Economy

Energy-intensive firms lose electricity aid

(Xinhua)
Updated: 2010-08-06 21:32

BEIJING: Preferential electricity rates granted by 22 provincial governments for high energy-consuming businesses have been totally scrapped, China's top economic planner announced Friday.

All energy-intensive enterprises must be subject to the new power tariff surcharges introduced in May, said the National Development and Reform Commission (NDRC) in a statement posted on its website.

The news comes three days after Chinese statistics authorities said China's consumption of energy relative to economic output rose in the first half by 0.09 percent from the same period last year.

"This points to the difficulty of the country reaching its target of improving energy efficiency by 20 percent between 2005 and 2010," said Li Zuojun, researcher of energy policies at the Development Research Center of the State Council.

The National Bureau of Statistics said China had reduced its energy use by 15.6 percent relative to economic output from 2005 to 2009.

"China has stepped up measures to curb energy-intensive sectors in the past five years, and progress has been made, but reaching the 20-percent target will be a tough task," he said.

However, the end of the preferential electricity prices represented a major step to enhance the energy efficiency of China's economy, Li said.

He cited research by investment bank UBS as saying that heavy industries, mainly energy-intensive ones, accounted for 56 percent of China's total energy consumption, and only 28 percent of GDP.

Local governments must cancel any favorable power prices to energy-intensive firms, including preferential rates in the name of direct trade between power generators and power users, said the NDRC in May.

Power surcharges for firms that fall into the restricted category would double to 0.1 yuan (1.47 U.S. dollars) per kilowatt hour, while those in the to-be-eliminated category would see surcharges rise to 0.3 yuan per kilowatt hour from 0.2 yuan, according to the May statement.

The ban on the preferential rates dates back to 2006, the first year of the nation's 11th five-year development plan, as part of the central government's efforts to curb energy-guzzling industries.

However, in order to stimulate their struggling economy at the height of the global financial crisis, some provincial governments, mainly in west China, started to find ways to subsidize energy-intensive enterprises in November 2008.

Since then, the preferential policies had reduced the electricity bill of China's energy-intensive firms mainly in the aluminum, cement, steel, zinc, ferro-alloy, calcium carbide and sodium hydroxide sectors by more than 15 billion yuan (2.22 billion U.S. dollars), said the NDRC.

Li expected the government to take more actions, such as raising energy prices, which would add to the inflationary pressure and risked dragging down the overall economy in the short run, as enterprises would have to focus more on adopting low-carbon technologies.

"This is a dilemma that China must face. A balance must be struck between compelling businesses to shift to a cleaner growth pattern and avoiding slowing of the economy," he said.