SHANGHAI/BEIJING (Reuters) - China's dramatic economic slowdown is paying an environmental dividend, slashing emissions levels from the world's biggest greenhouse gas emitter as its highest-carbon industries begin to contract.
The question Beijing will soon face is how it will manage to sustain those curbs once growth is restored. Some say it's moving in the right direction; others are far less certain, as the government, facing a threat to the economic miracle on which its credibility was built, rushes to pump growth up again.
"Safeguarding economic growth is the absolute No.1 priority of the authorities," said Wei Weixian, an energy professor at Beijing's University of International Business and Economics.
"The government might have to turn a blind eye to the rebound of some polluting heavy industries."
For the moment, Beijing can afford to make some systemic changes that will nicely serve both needs.
On Thursday evening, China passed along some oil price relief to motorists by cutting fuel prices by 14-18 percent, the first reduction since oil peaked in July. But at the same time it instituted a much heavier consumption tax in a pricing overhaul that should allow prices to cruise steadily higher should oil begin to rise again -- naturally tempering wasteful consumption.
Furthermore, Beijing has vowed that its 4 trillion yuan ($584 billion) economic stimulus package to aid the faltering economy will not invest directly in polluting and energy-intensive industries, and it has allocated 3.5 billion yuan to environmental projects.
It has also sped up plans to build nuclear power plants and doubled investment in the state power grid to 1.2 trillion yuan ($175.6 billion). That may also help renewable energy projects by allowing them quicker and more stable connections to the grid.
Beijing has also thus far resisted calls for it to aid the metals sector by cutting export taxes on aluminum and other energy-intensive products, despite a collapse in output.
But with construction at the core of its stimulus plan, it will be hard to avoid a big boost for carbon-intensive steel mills and cement producers, plus metals smelters, all of which consume coal or rely on it to generate 80 percent of their power.
It will need to walk a fine line to balance out competing interests next year as world governments face a December deadline to find a successor to the Kyoto Protocol on how to fight climate change, with China likely to be forced to take center stage because of its world-leading greenhouse gas emissions.
"The global economic slowdown is giving China a golden opportunity to move toward a green and sustainable mode of development," said Greenpeace campaign director Sze Ping Lo.
He said Beijing's target to improve its energy efficiency by 20 percent by the end of this decade was laudable, but policymakers needed to do far more to deter coal use.
"We think 2010 and the rest of the targets are ambitious, but we think they can do more. They're on track to achieving the targets, but that's not good enough.
NUMBERS TO TAKE HEART IN
For this year and possibly next, China will be able to boast statistics showing it making progress toward greener growth.
China managed to cut its energy intensity -- the energy used per unit of GDP -- by 3.46 percent cut in January-September compared with a year ago. With power output falling by its biggest-ever margin last month and steel production tumbling, it is set to improve on last year's 3.66 percent cut, officials say.
"China is likely to achieve its emission-cutting target this year," said Yang Fuqiang, vice president of the Energy Foundation, a U.S. consultancy. "An economic slowdown is actually good for combating climate change."
Last month, power consumption was down a tenth on November 2007, the biggest decline on record. To see a graphic, click:
Coal bore the brunt of the slowdown. Thermal power generation fell by one-sixth, with the balance made up by hydro-electricity and nuclear power, which are both small by comparison but taking big bites out of coal's market share.
But with the economy still expanding, albeit at a much slower pace, even modest improvements in efficiency are likely to mean more greenhouse gases from a country now estimated to have overtaken the United States as the top emitter.
China's per-capita emissions from transport, households, waste and aviation are very low, according to data compiled by Ecofys for Britain's Department of Energy and Climate Change. But emissions from power generation are among the worst in the world and Chinese industry is relatively inefficient in its energy use.
A CLIMATE OF CHANGE
But the central government, which has based its legitimacy on generating stability and prosperity, may well be too alarmed at the sudden downturn to tighten up on pollution and coal mines.
Economic growth of 11.9 percent in 2007 is likely to slide into the single digits this year, with 8 percent expected in 2009 -- a level the government has vowed to do all it can to ensure.
Local governments in Yunnan and Inner Mongolia have already rushed to cut power prices for industry. Beijing has not reacted to their move but is under pressure to offer similar help.
"I have to admit the priority to boost economy will hold back the energy saving task to a certain degree," said an energy official in Beijing, who declined to be named because of the sensitivity of the issue.
"But the impact will not be big at all because the government is not relying on boosting polluting firms to stoke economic growth. Moreover, market demand is dropping, so it is very hard for these energy-intensive companies to expand much."
(Additional reporting by Leonora Walet in Hong Kong)