We recently reviewed the provisions of  the newly amended Energy Conservation Law which apply to operating manufacturing facilities. Today, we'll look at the regulations and policies which apply to these operations.  The Medium and Long Term Energy Conservation Plan (the "Plan")(under "Laws & Regulations" in the right sidebar) noted that as of 2004 "the lack of compliance and slack enforcement of the [original Energy Conservation] law is rampant; the supporting regulations are incomplete. . . . The formulation of energy efficiency standard lags behind. The standards and codes on fuel economy for motor vehicles have now been promulgated, but there are no energy efficiency standards and codes for most of industrial energy consuming equipment (and products)." The situation on the regulatory front hasn't changed much since 2004, but the Plan itself constitutes a significant advancement in terms of the articulation of energy conservation policy.

Energy Conservation Policy

The Plan policy components which potentially impact manufacturing operations are as follows:

Section III. 2. (5) provides

As for key energy consuming enterprise with annual energy consumption exceeding 10,000 tce, it is necessary to apply strict and lawful management, specify targets and measures, publicize their energy consumption status, and intensify supervision and inspection. For small and medium scaled enterprises, more attention should be paid on policy guidance and service provision while applying strict lawful management.

In section IV, the Plan sets forth specific guidelines for various key industrial sectors including: Iron and Steel, Nonferrous Metals, Oil and Petrochemical, Chemical, Building Material, and Machinery Building Industry.

Some of these guidelines are fairly specific (but remember this is a policy document, not a law or regulation; it sets forth recommendations not requirements). For instance in the Chemical Industry section it is provided that:

Large scaled synthetic ammonia plants should employ advanced energy saving technical processes, new catalyst and high-efficiency energy saving equipment, so as to enhance conversion efficiency and recovery and reuse of residual heat. We should promote technology of recovering residual heat from flue gas of one-section furnace for gas-based synthetic ammonia, and renovate steam system. We should accelerate retrofit of replacing fuel oil with clean coal or natural gas for oil-based synthetic ammonia. Apply energy saving equipment and variable pressure adsorption recovery technology to medium and small scaled synthetic ammonia, so as to reduce energy consumption.

The Plan (Section IV. 2.) also specifically defines the "10 major energy-saving projects."  Those relevant to manufacturing operations include: Coal-fired industrial boiler (kiln) retrofit, District Cogeneration, Residual Heat and Pressure Utilization, Petroleum Saving and Substituting, Motor System Energy Saving, and Energy System Optimization.

The descriptions of the specific projects are also fairly detailed.  For instance the Coal-fired industrial boiler (kiln) retrofit projects includes a goal to:
transform or replace existing medium and small coal-burning boilers (furnaces and kilns) by burning high quality coal, screened lump coal and sulfur fixed coal, and adopting advanced technologies such as circulating fluidized bed and pulverized coal burning and establishing scientific management and operation mechanisms. As a result, the coal-burning industrial boiler efficiency will increase 5 percentage points with coal savings of 25 million tons; the coal-burning furnace and kiln efficiency will increase 2 percentage points with coal savings of 10 million tons.

Section V. 5. provides a road map for future laws and regulations in the Energy Conservation field (not all of which apply to manufacturing operations):

We should speed up establishing an energy conservation law and regulations system that takes the China Energy Conservation Law as the core, and coordinates with supplementary regulations and standards. Besides, we should intensify supervision and regulation according to related laws. First, study and perfect laws related to energy conservation and as soon as possible formulate such laws and regulations as the Power Conservation Management Method, Petroleum Conservation Management Method, Energy Efficient Labeling Management Method and Building Energy Saving Management Method. Second, formulate and implement mandatory and advancing performance energy efficiency standards, mainly including energy efficiency standards of industrial energy-consuming equipment, household electric appliances, illuminative facilities and motor-driven vehicles. Organize amending and perfection of rules on energy conservation design of main energy consuming industries and building energy saving standards. Speed up formulating such standards as on control of building cooling and heating temperature. Currently, much effort should be made to accelerate formulation of motor-driven vehicle fuel economy limited value standard and implement the standard by phase from July 1, 2005. Meanwhile, establish and practice the three rules of reporting, labeling and publishing motor-driven vehicle fuel economy. Third, establish and perfect the energy conservation monitoring mechanism. Supervise and inspect energy consumption and energy conservation management of energy intensive industries such as iron and steel, non-ferrous, building materials, chemical and petrochemical; supervise and inspect implementation of the Energy Efficiency Products Standard, the Building Energy saving Design Standard and the Industrial Design Code; supervise and inspect the regulations of adding provisions (chapter) of energy conservation in feasibility study reports of fixed assets investment projects. Perfect eliminating systems by laws and take compulsory measures to eliminate backward and extremely energy intensive products and equipment according to related laws. Fully develop roles of authorities such as construction, industry and commerce and quality control and energy saving monitoring and testing (inspection) organizations at each level of China and intensify supervision laws enforcement in every possible link.

To encourage energy efficiency, the Plan also contemplates revising power pricing policy to

Establish and improve a compensation system on peak, valley, sufficient and insufficient period power prices and interruptive power prices. Apply differential power prices to eliminated and restricted projects and energy intensive enterprises according to the national industrial policies. Restrict blind development of energy intensive industries and guide user rationally to consume power and conserve power.

Energy Conservation Regulations

There are a hodgepodge of energy efficiency regulations currently on the books. Most of them were cataloged in an NDRC Notice issued in 2007. The Notice explicitly recognized, however, that

Given that some of the standards were launched a considerable period of time ago, which caused some of the parameters to fall behind the current situation, we're organizing relevant units to speed up the formulation of or amendment to the standards. Please enforce these standards in a serious manner by taking into account local and industrial circumstances.

The Notice lists regulations which range from the general-Guidelines for Energy Management of Industrial Enterprises (GB/T15587-1995)-to the specific-Guidelines for Design of Rational Energy Consumption in Respect of Pharmaceutical Enterprises. It should be consulted if you have a particular compliance issue.

Although the regulatory goals of the Plan are ambitious, following its publication most effort was apparently devoted to amending the Energy Conservation Law, since few new, significant regulations addressing energy efficiency have been promulgated since its issuance. According to a Paper entitled "Setting Standards for Industrial Energy Efficiency:"

The China Standard Certification Center (CSC) has been authorized by the Chinese government to develop a series of national energy management standards. Three standards are planned for release by March 2008: Management System for Energy - Requirements, Management System for Energy - Guidelines for Performance, and Management System for Energy - Guidelines for Auditing. The draft Requirements standard has much in common with the other energy management standards in use elsewhere.

The Chinese government has selected the Top-1000 Energy Consuming Enterprises as a major source of potential energy savings to meet national energy reduction goals. The Chinese energy management standards will be completed in 2008 and will be added to the portfolio of policy instruments and program offerings to assist these plants in meeting their goals.

The last I checked, these "national energy management standards" had not been released.

China has also experimented with Voluntary Agreements with individual facilities to achieve energy efficiency improvements, but has not yet made these agreements part of its official energy efficiency compliance program. For those of you unfamiliar with these agreements, here's how they work (as noted at the link set forth above):

Participation by industries is motivated through the use of "carrots" and "sticks", which refers to incentives and disincentives. Supporting programs and policies (the "carrots"), such as enterprise audits, assessments, benchmarking, monitoring, information dissemination, and financial incentives all play an important role in assisting the participants in meeting the target goals. Some of the more successful Voluntary Agreement programs are based on some reduction of environmental regulations or taxes (the "sticks") for participants. Overall, international experience shows that Voluntary Agreements are an innovative and effective means to motivate industry to improve energy efficiency and reduce related emissions, if implemented within a comprehensive and transparent framework.

Is a Voluntary Agreement really voluntary if it's encouraged by a "stick?"  Ponder that until we meet again.