Monday, March 10, 2008

China rules out energy price hikes in near-term

China has ruled out increases in state-set gas, power and oil product prices in the near future, despite repeating a long-standing promise to gradually reform the system used to set them, according to key policy papers issued on Wednesday.

As Beijing struggles with the "urgent" task of curbing growth in energy consumption, it unveiled a raft of fiscal incentives to cut back on power and oil consumption, including tax breaks for energy-saving products and business ventures.

It plans to close small, less-efficient thermal power plants with some 13 gigawatts of capacity, stepping up an efficiency drive that last year put 10 GW out of action, even as parts of the country face electricity shortages.

In a speech released at the opening session of China's parliament, the country's top economic planner also said it would improve the pricing policy for renewable electricity -- a sector that has been constrained by relatively low tariffs.

China is simultaneously trying to battle high inflation and curb pollution and wasteful use of energy. Its pricing policy has been trapped between the conflicting goals.

Raising prices would cut power and oil demand but bolster inflation that in January was running at an 11-year high. Ever wary of sparking unrest, Beijing appears to have put price reform on hold in the hopes that it will soon tame inflation.

"We will strictly control the prices of commodities and services under government regulation," the National Development and Reform Commission said in its report.

"There should be no price increase in the near future for items...such as refined petroleum, natural gas and electric power," the report added.

ENVIRONMENTAL TAXES

But with imported oil now providing nearly half the country's needs, Beijing is worried about its energy-guzzling habits and is under growing international pressure to reduce greenhouse gas emissions that may have surpassed those of the United States.

It has set a target of trimming energy intensity -- the amount used to generate each yuan of national income -- 20 percent from 2005 levels by 2010, but limited improvements have still fallen short of a guideline 4 percent annual reduction.

In 2007 China notched up a 3.27 percent cut, compared with just a 1.33 percent fall the previous year.

"This year is crucial for meeting the obligatory targets for energy conservation and emissions reduction...and we must increase our sense of urgency," Premier Wen Jiabao told the National People's Congress, or parliament.

China would work to develop its energy conservation and environmental protection sectors, while limiting unnecessary expansion of polluting, energy-guzzling industries and tightening market access for discouraged sectors, he added.

The government also repeated promises to reform resource taxes, exploitation fees and environmental protection charges -- which it hopes will help consolidate and clean up the mining sector, without giving further details.

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