06 April 2010

Questions About China's 2010 Energy Intensity Target

[UPDATE 4/7: Michael Levi at the Council of Foreign Relations weighs in here.]

Stephen Howes, an economist at the Australian National University, has taken a look at data related to China's 2010 energy intensity target and raises some questions:
. . . while there is some uncertainty, the published data suggest that China is well off-track from meeting its 2010 target.
His analysis is as follows:

A recent China Daily article reported Premier Wen Jiabao as saying that China’s energy intensity had fallen by 14.38 per cent between 2005 and 2009, which would put the country on track to come close to if not hit its 20 per cent target with a year still to go.

The published data, however, seem to tell a different story. The National Statistical Bureau’s recently released 2009 Statistical Communique puts energy consumption for 2009 at 3.10 billion tons of standard coal equivalent up from 2.25 billion in 2005 (from China’s 2008 Statistical Yearbook). That’s growth of 37.97 per cent. The same 2009 Communique gives GDP growth for 2009 and 2008 at 9.6 per cent and 8.7 per cent respectively, and the previous year’s 2008 Communique gives 2007 and 2006 GDP growth at 13 per cent and 11.6 per cent. These annual figures give cumulative GDP growth of 50.24 per cent from 2005 to 2009.

So GDP grew 12.27 percentage points faster than energy between 2005 and 2009. The reduction in energy intensity is equal to this difference divided by 1 plus GDP growth, which, after rounding, is 8.2 per cent. This implies that China is less than half way towards its 2010 target with only one year out of five to go.

2009 was always going to be a difficult year because of the fiscal stimulus and all-out effort for growth. The 2009 Statistical Communique reports that energy intensity fell in 2009 by only 2.2 per cent. But the record for 2005-2008 doesn’t look too good either, with a cumulative reduction in energy intensity over these three years of only 6 per cent, much lower than earlier estimates.

Frequent readers may recall a similar analysis that I did (here and here), leading to similar questions. The graph at the top of this post, which is based on BP and IMF data, is discussed here.