Three Gorges Probe

The heavy hand of the Chinese state tries to go green

(September 17, 2010) Officials in Beijing are using a top-down, heavy-handed approach to curb the country’s worsening pollution problem. New reports show that it may be making the problem worse.

As Chinese officials look to “green” their image internationally by cleaning up polluting sectors such as manufacturing and power generation, they’re using a very traditional method: the heavy hand of the state. But that heavy hand is backfiring, provoking massive blackouts, and ironically, causing pollution.

In an attempt to meet the heavy-handed energy-saving targets set by the national planning agency, the National Development and Reform Commission, local governments have ordered power cuts, forcing businesses and manufacturers across the country to either slow, or halt production altogether. The environmental decree is also pushing businesses to use dirtier and more energy-intensive generators to avoid the forced shutdowns.

Businesses across the country, including an area known as China’s wire-manufacturing capital, have all been hit by the blackouts—in some cases, at the peak of production season.

According to the Associated Press (AP), local government officials are reacting to these administrative orders to meet energy-saving targets—especially when Beijing sends inspectors to see that the decree is carried out—by cutting power altogether.

Yang Ailun, a spokeswoman for Greenpeace China, agrees: “You could say local governments are trying to blackmail the central government: If you order me to do something I can’t deliver, I will pass on the pressure to ordinary people.”

A number of businesses say they are suffering from fines and a cutoff of power and water supplies as they struggle to meet the new rules. “People in the (steel) industry are heartbroken,” Shanghai Securities News said.

The irony is that Beijing warned its energy-efficiency campaign was being hampered by the recent building frenzy caused by Beijing’s very own stimulus package, which was driving production in steel, cement and other heavy industry.

Beijing wants to cut energy intensity—or energy used per unit of economic growth—this year by as much as 20 percent from 2006 levels. According to the World Bank, China uses up to twice the energy per unit of output as the United States, Japan and other economies.

But, rather than use more elegant market tools for full cost pricing and internalization of environmental risk, the government chose to use the strong arm of the state to cut emissions and curb pollution. According to reports, Beijing has in the last two years closed 2,087 steel and cement mills and other factories with poor environmental controls. It has also sent inspectors to 18 of China’s 32 provinces and major regions to enforce efficiency.

But Greenpeace China’s Yang says the government has it all wrong, and a better approach than heavy-handed decrees from the central government to promote conservation and efficiency would be to implement more long-term steps such as energy pricing.

“What they are doing now is relying too much on harsh administrative orders,” she said.

Furthermore, the recent power outages caused by the political battle playing out between officials may actually produce more emissions, as business owners turn to generators, which are often dirtier and less efficient, for their power.

Disruptions to the power supply and to the nation’s economy have occurred before under the heavy hand of the state. In 2007, for example, gasoline shortages rocked the country’s economy after refiners cut production in reaction to government-imposed price controls.

In a piece for Cogeneration and On-Site Power, Grainne Ryder, a former policy director at Probe International, detailed some of the fallouts from centralized, government control of the electricity market, which often resulted in annual shifts from over- to undersupply. In response to years of blackouts in the first half of the past decade, Ms. Ryder said, thousands of businesses and factories were forced to shut down several days a week, while some shifted their operations to off-peak hours.

“The problem is central planning—state power companies building power plants to meet government targets rather than actual market demand—and China’s leading economists and energy experts know it,” she wrote.

Brady Yauch, Probe International, September 17, 2010

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