China To Spend $372 Billion To Reduce Pollution, Encourage Energy Efficiency

The government’s ambitious goals include reducing energy consumption by 16 percent per unit of GDP and lowering major pollutant emissions by 8 to 10 percent from 2010 levels, according to an official statement released by Development and Reform Commission (NDRC), a government agency.

The endeavor also seeks to reduce China’s consumption of coal by 300 million tonnes each year.

The latest sending plan is part of the broader ongoing 2011-2015 five-year plan which was approved in July by outgoing prime minister Wen Jiabao.

About $128 billion of the newly unveiled program will be applied to lowering air and water pollution, by cleaning up rivers and by imposing stricter regulations on certain industries identified as “key” polluters, including power stations, and iron, steel and cement producers.

Another significant expenditure – about $154 billion -- will be devoted to energy-saving measures, including a plan to reward energy-efficient homes with subsidies; and calls for certain factories to cut down on power usage.

The remaining $89 billion will be used to expand China’s recycling economy.

However, the $372 billion figure will also reportedly include contributions from some private investors as well as local government sources (the allocation has not been made clear yet).

Moreover, as Chinese companies will soon have to meet strict new pollution-emission and energy-efficiency standards or face penalties, the government will also ensure the accessibility of loans for firms in order to invest in technology to reduce pollution.

China's plan to increase energy efficiency is urgently needed, as it replaced the United States as the world's biggest energy consumer in 2010, accounting for 20.3 percent of global demand, according to the International Energy Agency. (The U.S. accounted for 19 percent).

China overtook this title at a breakneck pace, since merely 10 years ago its energy consumption was just half that of the US. (Although, the U.S. is still by far the biggest per-capita energy consumer in the world, with the average American burning five times as much energy annually as the average Chinese citizen)

The latest plan to cut down on environmental damage appears to be somewhat of a change on China’s part.

Only two years ago, Beijing's attitude on capping energy consumption in fossil fuels and reducing pollutant emissions frustrated the White House, which had been attempting to forge an international climate agreement through a 2010 UN summit.

When asked to reduce carbon dioxide and other greenhouse gas emissions, Beijing refused. Rather, it responded by setting forth a goal to reduce emission “intensity” – that is, the amount of carbon dioxide emitted per unit of GDP -- by 40 to 45 percent from 2005 levels by 2020.

This meant that while China agreed to make its economy more energy-efficient – thereby, boosting its competitiveness -- it would still not lower its overall energy consumption.

Now, China continues to stand by its goal of increasing energy efficiency, but the latest plan is a modification from previous statements on energy issues.

"This plan is unlike the 2008 investment stimulus of 4 trillion yuan ($586 billion) by the government," Sun Li-jian, vice-chair of the economics department at Shanghai's Fudan University commented. "Because this time the Chinese government plans to achieve the goal through a long-term adjustment in the industrial structure."

That is, it plans to achieve systematic and enduring results through the comprehensive reformation in regulations that will guarantee a minimum level of emission rates and energy efficiency from private companies.

Not everyone is sanguine, however, about the new goals.

"Objectively, we can't be too optimistic for this plan," an analyst on the Chinese Radio Network wrote.

"Even though there have been improvements in these areas, how private firms will reconcile their needs for energy with their use of energy still requires further examination."

Indeed, this plan has many undeniable challenges, as the source of investment becomes a major concern.

More questions abound – for example, how attainable will the new targets on energy efficiency and pollution emission levels be for the companies? And how much in loans will private firms have to obtain in order to meet the new requirements? Such loans could also impart short-term negative impacts on their economic development, as new pollution standards can pose greater costs on the production side.

What is unquestionable is that pollution has been a major problem in China for a long time.

The first-ever national pollution census completed in 2010 shocked the Chinese people, as it revealed that China's "water is far more polluted and its industry is producing far more waste than previous realized," as reported by the Wall Street Journal.

The 2010 census exposed that in 2007, the amount of pollution discharged into the water totaled 30.3 million metric tons, while industrial solid wastes from mines or steel mills totaled 49.14 million tons. (These numbers doubled and tripled the original amount reported by officials in 2007)

Moreover, the famous smog air pollution in Beijing is still at an "unhealthy" level, according to the hourly tweeting smog watcher of the U.S. Embassy (first set in place because the Chinese government refused to monitor and publish pollution data).

With the high levels of PM2.5 -- tiny particles in the air resulting from automobile emissions and industrial production -- the air in Beijing was once deemed "beyond index" (a record of 522 micrograms of particulate pollutants per cubic meter of air) by the U.S. Embassy in 2010.

Besides making the sky in Beijing consistently gloomy in a depressing grey haze, the high level of PM2.5 increases Beijing citizens' risks to heart disease and other respiratory and lung problems.

Pollution also exists in other provinces, where local villagers often protest against constructions of power plants or industrial factories that they suspect will bring hazardous conditions to local people.

While the five-year plan puts energy efficiency and pollution control high on the national agenda, the detailed execution of the plan is still yet to unfold. According to the NDRC's official statement, the government is in the process of drafting new regulations in regard to achieving the ambitious 2015 objectives. As of now, there is no announced date for the publication of these new regulations.