Official figures from the National Development and Reform Commission (NDRC) show that China will fail to meet its target of reducing energy consumption per unit of GDP by four percent this year.
China has set a unit energy consumption reduction target of 20 percent for the five-year period from 2006 to 2010. The goal is aimed at guiding China's social and economic development but the country is already well behind schedule.
In fact, China witnessed an increase of 0.8 percent in its energy consumption per unit of GDP in the first half of the year and indexes for major pollutants have continued to rise.
The central government has put the blame for the sluggish start to their "Green GDP" pilot projects in ten provinces and municipalities squarely on the local governments. Many local authorities have resisted fiercely and some of them have even asked to abandon the scheme.
Under the green GDP project, the cost of environmental degradation is highlighted alongside economic growth figures of specific regions.
"A lack of economic motives is the fundamental reason for the local governments' weakness in reducing energy consumption and improving environmental protection," said Chen Qingtai, vice director of the Economic Committee under the Chinese People's Political Consultative Conference National Committee.
"No enterprises or local governments are taking pains to transform their methods of achieving economic growth or taking risks to improve technological innovation," said Chen.
Qin Min, the manager of a textile plant in South China, is a case in point. He insists he wants to equip all the machines in his factory with energy-efficient converters but is waiting for the government to introduce financial incentives.
"I want to change but the cost will be too high and whether or not, or by how much, I can benefit from a tax reduction is unclear," he said.
In a national meeting mapping out economic policies for 2007 held last week, China's central authorities recognized that more efforts were needed to improve energy efficiency in the country and issued a stark warning to uncooperative local government cadres.
Among the eight leading economic tasks it listed for next year, the Central Government put energy efficiency and environmental protection third, behind macro-economic control and agriculture.
"(All officials) must reach a common understanding and make their utmost effort to achieve practical improvement in reducing energy consumption and pollution," a statement issued at the conclusion of the Central Economic Work Conference read.
According to an energy efficiency plan circulated by the State Council to governments at all levels in August, an industrial structure that promotes energy efficiency will be created, which places emphasis on technological innovation, supervision of local departments and favorable tax policies.
Some steps in this direction have been taken this year. In 2006, 1,008 enterprises in nine major energy-consuming industries have participated in the energy efficiency program launched by the central government. The objectives of the project is to save energy equivalent to 100 million tons of coal.
In June, China for the first time published a list of provincial regions in order of energy efficiency in order to name and shame the worst offenders.
In September, China abolished export tax rebates on coal, natural gas and some primary wood products while reducing tax rebates on steel, cement, textile and non-ferrous metals.
"Administrative measures may be effective sometimes in encouraging energy saving and environmental protection, but it is by no means a panacea," said Chen Qingtai.
"Only when the government policies take effect through market forces will every player's efforts in pursuing profits fall in line with energy saving and environmental protection, otherwise achieving our energy efficiency target will be impossible," he said.
A list of energy-saving products is being drawn up by the central government, the use of which will result in tax preferences. Higher export taxes will be imposed to dissuade companies from exporting goods that involve a high consumption of energy and cause serious pollution.
"For China's energy saving project, 2007 will be very critical, because the time has come for those energy-saving measures, governmental or non-governmental, to prove effective," according to the Energy Research Institute of the NDRC.
