Guest essay by Eric Worrall

Atlas Shrugged Steel Unification Plan meet Chinese Climate Policy.

Climate Change: China’s new five-year energy efficiency targets to drive heavy industry consolidation, analysts say

Higher energy efficiency bars have been set for companies in sectors ranging from oil refining to non-ferrous metals smelting by a circular published on Friday

New policies will ‘amplify the trend of the strong getting stronger’, analyst says

Eric Ng
Published: 4:30pm, 14 Feb, 2022

Beijing’s announcement of five-year energy consumption reduction targets for 17 energy-intensive industries to drive the reduction of carbon dioxide and other pollutants will spur industry consolidation, analysts said.

According to a joint circular published on Friday by regulators overseeing industrial development and environmental and energy policies, higher energy efficiency bars have been set for companies in sectors ranging from oil refining to non-ferrous metals smelting.

For example, steel, cement, coal-to-chemicals, aluminium smelting – among the country’s biggest carbon dioxide emitting industries – must all meet certain minimum standards by 2025. Currently, some 20 to 40 per cent of their capacity fails to do so.

Companies whose energy efficiencies are below the minimum standards are urged to install advanced equipment and adopt new technology such as recycling of waste heat, according to the circular, which was issued by regulators led by the National Development and Reform Commission (NDRC).

Those that have difficulties meeting these standards before the deadline should be phased out through market-based means, it added.

Analysts said they expected the biggest players to gain market share from the phasing out of the weakest players, which will not have the financial resources to make the facility upgrades needed to avoid shutdowns.

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Read more: https://www.scmp.com/business/article/3166968/climate-change-chinas-new-five-year-energy-efficiency-targets-drive-heavy

Red tape is always more harmful to small companies. Big companies can afford to maintain large compliance departments. Of course, large companies are well aware that red tape is their friend. Whatever harm they suffer from additional compliance is vastly outweighed by the commercial advantage of making life impossible for small firms which keep threatening their generous margins.

A handful of well connected already insanely rich Chinese people are going to make even more money thanks to this abusive climate policy. Of course, beneficiaries in the magic circle will likely be expected to return the favour, by complying utterly with government directives – a situation which would be almost indistinguishable from an old style Maoist command economy, in which the government calls all the shots.

The enrichment of the few will come at great cost to the broader Chinese economy. Eliminating small players will reduce pressure on the beneficiaries of this policy to cut prices. But the smaller players who spent decades building their businesses, and stayed clear of politics, will be the real victims. They will all be forced to sell up, for a fraction of the true value of their businesses.

If this blatant looter’s charter climate policy is typical of what is happening in today’s China, their macroeconomy might be weaker than it appears. A Soviet style collapse is more of a possibility than I realised. Unchecked, the looters will burn through the productive, until they run out of people to loot. Then one day, like a rotten tree in a storm, the Chinese economy will collapse in on itself.

All thanks to greed and climate targets.