China pollution fuelled by heavy industry

China pollution fuelled by heavy industry
By Richard McGregor in Beijing

China’s rapidly worsening pollution is being driven by a surge in
investment in energy-intensive heavy industry caused by cut-throat
competition among cities and provinces, according to a study released
Tuesday.
The study, by the Peterson Institute for International Economics in
Washington, says the huge investment in steel, aluminium, cement and
other plant has begun to reverse almost three decades of gains in
energy efficiency.

“It is not air-conditioners and automobiles that are driving China’s
energy demand but rather heavy industry,” say Daniel Rosen and Trevor
Houser of China Strategic Advisory, the authors. “Consumption-led
demand is China’s future energy challenge.”
China’s huge growth has made its economy a global issue because of
rising exports of steel, in particular, and the impact on
inter=ADnational markets for related commodities.
Greenhouse gases are also under scrutiny; the Inter=ADnational Energy
Agency predicts China could surpass the US as early as this year as
the largest emitter of CO2, a figure Beijing disputes.
Chinese leaders have set tough new targets to reduce the use of energy
per unit of economic output by 20 per cent and pollution by 10 per
cent, between 2006 and 2010. But the rise of heavy industry, which the
study says caught even Beijing by surprise, means China failed to meet
the benchmarks in 2006 and will find it hard to do so by the end of
the decade.
China now accounts for almost half of the world’s flat glass and
cement production, more than a third of steel output and 28 per cent
of aluminium. Heavy industry consumes 54 per cent of China’s energy,
up from 39 per cent five years ago.
A structural bias towards heavy industry, which dominated in the
centrally planned Maoist-era economy, means energy intensity has
worsened even though Chinese steel plants have become more efficient.
“A new steel plant, no matter how much more efficient than its peers,
uses substantially more energy than a garment factory,” the study
says.
The study blames the growth of heavy industry on cut-throat internal
competition. “The rules of competition are set not just by Beijing but
also by local interests, including state-owned heavy industrial
enterprises,” it says. “And regardless of who sets the rules, the
reality of how they are implemented is almost entirely a local
matter.”
The National Reform and Development Commission, the economic planning
agency also responsible for energy, has tried for years to curb
industrial expansion.
Although nominally all-powerful and with the right to stop projects
over a certain size on a range of grounds, the commission has been
largely helpless to stop the flood of new investment.
The commission’s power is not reflected in the size or skill of its
staff or in the research base and industry expertise from which it
operates. Its energy bureau has 100 staff and the State Energy Office
under the cabinet 30-40, in contrast to 110,000 at the US Department
of Energy.
Individual state companies are better equipped than the ministries.
The State Grid, which is responsible for power transmission, has more
research staff than the commission’s energy bureau.
Weak regulation also makes it difficult to cut pollution and
greenhouse gas emissions. Fewer than 15 per cent of coal-fired plants,
which generate 80 per cent of China’s electricity, have systems to
remove sulphur dioxide from emissions, and even fewer use them, the
report says. Most new plants have sulphur scrubbers.
The authors say that China will not make unilateral adjustments in the
absence of changes to US policy. “China is an 800lb gorilla on the
world energy stage that cannot be ignored, but there is a 1,600lb
gorilla in this room too: the US,” they said.