Building a Stronger Foundation for China's Clean Energy Future: An Update on the Drafting of China's Energy Law

This post was coauthored with NRDC attorneys Adrian Lu and Alvin Lin.

 According to this recent article in China’s Economy and Nation Weekly (Chinese only), sources within the Chinese government who are currently drafting China’s long-awaited comprehensive Energy Law have recently disclosed some interesting updates about the status of the law and a few of the controversial issues that have come up in the drafting process.

 The Energy Law and its Current Status

China's goal in enacting a comprehensive Energy Law is to establish a fundamental legal basis for long-term energy planning and strategy, one that would provide a structure that ties together the 50+ different energy-related laws and regulations in China, ranging from natural resources laws and nuclear power laws to the recently amended Renewable Energy Law (which my colleague blogged about here).  The administration of these laws and regulations is currently spread among a number of ministries and government agencies, without a single body in charge of comprehensive energy planning and implementation.  Given the speed of China’s energy demand growth and the need to ensure that its citizens have access to sufficient energy resources, this is a situation that calls out for reform.

 Drafting of the Energy Law started in January 2006, with a version being released for public comment in late 2007. NRDC, partnering with the Regulatory Assistance Project and the China-US Energy Efficiency Alliance, provided extensive comments on the draft, including recommending that the law treat energy efficiency as a resource on par with new generation and that it create a ministry-level energy agency with a specialized department in charge of energy efficiency and conservation.

 The process by which the Energy Law drafting committee sought input on the initial draft was a model of transparency and inclusiveness. In addition to soliciting written comments, the Office of the National Energy Leading Group hosted an international symposium where they invited presentations from dozens of international and domestic experts. Discussion topics covered the entire range of energy issues, including a stirring keynote speech by one member of the law drafting team on the urgent need to address climate change.

 Media reports since the request for public comment have been sparse.  In February of this year, it was reported that the draft Energy Law had been passed back to the State Council’s Legislative Affairs Office from a group of energy-related agencies who had been asked for further feedback on the draft.  Unfortunately for those (including us at NRDC) who are eagerly awaiting the law’s final passage, the process is far from over: once the Legislative Affairs Office finishes making changes to the current draft (expected to happen at the end of this year), the bill will be presented to the Standing Committee of the State Council.  After approval by the State Council Standing Committee, the law will enter the legislative process of the National People’s Congress, which usually consists of at least three readings of the draft, separated by at least 3 months.  According to the Economy and Nation Weekly, an official at the Legislative Affairs Office estimates that, “if the process goes smoothly, the law may be promulgated next year or the year after, at the earliest.”

 Renewable Energy: to “Prioritize” or Merely “Encourage”?

According to drafting team member Wu Zhonghu, a researcher at the Energy Research Institute of China’s National Development and Reform Commission (NDRC), one of the most contentious issues facing the drafters is the positioning of renewable energy within the Energy Law, i.e., whether renewable energy should be “prioritized” (优先) over fossil fuels or merely “encouraged” (鼓励).  The “traditional energy faction” (传统能源派) argues that prioritizing renewable energy ignores the reality that China depends on fossil fuels for over 70% of its energy production, and that fossil fuels will continue to be China’s primary source of energy for the foreseeable future.  Wu believes that merely encouraging renewable energy development will do little to improve China’s energy problems.  Although renewable energy has been “encouraged” for many years with some positive results, “prioritizing” renewable energy is necessary to set a clear legal mandate that will achieve rapid acceleration of renewable energy to the necessary scale.

 According to the Economy and Nation Weekly, the current (non-public) draft of the Energy Law emphasizes using fossil fuels in a clean, efficient, comprehensive manner but does not prioritize the development of renewable energy over fossil fuels.  I hope that this unfortunate omission will be corrected in the remaining drafting and legislative process and that renewable energy – and energy efficiency – will be given preference over fossil fuel energy sources.  Buying into the argument of the traditional energy faction will lead China to a self-fulfilling and potentially disastrous prophesy.  Although I understand that, even with proactive development of renewable energy, China is likely to remain dependent on fossil fuels for the foreseeable future, if China does not prioritize renewable energy in its long-term planning, then it is certain to remain dependent on fossil fuels.

 Wanted: A Ministry-Level Energy Agency

The article points out another major weakness in the current draft: There is still no clarity on the authority and responsibilities of the Energy Law’s implementing agency.  Though the current draft incorporates the concept of the National Energy Commission (国家能源委员会, or NEC), it makes no progress on the issue of how to divide implementation responsibilities between the NDRC and the National Energy Administration (国家能源局, or NEA).  As Julian Wong and Erica Downs have explained previously, the NEC is merely a planning and coordination body, and the NEC–NRDC–NEA framework should not be seen as a permanent solution to China’s energy planning and implementation needs.  At a minimum, I hope that China will create a ministry-level energy agency that possesses:

 1)      the authority to effectively negotiate with the various agencies (some ministry-level, such as the State-owned Assets Supervision and Administration Commission) that currently hold interests in China’s energy supply and infrastructure; and

2)      adequate staffing, both in terms of quality and quantity, to effectively implement the principles and programs set forth in the Energy Law.        

 Although the latest updates are less than encouraging, the good news is that there are still plenty of opportunities in the drafting and legislative process to correct the weaknesses discussed above and to include a greater emphasis on treating energy efficiency as a priority resource in an integrated resource planning process.  If China is serious about its energy security and contributing to the global fight against climate change, it must set up an effective legal and administrative framework for energy planning and implementation that prioritizes energy efficiency and renewable sources of energy as essential pillars in its sustainable development strategy.