It is provided in the Overall Energy Conservation and Emission Reduction Work Plan during the 12th Five-Year Plan Period issued by the State Council in September that the government intends to reduce per GDP energy consumption to 0.869 tons of standard coal (calculated by the price in 2005) by 2015, down by 16% compared to 1.034 tons in 2010, and 32% over 1.276 tons in 2005. During the 12th Five-Year Plan Period, China will realize energy saving of 670 million tons of standard coal.
Insiders believe that it is challenging for China to fulfill its commitment of cutting per GDP CO2 emission by 40%-45% over 2005, and the targets of bringing energy consumption density down by 16% and CO2 density down by 17% during the 12th Five-Year Plan Period, which, however, may provide an important opportunity for the prosperity of energy conservation-related sectors.
Total Output to Exceed RMB4 Trillion by 2015
Premier LI noted that energy conservation and environmental protection industries will play a key role throughout the modernization process of China, implying broad market potential and extensive business opportunities.
According to statistics, in 2010, the total output of energy conservation and environmental protection industries exceededRMB2 trillion. Market speculates it to be provided in the 12th Five Year Plan for Energy Conservation and Environmental Protection Industries that by 2015, the total output of the industry will amount to RMB4 billion, doubling that of 2010, growingat a CAGR of over 15%. And the weighting of energy conservation and environmental protection industries in GDP is expected to reach 6%-7%. Key segments, e.g. environmental protection devices manufacturing and environmental service sectors would eachgenerate an output of over RMB500 billion.
In the meantime, the government encourages the growth and expansion of renewable energy companies, and looks to foster around 100 above RMB1 billion players during the 12th Five-Year Plan Period.
President HU Jingtao indicated on the 19th APEC Informal Leadership Meeting that China has identified the green and energy conservation industries as a key area for attracting and utilizing foreign investment. Robust needs for green energy and a supportive policy environment will create extensive business opportunities for investors both at home and aboard.
Take the thermal power sector as an example. As of the end of the 11th Five-Year Plan Period, 565 million kwh desulfurization devices for coal-fired power plants were put into operation, and the percentage of coal-fired power plants installed with desulfurization devices was raised to more than 80% from 12% in 2005. However, the per capita installed capacity in China is still relatively low compared to developed countries. And considering the current energy structure in China, the installed capacity of coal-fired power generators will continue to increase in an extended period, accompanied with increasing SO2, NOx and gas emission.
The Air Pollutant Emission Standards for Coal-fired Power Plants, which will be promulgated on January 1st, set forth new and more stringent emission standards for existing and newly-built thermal power plants. Mr. TAO Detian, the spokesperson ofthe Ministry of Environmental Protection said that the new standards would not only slash the emission of pollutants, but also promote the advancement of relevant technologies and industries. Relevant environment management and equipment manufacturing sectors, such as denitrification, desulfurization and dedusting sectors, are expected to collectively generate an output of over RMB260 billion.
At present, less than 15% of denitrification projects have been put into operation, and approximately 610 million kwh installed capacity is still not equipped with denitrification devices. The New Standards would undoubtedly bring out extensive business opportunities for the denitrification sector.
Multiple Beneficial Policies Released
SinceSeptember 2010 when the State Council selected energy conservation and environmental protection industries as the top 1 in 7 strategic new industries, a series of industrial policies have been released to speed up the development of energy conservation and environmental protection industries.
In Sept. 2011, the State Council released the 12th Five-Year Plan's Comprehensive Work Plan for Energy Conservation and Emission Reduction. In Oct. 2011, it released the Opinions on Strengthening Major Environmental Protection Work and approved the Nationwide Underground Water Pollution Prevention Scheme and in Nov., it approved the Schedule to Control Greenhouse Gas Emissions during the 12th Five-year Plan and the Ministry of Environmental Protection officially released the Development Schedule for National Environmental Protection Regulations and Environmental Economic Policies. The Schedule to Control Greenhouse Gas Emissions during the 12th Five-year Plan sets the overall requirements and key tasks for controlling the greenhouse gas emissions to reduce the carbon dioxide emission by unit GDP by 17%. And the low-carbon pilot programs shall be encouraged to explore the development of carbon emission trading market and accelerate the auditing system development for greenhouse gas emissions.
The 7th National Environment Conference, held every 5 years, will be convened on Dec. 20th, 2011 and the Planning on Environmental Protection during the 12th Five-year Plan will be possibly announced by the Ministry of Environmental Protection.
Based on our understanding, the Development Schedule for energy conservation and environmental protection industries during the 12th Five-year Plan, led by the NDRC with the Ministry of Environmental Protection, the Ministry of Finance, the State Administration of Taxation, the PBOC, etc., has been submitted for review by various governments. As the first state-level five-year plan in energy conservation and environmental protection industries, the plan will provide benefits for environmental protection enterprises in terms of land use tax, water resource tax, waste treatment charge, etc.
The Schedule on Equipments Manufacturing for Environmental Protection during the 12th Five-yearPlan is under discussion and is expected to be announced later. The schedule will vigorously encourage the development of manufacturing bases and key players. The Development Schedule for Environmental Service Industry during the 12th Five-year Planhas been finalized and will be announced as a supplement. The schedule proposes that the environmental service sector shall increase its contribution in the whole environmental protection industry from 15% to 30%.
Such policies clearly demonstrate that energy conservation and environmental protection industries will witness a frog-leap development in the 12th Five-year Plan period.
Speed up the R&D Efforts on Key Technologies with Proprietary Intellectual Property Rights
Industry insiders say that although energy conservation and environmental protection industries in China enjoy large room for growth, the overall development level for China's energy conservation and environmental protection industries is positioned in the middleand lower reaches of the international division of labor and disadvantaged in the international competition due to its low industrial concentration without clear-cut labor division and synergies. We shall positively leverage all resources to nourisha batch of industrial players with proprietary intellectual property rights and then to promote the industrial growth as a whole.
Currently, the industrial guidance on China's energy conservation and environmental protection industries are mostlyin the form of large-scale project or subsidies on end-products. The healthy development of energy conservation and environmental protection industries shall rely on the add-on growth and the organic growth by innovation, both of which are necessary.
According to statistics, only 0.01% of enterprises in energy conservation and environmental protection industries enjoy the proprietary intellectual property rights. Due to the limited R&D investment, the lack of flagship enterprises, the weak innovative capabilities, most enterprises are only able to provide single technology without proprietary intellectual property rights and core competitiveness.
Some experts indicate that given the late start and the weak foundation of China's energyconservation and environmental protection industries, apart from the tailored industrial policies, we shall speed up the R&D efforts on energy conservation and environmental protection industries and then enhance the development level for energy conservation and environmental protection industries as a whole. For example, the plasma oil-free ignition and stable combustion technology exert positive influence on the energy conservation and emission reduction for the whole coal-fired sector.
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