China Environmental Law

There hasn’t been much reporting on the newly created energy offices probably because there isn’t much to report, and the news that is available is extremely confusing.  What is clear it that this was a compromise between those who wanted a full scale Ministry of Energy and those who wanted to maintain the diffused energy authority of the status quo.  Beyond that point, the clarity ceases.

Here’s what I think is happening, but don’t make any bets based on this analysis: there will two new entities created: a National Energy Commission (NEC) and a National Energy Bureau (NEB).  Caijing Magazine reports that

The new commission would integrate all energy-related institutions and functions controlled by the NDRC, the entire National Energy Leading Group (NELG), and the nuclear power management office of the Commission of Science, Technology and Industry for National Defense. The government would disband NELG - which was set up in 2005 to integrate energy sector planning - and its executive organs.

By forming a national energy commission, a single government department would assume responsibility for uniform enactment of energy policies and programs.

According to an explanation given by the State Council’s secretary-general at an NPC hearing, the new national energy commission would be responsible for studying and drafting an energy development strategy. It would also consider energy security and development issues, while a national energy bureau under NDRC would be established as a standing body to handle the commission’s day-to-day work.

Thus, the NEC will be the national energy issue think tank and will coordinate national energy-related policy.  It appears to me that the NEC is simply a slightly more concrete entity than the old National Energy Leading Group (NELG), but will essentially do what the NELG did. To my knowledge the NEC has not yet been staffed. There has been talk that the NEC would be headed by the Premier or Vice-Premier of China, which makes sense since Wen Jiaboa was head of the NELG.  If this leadership speculation is true, it also seems extremely unlikely, as some reports have indicated (including the Caijing article quoted above), that the NEC itself would be subordinate to the NDRC.  It would be very unusual to have a Commission headed by a Premier or Vice-Premier be subordinate to a Ministry (no matter how powerful). If it turns out the NEC is subordinate to the the NDRC, then those backing a full-blown Ministry of Energy suffered a severe set back in this round.

The second new energy entity is the NEB which is charged with carrying out day-to-day energy policy implementation. The precise relationship between the NEC and the NEB is unclear, but my guess is that it is similar to the relationship between the old NELG and the National Energy Leading Group Office which was “housed in the National Development and Reform Commission to take charge of the routine work of the [National] Energy Leading Group.” See here. Thus, in my opinion, the reports of one of the new energy offices being part of the NDRC refer to the NEB, not the NEC.

The powers of the NEB appear rather limited. It did not obtain any jurisdiction “over the three state oil and gas monopolies and other government-controlled energy and electricity conglomerates” according to this China Brief report, and an article in the China Economic Review notes that:

Energy prices in China will continue to be set by the National Development and Reform Commission (NDRC) despite the creation of a new National Energy Bureau under it during the recent National People’s Congress (NPC), the South China Morning Post reported. Zhang Guobao, the National Energy Bureau’s new chief, said at an economic forum in Beijing that the new office “should not seek to participate in the pricing of energy,” though it should make proposals on price adjustments. Zhang said it should also consult with the NDRC’s price bureau if it wished to adjust energy prices. He added that details on how power will be shared by the agencies is still under discussion.

As noted above, Zhang Guobao (张国宝), an NDRC vice minister, was appointed on March 19 to head the NEB.  Zhang’s portfolio at the NDRC included general energy issues in the past, and his most recent portfolio covered nuclear power sector in particular. He appears to have kept a relatively low profile, although there is the following cryptic reference, attributed to an “industry insider” in a December 2006 Brookings Foreign Policy Studies Energy Security Series report (p. 22) on China

More recently, in December 2005 CNOOC Ltd. broke off talks with Chevron over the purchase of LNG from Chevron’s Gorgon project in Australia because it did not want to pay the prevailing world price (a decision which reportedly angered NDRC vice minister Zhang Guobao, who had a personal interest in seeing the deal consummated).

Two deputy heads have been appointed so far. Sun Qin, a former vice minister, will oversee the nuclear power industry, and Zhao Xiaoping, the former director of the energy bureau under the NDRC, will also serve as a deputy head although I have not heard what his responsibilities will include.

Zhang has signaled that his energy priorities will include:

1. Rapid development of nuclear power with a goal of 5% of China’s power generated by nukes in 2020. 

2. Encouragement of wind power so that China becomes the largest wind power generator within the next 5 years.

3. Active development of hydropower.

He has also signaled that China is “keen” to join the Organization for Economic Cooperation and Development (OECD), which is probably prompted, at least in part, by a desire to join the OECD’s affiliate, the International Energy Agency.

The Caijing Magazine article has Zhou Dali, chairman of the the Energy Research Institute, “a think tank affiliated with NDRC,” reflecting that

energy sector management and supervision is complex, and that more patience will be needed before an institutional overhaul can be completed. “On one side, we must strengthen our macroeconomic control,” Zhou said. “On the other, we must divide roles with NDRC.”

This is going to be a long process folks. Although we don’t know how all this will all shake out in the next month or two (such as who will head the NEC?), it looks like the Ministry of Energy proponents lost this round.  When the dust clears, I think it will become clear that the old NELG/NELG Office structure has simply been rebranded in a very small first step toward a Ministry-level Energy entity.