Beijing plans to put a ceiling on energy usage in an apparent attempt to control GDP growth
Smoke billows from chimneys of a coal-burning power plant in Wuhan / Reuters
Having strayed from energy lately, I thought it a good time to return to it. Just when you thought the whole 12th Five-Year Plan (FYP) matter was wrapping up, it turns out to have only begun. An energy-specific 12th FYP is expected to be released later this year, barring delays. The plan should offer plenty of details on how China will execute the policies to reach the energy targets it has set.
Why the delay? It has to do with the controversial measure of capping total energy consumption. That is, based on preliminary details, Beijing intends to put a ceiling on energy consumption at 4.1 to 4.2 billion tons of standard coal equivalent (STCE) by 2015. This implies that they plan for, roughly, a 10 percentage points drop in energy consumption growth from the 11th FYP period that ended in 2010. And because energy consumption is highly correlated with economic growth in China, the attempt to curb energy demand could signal an attempt to tame GDP growth. It could also be intended to force industry to dramatically improve efficiency -- a requisite if Beijing is serious about controlling energy consumption.