Source: The New York Times                            Date: 12 August, 2010

Earlier this summer, Prime Minister Wen Jiabao of China promised to use an “iron hand” to improve his country’s energy efficiency, and a growing number of businesses are now discovering that it feels like a fist. The Ministry of Industry and Information Technology quietly published a list late Sunday of 2,087 steel mills, cement works and other energy-intensive factories required to close by September 30. Energy analysts described it as a significant step toward the country’s energy-efficiency goals, but not enough by itself to achieve them.

Over the years, provincial and municipal officials have sometimes tried to block Beijing’s attempts to close aging factories in their jurisdictions. They have particularly sought to protect older steel mills and other heavy industrial operations that frequently have thousands of employees and have sometimes provided workers with housing, athletic facilities and other benefits since the 1950s or 1960s.

To prevent such local obstruction this time, the ministry said in a statement on its Web site that the factories on its list would be barred from obtaining bank loans, export credits, business licenses and land. The ministry even warned that their electricity would be shut off, if necessary. The goal of the factory closings is “to enhance the structure of production, heighten the standard of technical capability and international competitiveness and realize a transformation of industry from being big to being strong”, the ministry said.

The announcement was the latest in a series of Chinese moves to increase energy efficiency. The National Development and Reform Commission, which is the government’s most powerful economic planning agency, announced last Friday that it had forced 22 provinces to halt their practice of providing electricity at discounted prices to energy-hungry industries like aluminum production.

Even if China meets its energy-efficiency goal this year and its carbon goal by 2020, its total carbon emissions are still on track to rise steeply in the next decade, according to forecasts by the International Energy Agency. That is because of factors including rapid growth in the Chinese economy, growing car ownership and rising ownership of household appliances.

The current Chinese five-year plan calls for using 20 percent less energy this year for each unit of economic output than in 2005. But surging production by heavy industry since last winter has put in question China’s ability to meet the target. The success or failure of China’s energy-efficiency campaign is being watched closely not just by economists, who cite the campaign as one reason that growth of the Chinese economy has slowed down a little this summer, but also by climate scientists.

China’s energy consumption rose so sharply last winter that it produced the biggest surge ever of greenhouse gases by a single country. Power plants burned more coal to generate enough electricity to meet demand.

As China has become increasingly dependent on imported oil and coal, its national security establishment has become more visibly involved in energy policy and energy security, including efforts to improve energy efficiency. Efficiency improved 14.4 percent in the first four years of the current plan, only to deteriorate by 3.6 percent in the first quarter of this year, according to official statistics. Mr. Wen responded by convening a special meeting of the cabinet in May to address the situation.

The ministry said in its statement that the factories to be closed would include 762 that make cement, 279 that produce paper, 175 that manufacture steel and 84 that process leather. Closing factories is more palatable now than in the past because a labor shortage in many cities has made it easier for workers, particularly young ones, to find other jobs.