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UPDATED: November 30, 2007 NO.48 NOV.29, 2007
Who'll Turn on the Lights?
China is faced with the tough task of reshuffling current overlaps in energy administration, in order to create a centralized ministry of energy

The draft of China's first energy law is currently being discussed by all related departments and enterprises. As the discussions get deeper, there are increasing voices calling for reestablishing the Ministry of Energy.

The law, aimed to standardize energy supervision, covers all aspects of China's energy strategies and programs including energy exploration, efficiency, security and emergency response as well as international cooperation.

China set up the Ministry of Energy in 1988 but it was dismantled five years later because its administrative functions overlapped with other departments. Faced with increasing energy shortages, the government set up an energy bureau under the National Development and Reform Commission (NDRC) in March 2003. The bureau was crippled, however, because much of the administrative power in the energy sector was scattered between different government organs and major oil, power and coal companies including the State Electricity Regulatory Commission, the State Administration of Coalmine Safety, the Ministry of Water Resources, the Ministry of Land and Resources, China National Petroleum Corp., Sinopec Group and State Grid Corp. of China.

Energy issues have become one of the major bottlenecks for China's economic development following its rapid growth in the last decade. It is imperative the government set up a uniform body for energy macro-control and supervision. Economists and energy experts have called for reestablishing the Ministry of Energy, especially after China suffered a widespread energy crunch in 2004. Many delegates have submitted proposals to establish a ministry of energy to the National People's Congress (NPC), China's top legislature, in March of the past two years.

Usually, creating a ministry as important as the energy ministry is only possible when the tenure of the current government ends and the newly elected one carries out institutional reform. As the office term of this government will expire in early 2008, the coming March will reveal a better chance for the energy ministry, otherwise, it might have to wait five years for another opportunity.

Overlapping decision-making

Before the Ministry of Energy was set up in 1988, four former ministry-level organs were responsible for energy administration, namely, the Ministry of Petroleum Industry, the Ministry of Coal Industry, the Ministry of Nuclear Industry and the Ministry of Electricity.

During the institutional reform in 1988, the Ministry of Energy was set up to replace the Ministry of Electricity and take over administration functions of the three other energy-related ministries, which were turned into three enterprises. However, the decision failed to win support from the petroleum and coal ministries and 20-odd former officials of the coal ministry appealed to the State Council to resume the ministry.

During the 1993 institutional reform, their wishes came true when the Ministry of Energy disappeared and the Ministry of Coal Industry and the Ministry of Electricity came back. China's energy administration was again scattered and administration efficiency crippled.

In 1997, the Ministry of Electricity was turned into the State Grid Corp. of China and the Ministry of Coal Industry was abolished.

In 2003, the NDRC was established and an energy bureau was set up under it to take over the energy administration functions.

Soon, officials with the NDRC's energy bureau became embarrassed by their role-the administrative level of their bureau was lower than those ministry level or vice-ministry level agencies and enterprises such as Sinopec and the State Electricity Regulatory Commission.

The related administration functions have now been handled by a variety of ministries, resulting in a lack of planning for energy exploration, consumption, savings and reserves.

As a solution, the State Energy Leading Group was established directly under the State Council to help manage the energy industry in 2005, with Premier Wen Jiabao heading the group, and Ma Kai, Minister of the NDRC, acting as the office director.

Yet, since the main role of the group is to organize and coordinate, the overlapping and scattered administrative pattern remains unchanged.

"This scattered administrative pattern made it nearly impossible to plan energy strategies and failed to meet the demands for sustainable economic growth," said Wang Weicheng, a member of the NPC's Environmental and Resources Protection Committee. Wang submitted for a third time his proposal on setting up an energy ministry to the NPC in March this year.

Strategic importance

The energy ministry should cover all related energy organs and be entrusted with strong power to make decisions and work out energy strategies, said Zhao Xiaohui, an official with the Ministry of Information Industry.

"We should set up a new energy ministry as soon as possible," continued Zhao. "Because China has already lagged behind in terms of working out energy policies and strategies to meet huge domestic demands for energy and resources." China has to enhance its administrative efficiency and set up an energy ministry to facilitate asset restructuring and acquisition between enterprises, look for global cooperation for oil and gas exploration and stipulate related policies. "It's far from enough to rely on the government to play the coordinator," Zhao added.

Zhao believes a breakthrough would be possible only when the Central Government makes up its mind to overcome barriers between different ministries which do their best to guard their own interests and power. This is difficult in China, but it's good for the implementation of the state's development strategies as well as the long-term national interests, Zhao said.

China needs a minister of energy from the policy-making team, said Li Puming, a researcher with the NDRC's policy research office. He argued that in dialogues China has with other countries on energy issues, one energy minister instead of a dozen ministers from all energy-related departments will definitely do the job much more efficiently.

An International Energy Agency (IEA) report said China's increasing consumption would make it the world's largest consumer of energy by 2010. China's energy demand is projected to more than double from 2005 to 2030, the report said. As the second largest oil consumer after the United States, China has no authoritative energy administration organ, which made problems worse during recent global oil price hikes.

Difficulties to overcome

Despite all the calls about the importance of setting up a powerful, unified energy ministry, mountains of difficulties are ahead for the government to overcome.

To set up a new ministry means a power and personnel reshuffle among all these related energy organs. The biggest difficulty is how to make those already accustomed to and satisfied with their posts and duties satisfy again with their new roles, and to break the balance of power and restore it in terms of interests.

The 1988 institutional reform during which the former energy ministry was set up involved only four ministries, and today it could involve a dozen. It remains unknown whether officials from the above-mentioned ministries will disagree once the new energy ministry takes over their administration power.

It was reported that there were four candidate plans circulating before the leading group was formed in 2005. The idea of forming an energy leading group should win out because the other three, to set up an energy ministry, to form a state energy commission and to promote the NDRC's energy bureau as a vice-ministry level agency, all contain the possibility of claiming energy administration power from related ministries.

It still remains to be seen whether the energy ministry will acquire its due authority if it is eventually established. At present, the Central Government gives priority to energy efficiency and environmental protection while the local governments pursue economic growth. The authority and image of the energy ministry will be trimmed if it fails to coordinate between these government organs.

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