2012-6-6  Source: REUTERS

BEIJING, June 6 (Reuters) – China will continue to keep electricity prices steady even if its stance complicates efforts to rein in runaway energy consumption and greenhouse gas emissions, an official of the country’s state planning agency said on Wednesday.

China is the world’s biggest emitter of greenhouse gas and its coal-heavy power sector generates more than half of total emissions.

But while Beijing has made broad commitments to reform the pricing system, it fears nationwide tariff increases could stoke inflation and even create social unrest.

The comments by Sun Cuihua, vice-head of the climate change department of the National Development and Reform Commission (NDRC), suggest China’s power sector will be excluded from a proposed national carbon trading scheme.

Speaking at the release of an International Energy Agency study on power sector participation in emissions trading, she said supply security and price stability would remain the main focus even if this meant shelving some of China’s ambitious carbon trading proposals.

“If the problem of rising electricity prices and shortages cannot be solved, then the government cannot accept such proposals,” she said.

Power generation accounted for 2.8 billion tonnes of CO2 emissions in 2008, more than twice as much as Japan’s total annual emissions, and exempting the sector from an emissions market could cast doubt on the scheme’s effectiveness.

China’s artificially low, state-set power pricing system makes it impossible for struggling state-owned utilities to pass rising fuel costs on to consumers, besides making it harder to lure investment and hit state energy efficiency targets.

China is considering plans to launch a series of “market-based mechanisms” to reach energy and greenhouse gas targets.

The government has pledged to increase the share of non-fossil fuel energy to 15 percent of the total energy mix by 2020, and has also promised to cut the amount of CO2 produced per unit of GDP by 40 to 45 percent over the 2005-2020 period.

Beijing plans to launch pilot CO2 markets in seven cities and provinces next year, and roll out a national scheme by 2015 or 2016.

The IEA study, done jointly with the NDRC’s Energy Research Institute, proposes a total cap on carbon dioxide emissions from China’s electricity sector and the allocation of carbon credits to individual power plants.

The IEA said a power sector emissions market should ensure generators receive 90 percent of permits for free, keeping costs down but still driving emissions cuts.

But the central government would not back an emissions trading scheme in the sector unless price and supply concerns were properly addressed, according to Sun.