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CHINA: One Green Leap Forward, Two Steps Backward

BEIJING, Dec 7 2009 (IPS) - With low carbon seen as the new buzzword for government promotion and backed by Beijing as the new economic growth engine, China is poised for a green leap forward.

But the political overtones of the drive and the zeal of local governments jumping on the low carbon bandwagon have raised concerns that the new green campaign may result in overcapacity, worsening China’s frictions with its trade partners.

As world leaders get together this week in Copenhagen to discuss the earth’s low carbon future, China is facing warnings that its expansion into green energy may have trespassed certain boundaries.

Last week the European Chamber of Commerce in China warned Beijing on threat of trade backlash. A report issued by the European business group said Beijing’s huge stimulus measures to revive the economy have aggravated the problem of overcapacity, which may result in a new surge of cheap exports. The chamber cited expansion in the wind power equipment as one of the sectors facing severe over-capacity.

In another development, the United Nations stopped approving aid for Chinese wind-power projects, pending determination whether they qualified unfairly.

The ‘Financial Times’ reported that the U.N. stopped accrediting Chinese wind farms this summer on concern that government subsidies were cut to make them eligible for the international body’s Clean Development Mechanism, which allows developed countries extending financing and/or technologies for greenhouse gas (GHG)-reducing projects to developing countries to earn credits for their GHG reduction efforts.

But even before the international community and businesses raised voices of concern, Chinese leaders have begun worrying that the new drive for clean energy is creating an overcapacity that may become a long-term burden for the country.

In July the National Planning and Development Commission, the state top planner, released a circular cautioning against new overheating of the economy. Last month, the State Council, China’s cabinet, announced it was taking measures to limit capacity increases in seven sectors.

“It is not only Beijing that has a low-carbon plan but all 32 provinces in China have their own plans, and sometimes those are more ambitious than the national projects,” says Wu Changhua, Greater China director for Climate Group, a Britain-based non-profit organisation. “They don’t seem to realise that it is not enough just to produce the technology and get the clean energy but that you should be also able to deploy it.”

A low-carbon expo held in Nanchang, the capital of Jiangxi, one of China’s central provinces, last month gave a glimpse of how local governments were vying to embrace the new low-carbon concept.

During the expo Jiangxi provincial government announced that it was cooperating with the Finish government on building a low-carbon eco-city in Gongqing city by the Poyang lake, China’s largest freshwater lake. The city, also dubbed DigiEcoCity, was being planned by a Finish company of the same name, and it was the envy of all other localities.

“The drive for green economy has become totally politicised,” said one of the expo participants who spoke on condition of anonymity. “Every single provincial representative at the expo was courting the Finish architect and inviting him to choose their province to be the next setting for a DigiEcoCity.”

The Finish company has agreed to build another eco-city in east China’s Jiangsu province and has been negotiating with Beijing and Shanghai for more eco-city plans, according to the state Xinhua news agency.

“Having one (such city) is regarded now as a thing of political prestige,” said the participant.

Chinese officials have also approached British businesses for cooperation on building eco-cities with intention to have a score of green model dwellings in China twinned with similar eco-development projects in Britain.

“The danger here is that many (cadres) are following a political momentum but their regions have no facilities and skills to support the implementation of new green projects,” Zhang Yongwei, researcher with a leading think tank under the State Council, told the ‘China Times’ last month.

Zhang cited a survey carried out by a working group of the National People’s Congress on how stimulus money pledged by Beijing was utilised by four provinces. The survey published in late October revealed that only 2.2 percent of the entire amount slotted for investment in technology innovation had been used to that end.

“The central government has said it will support low-carbon economy in a big way, but the implementation on local levels is patchy because many places lack the fundraising capacities and strong enterprises needed to sustain green development,” Zhang said.

The development of wind power is a case in point. In May this year China increased its goal for wind power generation capacity by the year 2020 to as much as 100 gigawatts, from the 30 GW that the central government had set 18 months before.

A report by the Global Wind Energy Council in the summer predicted that China would emerge as the biggest growth market for wind power generating capacity this year, ahead of the United States.

But the wind power sector remains ridden with controversies as government officials seem more interested in meeting capacity targets than ensuring that the generated power flows into the grid. Many installed turbines have been left idle as suppliers have found that power distribution networks were not up to the task of feeding the power to the grid.

Suspicions that Beijing has cut wind power subsidies in order for some projects to qualify for carbon credits and meet green energy targets appear to underpin the U.N. decision publicised last week to stop approving new wind power projects from China.