involving 15 billion yuan ($2.22 billion) in power charges, will help the nation conserve energy and control emissions, as well as shutter outdated manufacturing facilities, the NDRC said in a statement on its website.

The steps will also help the nation achieve the target for cutting energy intensity to some extent, said analysts. China has pledged to reduce its energy intensity, the amount of fuel needed to generate each unit of gross domestic product (GDP), by 20 percent from 2005 to 2010.

An immediate fallout of the move would be higher power charges for energy-intensive industries. At the same time, it is also expected to trigger an industry consolidation in the future as many of the smaller companies may find it difficult to cope with the higher power charges, analysts said.

Local governments were asked to stop offering power on favorable terms to energy-intensive industries in May this year, with the impact likely to be felt most in industries like electrolytic aluminum, ferroalloy and calcium carbide.

The government had earlier also asked local governments and electricity companies to stop the preferential power price treatment for energy-intensive sectors.

Local governments were not too serious in implementing the order, as they were keen on boosting the economic output and fiscal revenues.

The policy was ignored from late 2008 onwards as the economy was impacted by the global financial crisis.

"More stringent policies are expected in the second half of this year to ensure that the nation will achieve its energy conservation targets," said Lin Boqiang, professor at Xiamen University.

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China's energy intensity edged up by 0.09 percent in the first half of this year from a year earlier, according to official statistics.

The increase, much smaller than the 3.2 percent rise in the first quarter of this year, indicated energy intensity could fall again in the coming quarters after the recent tough measures.

Official statistics showed that energy intensity fell by 14.38 percent from 2006 to 2009.

Some analysts feel that the nation should consider introducing some market-based mechanisms like resources taxes and carbon taxes to better achieve the energy conservation and emission control targets.