Philip Andrews-Speed is Senior Principal Fellow at the Energy Studies Institute of the National University of Singapore.

Subtitle:

Good afternoon ladies and gentlemen! It is great to be with you virtually again two and a half years on from the initial meeting we had, for the launch of this important book. My chapter was entitled “seventy years of energy sector development in the People's Republic of China” calculated incrementalism.

Today I shall make just two parts: the first reiterates a concern that I expressed at the end of the chapter that I wrote; the second concern is new, but it's related.

The first relates to the government's ongoing steps to push forward introducing further market mechanisms into the energy sector, notably electricity, gas and carbon emissions. The concern that I have arises from the fact that companies involved in the production, transformation and transmission of energy are largely state owned at local or central government levels either wholly owned or partially owned, as is the same with energy intensive users, so these state owned enterprises face soft budget constraints and often have very close relationships with governments and agencies. And I think that these features are likely to continue undermining the effectiveness of markets and will constrain the benefits that may accrue from market mechanisms either in terms of economic efficiency in terms of pricing or in terms of reducing carbon emissions.

My second concern is linked but has arisen more recently and that comes from policy documents and statements released over the last eighteen months or so, and taken together they reveal some tensions between different policy objectives, for example economic growth versus low carbon objectives. And we've seen the economic recovery plan launched over a year ago has led to a vast increase in industrial and infrastructure activity that has boosted coal use and emissions, when is this going to turn around, and the pledge to double the economy by 2035. The other one relates to this call for energy security producing more energy domestically, does this mean producing more coal, oil and gas domestically? That then puts a pressure on the national oil companies because they‘re not going to make a lot of money producing some of this oil and gas because it’s geologically very difficult. And yet at the same time the government is putting pressure on all state owned enterprises to be more commercially viable so there’s another tension there. And again the central role of state owned enterprises that has been reiterated at the same time as pushing markets, also the key role that state owned enterprises should play in innovation that will lead to the low carbon economy. Again I think it is a problem because the state owned enterprises in general have not proved that innovative. So these tensions are there, they appear at least as an outsider to be important, but I look forward to seeing the fourteenth five year plan for energy and the longer term plans to understand how these tensions will be reconciled. Thank you very much indeed for having me today.

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