What to Look for in China’s 12th Five-Year Plan?

China’s annual political meetings begin on Thursday March 3 and the major outcome will be the announcement of the 12th Five-Year Plan (2011-2015). Votes at both the advisory China People’s Political Consultative Conference (CPPCC, opening March 3) and the National People’s Congress (NPC, opening March 5) are not in question. But the content of the Five-Year Plan, as well as various government work reports and major pieces of legislation, are only revealed during the meetings.

In the lead-up to these meetings, a number of official and semi-official Communist Party and government announcements give us an indication of what we are likely to see. For those interested in energy, climate and environmental issues, one key indicator is the GDP growth target, since pursuit of high growth in the past has driven investment in energy-intensive heavy industry. As has become standard practice, Premier Wen Jiabao held a pre-NPC press conference this past weekend at which he announced that the government’s annual growth target during the 12th Five-Year Plan would be 7%, lower than the 7.5% target rate in the previous plan period, in order to emphasize quality and sustainability of economic growth.

China’s Communist Party set the direction for this Five-Year Plan last October with its most comprehensive discussion of climate and environmental issues to date. Significantly, we can anticipate a formal adoption of the pledge to reduce carbon intensity 40 to 45 percent from 2005 levels by 2020 – a pledge first made at the climate negotiations in Copenhagen and then reaffirmed in December in Cancun. The incorporation of these pledges into the 12th Five-Year Plan and their adoption by the National People’s Congress makes them domestically binding. This commitment covers the period up to 2020. We will have to look at the Plan document to see how much of this target is assigned to 2011-2015 and how much is left for the subsequent Five-Year Plan period.

Similarly, we are still waiting to see how energy targets are assigned in the Plan. China set a 20% energy intensity reduction goal for the period 2006-2010 and it has now announced that it actually achieved a reduction of 19.1%. In the same press conference where Premier Wen announced this result, he also said that the energy intensity reduction target would be set at 16-17% in the next Five-Year Plan. A somewhat lower target has been widely expected, both because China has had some trouble reaching the full 20%, and because many of the relatively easy efficiency gains have already been made. The plan should include a more precise energy intensity target, and there have been some rumors that it will also include a target for total coal consumption, but it is not clear whether a coal target will really be published.

Most of the additional details on how China will implement its climate and energy policy will not be in the Plan document itself but in ministry- or provincial-level plans that come out in the months following the National People’s Congress. Some of these more detailed implementation documents have in fact already come out. On January 6, outgoing National Energy Administration Director General Zhang Guobao presented a blueprint for achieving China’s long-term goal of meeting 15% of its total energy needs from non-fossil sources by 2020, establishing a mid-term target of 11.4 percent for 2015 (Chinese only).

One interesting facet of China’s Five-Year Plan goals is that the Plan is passed in March but the clock for achieving the targets begins ticking two months earlier, in January. The Ministry of the Environment attempted to address this issue by announcing its 2011 targets early. It announced a single-year goal of 1.5% for reductions in two major air pollutants (sulfur dioxide and nitrogen oxides), as well as two water pollution measurements (chemical oxygen demand or COD, and ammonia nitrogen). This is highly significant. The previous Five-Year Plan included reduction targets for sulfur dioxide and COD; expanding the list of national priority pollutants to five indicates a strengthening of environmental concerns. The 1.5% number itself is not terribly ambitious, and many expect that the five-year goal will be higher. In the last Five-Year Plan the goal for both sulfur dioxide and COD was a reduction of 10%. And in the case of sulfur, China exceeded its target handily, achieving a 14% reduction over five years.

Minister of the Environment Zhou Shengxian also announced a five-year plan for heavy metals. It will be interesting to see whether these new targets are incorporated into the overall national Plan or simply into the Environment Ministry’s plan.

Question of Allocation

In the months after the Plan comes out, the key action will come in target allocation. Typically, national targets are allocated to provinces and ministries, which then subdivide and allocate them to individual cities and companies. Because China had a great deal of experience in the ups and downs of implementing the energy intensity target under the last Five-Year Plan, and because its carbon intensity target has been known since November 2009, a great deal of work has already been done both on the measurement and tracking systems for the targets and on ways to more effectively and equitably allocate the targets.

At a February 25 meeting to review China’s low-carbon development, Professor He Jiankun, Director of Tsinghua’s Low-Carbon Energy Research Institute and a key climate policy advisor to the national government, suggested that cities with higher GDP growth rates might be assigned more stringent energy intensity targets.

In addition to the Plan, it will be worth looking at how heavily energy, environment and clean technology feature in the government work report delivered by Premier Wen at the opening of the NPC. This work report will be a key statement of national priorities.