China’s Central Government-based Energy Conservation Policies

Michael Giberson

Tom Friedman wants to laud the China’s political leadership for their ability to get big things done economically while distancing himself from government’s authoritarian controls on politics. As mentioned in the prior post, Craig Pirrong responds that “it’s a package deal. Governments who think about people purely instrumentally, who think that they can push them around to achieve this economic result or build that glittering piece of infrastructure have a tendency of engaging in brutal behavior.”

But even if we ignore the oppressive nature of the government with respect to political freedoms, as Friedman would like to do, we can’t ignore the oppression that is inherent in the the government’s ability to get big things done economically.  A recent example: China’s efforts to control energy consumption.  From the Associated Press via CNBC (September 8, 2010):

BEIJING – Chinese steel mills and mobile phone factories are being idled and thousands of homes in one area are doing without electricity as local governments order power cuts to meet energy-saving targets set by Beijing.

Rolling blackouts and enforced power cuts are affecting key industrial areas. The prosperous eastern city of Taizhou turned off street lights and ordered hotels and shopping malls to cut power use. In Anping County southwest of Beijing, an area known as China’s wire-manufacturing capital, thousands of factories and homes have endured daylong blackouts over the past two weeks.

“We can’t meet deadlines for some orders and will have to pay penalties,” said Han Hongmai, general manager of Anping’s Jintai Metal Wire Co. “At home we can’t use the toilet” on blackout days due to lack of power for water pumps, he said.

While the U.S. and Europe struggle with flagging economies, the power outages are symptomatic of China’s torrid growth and officials’ capricious use of their powers to meet the authoritarian government’s goals….

It’s not the first time something like this has happened.

In 2007, gasoline shortages disrupted the economy after refiners cut production in response to price controls. The next year, parts of China shivered through blackouts in bitter winter cold after the government froze power prices, prompting utilities to cut expenses by letting coal stockpiles run low.

This year’s power cuts began after Beijing announced in August that an energy efficiency campaign suffered a setback as a stimulus-fueled building boom drove growth in steel, cement and other heavy industry….

[Greenpeace’s Yang Ailun] said environmentalists welcome moves to close antiquated factories because that improves overall efficiency. But she said temporary blanket cuts come at a high social cost and the government should be taking more long-term steps such as changing energy pricing to encourage conservation.

“What they are doing now is relying too much on harsh administrative orders,” she said.

In some ways, the power cuts are backfiring. Han, the manager in Anping, said his wire factory coped by purchasing its own generator. So it still uses power — but from a source that might be dirtier and less efficient.

Energy is politically sensitive for Beijing, which is trying to clean up the battered Chinese environment and rein in growing demand for imported oil and gas, which it sees as a strategic weakness.

So because “energy is politically sensitive for Beijing,” orders go out to cut consumption and the consequences – for anyone not having political connections in Beijing – be damned.

I don’t mean to suggest that rolling blackouts are kind of brutality, just evidence of how things get done when central governments have the ability that Thomas Friedman lauds to just do it. To be clear, there is nothing inherently Chinese in this example. Governments the world over, when they have the kind of unconstrained power that Beijing does, impose themselves in these same ways.