Feng Fei

Research Report No. 001, 2008

I. Fully Understand the Difficulty in Realizing the Energy-saving Goal and the Essence of the Problems to Be Addressed during the Eleventh Five-Year Plan Period

The first two years in the Eleventh Five-Year Plan period saw the decrease of the energy consumption per unit GDP by only 1.33% in 2006 and by about 3% expected in 2007. Although on the whole some progress has been made in energy-saving work, there is a still much work to be done before realizing the goal of the Eleventh Five-Year Plan and the current situation of energy saving remains severe.

Then what's the reason behind such a huge habitual increase in energy consumption per unit GDP? What new circumstances and problems are there related to energy-saving work? The following issues should be given adequate concern.

Firstly, the major driving force for energy saving has been reversed. From 1990 to 2005, the annual decrease of energy consumption per unit GDP was 4.2% on average. The goal of keeping the average decrease in energy intensity by 4.4% per year in Eleventh Five-Year Plan period seems just slightly higher than the annually average decrease in the past three Five-Year Plan periods, but actually we are confronted with much bigger difficulties at present, and the new circumstances and contradictions are much more complicated than ever before. All these difficulties can be attributed to the change in the major driving force for energy saving.

Structural elements have contributed a lot to previous achievements. In a broad sense, structural elements include not only industrial structures, but also the energy saving results deriving from the increased added value of products. Among the total amount of energy saving, 60% to 70% was contributed by structural elements. However, things changed since 2002: structural elements turned to be the driving force for increasing energy consumption per unit of GDP, rather than for energy saving, and its role in energy consumption per unit of GDP has been totally reversed. During this period, the positive contribution of technological progress has been greatly offset by the negative influence from structural elements, and hence the energy consumption per unit of GDP has risen.

Thus it can be seen that the difficulty in current energy-saving work is rooted in the changes in driving force and the inner mechanism of energy saving. Under new circumstances, it is imperative to build up a new inner mechanism of energy saving, which can hardly borrow from the past experience or practices. The new inner mechanism will be comprehensive and inclusive, incorporating both structural and technical elements, and including both production links (energy-intensive industries in particular) and consumption links.

Secondly, there are systematic defects in energy-saving administration, policies, laws and relevant aspects. At present, distinct defects exist in the scope, approach and degree of government's intervention in energy saving, particularly represented by insufficiency of policy incentives, such as inadequate incentive measures for energy saving related to taxation and pricing, absence or inapplicability of laws, rules and standards in new circumstances, disorder in energy administration system like energy-saving mechanism, notable weakening in energy administration capabilities, and the immaturity and incompleteness of market system during the transitional stage. Different forms of defects accumulated comprise systematic defects. In the last two decades of the last century, the structural elements caused continuous drop of energy consumption per unit of GDP and covered up the harm of systematic defects. Now, the harm becomes more and more visible as structural elements have increased energy consumption per unit of GDP. Due to these systematic defects, extensive mode of economic growth can hardly undergo significant changes. When extensive mode of economic growth comes through to the new development stage featuring the accelerated development of heavy and chemical industry, problems in energy and environment are multiply magnified.

Thirdly, the present economic growth rate greatly exceeds the expected rate on which energy-saving goal was set, which has made it harder to achieve the goal. When the energy-saving goal was set, the average rate of economic growth during the Eleventh Five-Year Plan period was expected to be 7.5%, and based on that rate, the amount of energy to be saved (absolute value) till 2010 would be 640 million ton standard coal. Each percentage point higher than expected will raise the goal of energy saving by 4.7%. In case the growth rates of GDP are 8.5% and 9.5%, the energy-saving goals will be respectively 670 million and 700 million tons of standard coal equivalent (mtsce). Therefore, as the present growth rate is much higher than expected, the energy-saving goal will be much more difficult to be accomplished.

It is theoretically possible to achieve the energy-saving goal of the Eleventh Five-Year Plan while maintaining a high rate of economic growth at the same time. But it requires that remarkable progress should be made in structural adjustment and transformation of economic growth mode, and current energy-intensive industries should be replaced by fast-growing industries with low energy consumption and high added value. Otherwise, high growth rate and low energy consumption can hardly be achieved simultaneously as the economic growth is driven by energy-intensive industries at present. However, neither can new industries driving economic growth emerge in a short time, nor can growth mode be transformed overnight, so we must make our choice between economic growth rate and sustainability. Under the circumstances when growth rate and growth quality can hardly be obtained at the same time, it is necessary to make clear that to enhance sustainability is one of the important goals of the Eleventh Five-Year Plan. And to some extent, this can only be achieved at the cost of growth rate.

II. Focus on Establishing New Energy Saving Mechanism with Lasting Effects

The energy saving work was confronted with problems of "three more and three less", namely, the central government paid more attention to this issue whereas local government paid less attention; more attention was given during energy shortage or crisis periods whereas less attention was given when energy was comparatively sufficient; more attention was paid in areas with high energy restrictions whereas less attention was paid in areas with abundant energy supply. At present, the energy saving work is also faced with problems of "three more and three less", referring to more mobilization measures made by the government whereas less actions taken by enterprises and consumers; more requirements made whereas less concrete measures; more administrative measures applied whereas less economic and legal approaches. Thus it is imperative for the government to build up a new effective energy-saving mechanism. The four principles below should be followed in promoting energy-saving work.

Firstly, we must take integrative measures with more emphases on economic incentives. Economic, legal and administrative measures are different by nature, with different effects on different objects. The effects of different measures depend on their mechanisms and the subjects they work on (Table 1):

Table 1 Effectiveness of Different Measures on Different Subjects