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Print Edition> Business
UPDATED: May 10, 2010 NO. 19 MAY 13, 2010
Low-Carbon Prizes and Penalties
Making profits is not the only goal for central SOE executives as they face repercussions for failure to reduce emissions


BUILDING A GREEN PORT: Taicang Port in Jiangsu Province invested more than 80 million yuan ($11.71 million) to transform the power source of its equipment, reducing carbon dioxide emissions by 57 percent and wastewater and waste oil by 95 percent (SUN CAN)  

The State-Owned Assets Supervision and Administration Commission (SASAC), which supervises and manages assets of state-owned enterprises (SOEs) under the supervision of the Central Government, issued a document on April 12 titled Provisional Measures on Supervision and Administration of Energy Saving and Emission Reduction by Central SOEs. In the document, energy saving and emission reduction are incorporated into the performance assessment mechanism for central SOE executives.

The SASAC will publicize the assessment results of central SOE executives, including their performance in energy saving and emission reduction, the report stated. Inefficient enterprises and executives will face serious consequences for failing to meet SASAC criteria.

There are currently 126 SOEs under the supervision of the Central Government. In 2009, central SOEs contributed more than one third to the country's GDP, playing an important role in China's economic development.

The basis for the document is to urge central SOEs to promptly readjust their industrial structures and improve the technologies so as to adapt to the development of the low-carbon economy and ensure China reaches its target in saving energy and reducing emissions.

While establishing "the low-carbon economy" as one of its key development strategies, China has made the commitment to the world that by 2020 it will reduce its carbon dioxide emissions per unit of GDP by 40-45 percent from 2005 levels. Central SOEs' performance in saving energy and reducing emissions will play a fundamental role in achieving this goal.

Rewards and punishments

The SASAC carries out differentiated monitoring on SOEs environmental techniques. Among the enterprises classified as major energy consumers—from nine core industries including petroleum and petrochemical, iron and steel, non-ferrous metals, power, chemical, coal, building materials, transportation and machinery—operations will only be monitored at the highest level if their annual energy consumption surpasses 2 million tons of standard coal, or annual emissions of carbon dioxide surpasses 50,000 tons, or annual chemical oxygen demand surpasses 50,000 tons. Other enterprises will fall under the attention category or general category. Among the 126 central SOEs, 32 are already incorporated into the category of key monitoring, the highest level.

Enterprises under the key monitoring category should establish special departments for coordination and supervision of energy saving and emission reduction. Attention category enterprises should have special internal organizations with special personnel for coordination and supervision of environmental efforts. Enterprises in the general category should establish special posts responsible for measurement, statistics, analysis and supervision of the energy saving and emission reduction work.

Targets and specific standards for rewards and punishments have been established for each central SOE. The assessment results are divided into four grades, which will be linked with promotions or removals of executives. It will also affect their bonuses.

As an incentive, the SASAC will reward enterprises or individuals that stay within energy saving and emission reduction guidelines.

Since 2004, the SASAC has carried out assessments of central SOEs for their performance every three years. But this is the first time that the SASAC has formulated clear and detailed standards for rewards and punishments. Previous assessments were mainly focused on the business performance of the central SOEs.

But pressure to stay within SASAC's environmental controls and ensure steady business growth will inevitably cause problems for SOE officials. Saving energy and reducing emissions aren't without costs—and such costs will invariably influence the economic benefits of an enterprise.

Enterprises can realize the goal of energy saving and emission reduction, and increase economic benefits, said Director of the Bureau of General Affairs of the SASAC Liu Nanchang, by adopting new technologies, introducing new equipment and eliminating backward production facilities.

Liu said that in 2007, to produce every kilowatt-hour of electricity, China's thermal power plants consumed 357 tons of standard coal, 11.2 percent higher than the international level of 317 tons. Furthermore, the energy efficiency of boilers in China was 60 percent—20 percentage points lower than the level in developed countries. Overall, Chinese enterprises have room to improve.

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