Source: The Financial Times                         Date: 17 August, 2010

China is directing 2,000 industrial companies to shut obsolete factories to meet national energy intensity targets. Five years ago, Beijing pledged to cut by a fifth its industry’s energy intensity, a measure of energy consumed by unit of output. That goal looks in jeopardy, mainly because the USD586-billion stimulus package rolled out in 2008 favored China’s biggest and dirtiest industries. In the aftermath of the Lehman shock, China chose growth over the climate. Now the panic is over, there are tentative signs that it is planning another push to improve the efficiency of its smokestack economy. That is to be welcomed, so far as it goes.

Measuring energy intensity was much criticized in the run-up to the Copenhagen summit on climate change as a poor substitute for setting overall emissions targets. In fact, as the Japanese have argued, there is much to be said for focusing on how much energy individual industries use, a bottom-up approach that can be more practical than setting grandiose (sometimes unattainable) goals.

In China’s case, the problem is implementation. In practice, far from the eyes of the planners in Beijing, many party cadres have favored growth and job creation, and left environmental improvements for another day. Nor are Chinese data on energy use – surprise, surprise – entirely trustworthy. Recent statistical revisions make it easier for industry to meet its five-year target. There are even suggestions that the recent crackdown is not all it seems. Some of the factories slated for closure have already stopped producing.

Beijing is not blind to the merits of cleaning up its industry. For every unit of output, China uses almost six times more energy than Germany or Japan, a horrendous waste. Pollution is also a potential source of unrest, particularly since the Olympics, when Beijing’s inhabitants were reminded of what blue skies actually look like.

There is certainly more rhetorical urgency in the clampdown on heavy industry. Chinese officials are even hinting that it may be worth sacrificing a percentage point or two of growth to meet energy intensity goals. As Mr.Yasheng Huang, a China scholar at the Massachusetts Institute of Technology, has said, it is easy to produce high headline growth by digging holes and filling them up again. Too much Chinese economic activity is still spent in similar activities. It will take more than a dubious target dubiously implemented to convince skeptics that Beijing is really serious about a clampdown.