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China Is No Leading Light In Energy Efficiency

JIM LANDERS – Dallasnews | Tuesday, August 19, 2008

BEIJING – China’s ballooning appetite for energy has helped push global prices higher for oil and coal, much of which is wasted.

Energy efficiency in China is just a fifth of U.S. levels. The government has put a priority on improving that by closing hundreds of small, coal-fired power plants and steel mills, raising fuel economy standards and consumption taxes on gas-guzzling cars, and pushing stores and apartment owners to replace incandescent bulbs with green ones.

But energy policy made through government fiat will only take you so far. Even as Beijing issues decrees about reducing the amount of energy used, it still subsidizes gasoline and electricity, and it’s falling short of its conservation targets.

Free-market economists – including some Chinese advisers to the communist government – argue that price is the best way to save energy. High prices have pushed down U.S. oil consumption about 3 percent this year, the biggest drop in a generation.

China’s motorists pay about $3.40 a gallon for gasoline – up 17 percent in the last two months – but that’s less than U.S. prices, and it hasn’t done much to slow oil consumption or car purchases.

(The price is also far less than the $8-a-gallon price in Hong Kong, where the government is trying mightily to discourage people from buying cars.)

China’s government finds it difficult to let go of price controls because some companies say higher energy costs are forcing them to close factories and move to cheaper locations such as Vietnam, eliminating thousands of jobs, said Huang Fanzheng, a senior adviser to the Chinese government and one of China’s most respected economists.

“So we should not only consider the influence of price on consumption, but also consider how much companies can bear, including foreign companies,” he said.

Price controls have other distorting effects. China imports most of its oil. China’s refiners pay world prices for those imports but collect far less from gasoline consumers. The losses are usually covered by government cash, but that’s no sure thing.

One result is an incentive to sell cheap, low-quality gasoline. It also discourages refiners from investing in expensive technology to eliminate pollutants such as sulfur, which automakers say ruins their more advanced emissions controls.

So while Beijing has ordered China’s governors to cut air pollution by 20 percent over the next decade, the oil refiners won’t be much help.

Nor will the power companies. China leads the world in renewable energy used for electricity generation, with 152 gigawatts of power from sources including wind, nuclear and hydro. (One gigawatt is 1,000 megawatts, or roughly the size of a large power plant.)

But China is the world’s biggest consumer of coal. Eighty percent of its electricity comes from coal-fired power plants. Although coal is the country’s most abundant energy resource, China has been a net coal importer since 1992. Smoggy Beijing has giant coal smokestacks peeking out among the city’s skyscrapers. Most of those power plants are shut for the Olympics, but they’ll fire up again once the games are over.

Wang Jiacheng, deputy director of the government’s Academy of Macroeconomic Research, says China’s per-capita electricity use has climbed an average of 10.28 percent a year since 1990.

Coal importers, like oil importers, pay world prices for supplies but get discount payments from customers. So China is going through a coal shortage. That’s pushing companies to curb production or switch to diesel-powered generators, one of the most energy-inefficient ways to produce electricity.

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