Three new World Bank-financed projects, approved on Tuesday, will support China's effort to improve the country's efficient use of energy and reduce polluting emissions from power plants.

Loans, totaling US$441 million and accounting for almost one third of World Bank lending planned for China in fiscal year 2008, will support the Energy Efficiency Financing Project, co-financed by a Global Environment Facility grant of US$13.5 million; the Shandong Flue Gas Desulfurization Project; and the Liaoning Third Medium Cities Infrastructure Project.

"Improving energy efficiency is critical to China's ability to sustain economic growth and protect its environment," said Mr. David Dollar, World Bank Country Director for China. "It is also a priority area for the World Bank's work in China. Our support is now focused on energy efficiency, renewable and clean energy, urban heating and power supply efficiency to help China better meet its energy needs and reduce greenhouse emissions for more sustainable growth. This will also contribute to the global efforts to mitigate climate change."

Through the Energy Efficiency Financing Project, the World Bank will foster the development of large-scale energy efficiency loan programs in the Export-Import Bank of China (EXIM), Huaxia Bank (Huaxia) and other domestic participating banks so that those banks can lend for energy conservation projects ranging from US$5 million to US$10 million, especially in heavy industries.

In Shandong Province, which ranks second in coal consumption in China and produces more sulphur dioxide (SO2) than any other province, the Shandong Flue Gas Desulfurization Project, will see the installation of gas desulfurization and SO2 control facilities in four coal-fired heat and power plants. It will also target the capacity of local regulatory authorities to monitor and enforce their SO2 emission control programs.

The Liaoning Third Medium Cities Infrastructure Project targets the inefficient, polluting and outdated central heating systems of this province. Currently, coal-fired heat-only boilers and combined-heat and power plants provide most of the heating for Liaoning's small and medium-sized cities. This project will see the construction of more efficient centralized heating systems and target the recovery of waste heat from power generation and steel production.

China is the world's second largest energy user. Energy consumption in the country increased from 990 million tons of coal equivalent (tce) in 1990 to 2,648 million tce in 2007, reflecting the rapid growth of its economy. China's rising energy demand has been largely met by coal. The country burns more than two billion tons of coal each year, about one third of the world's total. More than 50 percent of the coal consumed is used for electricity generation.

The Government of China recognizes that reducing energy intensity of the economy is key to sustaining China's fast growth. Efforts are being made to promote efficient use of energy and cleaner energy resources. Energy efficiency is a cornerstone of the country's energy strategy and policy. The 11th Five-Year Plan (2006-2010) has set an ambitious target of 20 percent reduction in energy intensity by 2010. The Government is also taking action to diversify energy sources and develop renewable energy to reduce the carbon intensity of energy supply.

China's medium to long term energy plan calls for increasing the share of renewable energy from the current 7 percent to 10 percent by 2010 and 16 percent by 2020; and increasing gas consumption from the current three percent to more than five percent and eight percent of the total energy demand by 2010 and 2020 respectively.

The World Bank has been working with China to help the country achieve these targets through analytical and advisory assistance as well as investment projects to improve energy efficiency, harness indigenous clean energy sources and promote the clean use of coal. Since its first energy conservation loan/GEF grant project in 1998, the World Bank has supported seven projects in the area of clean energy and energy efficiency in China, covering small hydro, wind power, biomass and photovoltaic, as well as energy efficiency in the industry and building sectors.

The World Bank, which manages several carbon funds from donors, has also been actively promoting carbon trading in China. More than 12 emission reduction purchase agreements worth US$222 million have been signed for energy efficiency and clean energy projects. The private sector arm of the World Bank Group, the International Finance Corporation (IFC) is also supporting clean energy and energy efficiency in China through the China Utility-based Energy Efficiency Finance Program.

(China Development Gateway May 28, 2008)