UNRESTRAINED IN CHINA

This is a lengthy and fascinating piece, filled with local details. Here is the gist:

Despite its proclaimed intentions to cut back, China will become the world’s biggest GHG emitter in 2008. And its coal consumption is expected to double in the next 20 years.

Theoretically, the central government has control. Ironically, local officials are telling the Chinese central government the same thing the Chinese central government is telling the world: "As a less developed region, Ningxia needs time to progress and develop. We're working hard to close the gap between us and the other provinces."

Environmentalists say the central government must crack down. Yet it has not done so. Perhaps it does not want to repress economic growth. Perhaps it fears a backlash. On the other hand, it must control environmental degradation and pollution or public health will produce its own reaction.

Worst case scenario: Air and water pollution become so bad they create an emergency that FORCES cutbacks. It happened in London in 1952.

Far from Beijing’s reach, officials bend energy rules
Howard W. French, November 23, 2007 (International Herald Tribune)

WHO
Chinese central government (Wen Jiabao, China's premier) Qingtongxia regional government, Qingtongxia Aluminum Group

With 70% of 1300+ gigawatts of planned energy coming from coal, China is clearly fighting a desperate battle. (From the 2007 IEA Energy Outlook. Click to enlarge)

WHAT
When the Chinese central government required the Qingtongxia regional government raise electricity prices, local officials – fearing economic consequences - arranged for Qingtongxia Aluminum Group, the local industrial giant, to avoid higher power prices by going off the national electricity grid.

WHEN
The example in Qingtongxia came after central government action in 2005 to cut consumption.

WHERE
Qingtongxia is in the Ningxia Hui Autonomous Region of western China, remote from the national government’s seat in Beijing.

WHY
- Qingtongxia Aluminum Group consumes 20% of the region’s industrial power and earns 10% of its GDP.
- Beijing says it will cut 20% of energy use/dollar of output because energy consumption has quadrupled since 1980. So far it is cutting 1.23% and statistics are not improving.
- The central government’s drive to cut energy consumption runs exactly counter to localities’ drives to grow and prosper.
Visitors to the Ningxia region’s capital can literally see the unfinished quality of the city.
- Beijing has in the recent past negotiated with localities, striking compromises between its goals and local needs. This year it has begun citing the localities for violations.
- The next step may be to see if the violation citations can be enforced as local entrepreneurs conspire with local officials, both of whom have the same goals, to concoct technicalities and circumvent restrictions.

China has options. Will it exercise them or will it suffer the consequences of the worst case scenario? (click to enlarge)

QUOTES
- Wen Jiabao: "Understanding is not adequate, responsibilities are unclear, measures are not complementary, policies are incomplete, investment doesn't arrive, and coordination is ineffective…If these problems are not turned around, it will be difficult to achieve any obvious progress."
- Ningxia industrialist, justifying local violation of central government dictates: "It's such a simple theory to say that everyone knows you make more profit growing bananas than potatoes…But how can you force people to grow bananas on land where only potatoes will grow? Ningxia is a land of potatoes, and it is our natural resources and environment that determine everything."
- Lin Boqiang, director, China Energy Research Institute/Xiamen University: "To get reforms implemented, two things have to be done…One is to rate the local government's performance on compliance, and if they don't comply telling people they have to go. The other is introducing financially meaningful penalties. We haven't seen either of these yet."