Environmental Permits Can Help to Implement Power Sector Reform


During my trip to China this past October and November, my tenth such during that time of year, I wore my facemask only once, on a day when the air quality index (AQI) was 260. While an AQI of 260 is unacceptable and hazardous, just five years ago during the same calendar period, I experienced weeks of the AQI being at 400-500 (or higher), and there were many days when I couldn’t see the ground from my office on the 25th floor.

Five years of improving air quality represent excellent news, with this study showing that 100,000 fewer deaths have occurred each year since 2013 due to improved air quality. End-of-pipe emission controls have achieved high penetration rates and over 80 percent of power plants have installed NOX and SO2 controls, proven technologies that are readily enforceable by air quality agencies. However, to fully meet China’s health-based air quality standards, air quality agencies also need to recognize the benefits of clean energy policies and energy efficiency, and include such programs in their air quality plans.

Air Quality Management Moves from Planning to Reducing Pollution Through Permits and Enforcement

China’s initial efforts have followed a strict command and control approach, with SO2 and NOX control devices operating on over 820 GW power plant capacity as of the end of 2015; no emission trading is allowed. This rigorous approach fueled the air quality improvements China currently enjoys, and emissions are readily measured with continuous emission monitoring systems. With this foundation in place, China’s policymakers are turning their attention to the details of designing and enforcing a long-term permit system.

Air regulators have a tremendous opportunity to direct clean energy and energy efficiency investments through the permit system—securing blue skies. In July, the Ministry of Environmental Protection (MEP) issued one-quarter of the 20,000 permits that are expected to be issued by 2020. This first group of permits was issued to power plants and pulp and paper mills. These permits cover multiple pollutants and apply to air-, water-, and land-based pollutants.

The Appraisal Center for Environment and Engineering (ACEE) issued a series of guidance documents addressing the permit application process, sources of pollution, monitoring, record keeping, technologies available to control emissions, compliance and reporting, and information disclosure. Covering 74 industrial sectors and 82 sub-sectors, the ACEE documents address these topics for each of these 156 sectors and sub-sectors. Monthly meetings among all accountable MEP departments and academies help to ensure coordination and more effective implementation. However, by focusing only on the end-of-pipe measures, the permit plans miss more cost-effective opportunities to improve environmental conditions through energy restructuring, energy efficiency, and renewable energy generation. 

Energy and Coal-Savings Programs Improve Air Quality

Direct energy consumption has long been managed by the National Development and Reform Commission (NDRC). Each enterprise is assigned a five-year energy consumption ceiling, with annual assessments to ensure that the long-term ceiling will not be breached. In addition, more than 200 energy efficiency standards were issued as of the end of 2015, covering a variety of appliances and industries, to help reduce the intensity of energy consumed. An analysis by the Lawrence Berkeley National Laboratory concludes that just 28 of these standards result in lifetime energy savings of 135 TWh—an amount equal to the output of 28 coal-fired power plants.

The “Top 10,000” coal-savings program yielded substantial air quality benefits—for example, the average on-site emissions avoided from district heating improvement projects amounted to 310 tons of NOX and 780 tons of SO2 every year. How could the benefits of these good energy programs be recognized in air quality plans? Could air regulators work with their energy colleagues to help plan and prioritize future energy efficiency standards and energy savings programs to identify those which also provide significant air quality benefits? Could the permit system, or management of that system, be used to meet China’s energy restructuring goals?

Recommendations to Strengthen Energy-Environment Coordination

The existing MEP permit coordination structure, with monthly meetings, presents an attractive option. NDRC officials could be invited to these meetings to work with MEP to crosswalk applicable requirements and standards. MEP could provide input to NDRC as that agency considers new or revised efficiency standards, to prioritize those that would achieve greater air quality benefits. These benefits could also be included in air quality models to determine their contribution to reducing ambient pollutant concentrations. The MEP permits could cite the applicable NDRC requirements, and the MEP inspectors could check parameters that influence energy consumption as part of both their routine and unannounced inspections.

As an example, the MEP permits could continue the NDRC program to improve the intensity of energy consumption through annual boiler tune-ups, identifying areas to further improve heat rates, complete turbine upgrades, or improve fuel quality. Such improvements are highly cost-effective, generating the same quantity of electricity while burning less fuel.

For new sources, MEP could work with NDRC to help implement “Document 9,” the power sector reform effort launched by China’s State Council and Central Committee of the Communist Party in March 2015. For example, a condition of obtaining an environmental impact assessment approval for a new power plant could be that the plant must also help to reduce curtailment of renewable energy generation, and to close older, inefficient power plants in same province.

An Environmental Performance Standard (EPS), which establishes a performance-based emission limit (in kg/MWh) for specific pollutants, such as NOX, SO2, CO2, and mercury, would be effective for new and existing power plants, and is a third possible area of collaboration between MEP and their NDRC colleagues. EPSs apply to retail suppliers who sell electricity into designated geographic regions, and to large end users who buy electricity directly from the generator, regardless of the age of particular plants or the type of fuel or technology used. As generator quotas are expected to be phased out by 2020, an EPS would help to ensure utilization of the most efficient power plants. MEP and NDRC could prioritize provinces or regions where an EPS could be implemented, based on air quality factors, planned addition of new or greater use of existing renewable generation, and location of the most thermally efficient fossil-fueled power plants.

Clean Energy Policies Will Help to Achieve Sustained Blue Skies

Air quality is demonstrably better than it was five years ago. However, to consistently achieve blue skies across China requires sustained progress over several Five-Year Plans. Leveraging the benefits from clean energy policies and renewable energy generation through evaluation of their contributions to reducing pollution will help to reach cleaner air sooner. And, MEP and NDRC officials can work together to develop policies that jointly achieve air quality and energy objectives.