China confronts global warming dilemma

But, according to calculations by Greenpeace China, based on data supplied by the companies themselves, only one appears to be on track to meet those targets.

At the root of the problem is simple economics. Coal remains the cheapest source of power generation, which hampers the implementation of China’s renewable energy law.

Says Yang Ailun, climate and energy campaign manager for Greenpeace China: “The [power] companies earn more money with coal. Our argument is that the price of coal in China is too cheap. It’s plentiful and easy to mine, but the current coal price doesn’t reflect the serious environmental or health side-effects.” (Greenpeace estimates that these “external costs” of coal burning amount to seven percent of China’s GDP.)

The price of power
Barbara Finamore, founder and director of the Natural Resources Defense Council’s China Program, offers a similar perspective: “Right now renewable energy is a lot more expensive in China. The renewable energy law requires that utilities obtain a certain percentage from alternative energy sources, but they must do so at above market rate. The fact of matter is that it [the law] is not being well-implemented.”

Ms. Finamore suggests that raising coal prices could help “level the playing field.” Some groups, including Greenpeace China, call for a tax on carbon to account for the external costs that are not reflected in the current market price. But while the proposal has been around for decades, it has consistently stalled.

Among the prominent opponents of a coal tax or other price hike are the CEOs of the top 10 power companies. “Power system reform is an ongoing process. There’s no need for anyone to get overexcited,” Lu Qizhou, president of China Power Investment Corporation told the Chinese newspaper Southern Weekly. “Of course the government will make sure that the pace of reform is in line with economic development and the market’s ability to cope.”

Because China Power is state-owned, Lu speaks as both an industry head and a de facto part of government. As with the CEOs of all major state-owned enterprises, he was appointed by the leadership in Beijing. Previously, he served as deputy CEO of China’s State Grid Corporation and then as China Power’s Communist Party secretary.

In China, both the power sector and the oil sector — each critical to climate and energy policy — are dominated by a handful of large state-owned enterprises. And, in one sense, that obviates the need for lobbyists.

“There is a permanent revolving door between the Party and government and the SOEs [state-owned enterprises],” says Beijing-based political commentator Zhao Jing, who writes in the English-language press under the name of Michael Anti. “There don’t need to be ‘lobbyists,’ when discussions can happen directly through the Party.”

This interwoven network does not mean everyone always shares the same immediate goal. For instance, the power company CEOs would like to see the central government increase the price of electricity, which is currently fixed, while Beijing worries that raising prices that impact poor farmers could lead to social unrest.

However, the cozy political arrangement does mean that power companies are involved in reviewing draft regulations that would impact their sector, and they can exercise something close to veto power.

“The bosses of the big five power companies, they have official ranking — almost minister level,” says Greenpeace China’s Yang. “As an official of the system, they are not even made accountable to the energy bureau in the National Development and Reform Commission, which is ranked lower.”

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