Closure program to help nation meet energy targets

09:33, August 10, 2010      

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The central government's measures to close outdated industrial facilities, its latest efforts in energy conservation, will help the country achieve its target to reduce energy intensity, said analysts.

A front loader loads a truck with materials for producing cement at the West China Cement Ltd plant in Xi'an, Shaanxi province. Nelson Ching / Bloomberg

In line with several recent orders to cut energy consumption and promote environmental protection, the government is expected to issue more tough policies in the next few months, they added.

Closing obsolete facilities in energy-intensive and high-polluting industries may be the best way for China to promote energy saving and emission control, said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

In terms of energy conservation and environmental protection, large domestic companies are almost on the same level as their foreign counterparts. However, the same cannot be said about many small companies, he added.

As a result, shutting "the facilities of small enterprises with backward technologies is essential to meet the country's energy and environmental targets", he said.

Lin said that after the closures there should be some significant private players to avoid a situation where the industry is dominated by large State-owned companies

Yang Fuqiang, director of global climate solutions at the World Wildlife Fund (WWF), said: "I think administrative orders now remain one effective way for China to implement energy conservation, as the market is not mature enough."

"After the market becomes mature enough, market-based mechanisms will play an important role in meeting energy and environment goals," he said.

China has ordered over 2,000 companies in 18 industries, including cement, steel, and coking, to shut outdated manufacturing facilities by the end of September, the Ministry of Industry and Information Technology said in a statement on its website on Sunday.

Companies that fail to meet the deadline will be barred from obtaining loans, and won't get approval for new investments and access to land, according to the ministry.

Accelerating the elimination of outdated production facilities is an important move to change the economic growth pattern, restructure the economy and improve the quality and efficiency of growth, it said.

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.

The country's energy intensity edged up 0.09 percent year-on-year in the first half of 2010. The figure fell 14.38 percent from 2006 to 2009.

Analysts said that a drop in energy intensity remains in the pipeline given the recent measures. Yang from the WWF said he expected the country's energy intensity in 2010 to drop 3 percent year-on-year.

And for the total drop between 2005 and 2010, Yang said it would be around 18 percent.

China has canceled all preferential power tariffs for energy-intensive industries decided by local governments in 22 provinces as of July 14, to curb expansion in energy-hungry and polluting industries, the National Development and Reform Commission said last week.

Source:China Daily


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