Audit Investigation on Energy Conservation and Pollution Reduction

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Energy conservation and pollution reduction is an important policy adopted by Chinese government in response to climate changes. In recent years, the National Audit Office of China has conducted three audits on the funds and projects for energy conservation and pollution reduction, promoted the implementation of relevant policies and undertakings.

From October 2009 to September 2010, the Audit Office conducted an audit investigation on the fulfillment of energy conservation and pollution reduction in 20 provinces over the three years from 2007 to 2009. The audit enterprises covered key industries like cement, power and steel.

I. Objectives, Scope, Contents and Criteria of Auditing

1. Objectives

The audit is intended to investigate the fulfillment of local governments targets concerning energy conservation and pollution reduction, examine the efforts and fund use by major industries, and reveal the outstanding issues with the exercise of duties, the implementation of relevant policies and regulations, and the management and use of special funds by local governments, authorities and enterprises. Through an analysis on the causes of such issues, the Audit Office is able to offer specific comments and suggestions on the promotion of energy conservation and pollution reduction.

2. Scope and Contents

Audited entities include local governments concerned, authorities in development & reform, finance, tax, environmental protection, land use, urban construction, industrial information, state assets and power regulation, the administrative center for energy conservation, the assessment center for financial investment as well as intermediary agencies.

The audit covers the implementation of policies and regulations on energy conservation and pollution reduction by local governments, authorities and enterprises, the input, management and use of funds, as well as the efforts of major companies and industries.

3. Criteria

The audit criteria mainly come from the following laws, regulations, plans and environmental protection standards: the Law of the People's Republic of China on Conserving Energy, the Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution, the Environmental Protection Law of the People's Republic of China, the Comprehensive Scheme of the State Council on Energy Conservation and Pollution Reduction, the Regulations on the Administration of Collection and Use of Sewage Charges, the Notice of the State Council on Approving and Forwarding the Implementation Plan and Measures for the Statistical Monitoring and Evaluation on Energy Conservation and Pollutionn Reduction, and the General Principle of Energy Audit of Industrial and Commercial Enterprises, etc.

 

II. Main Audit Investigation Findings

1. The elimination of outdated productivity in some enterprises was not thorough. As of the end of 2009, as far as 8 enterprises concerned there existed issues of over-reporting of closed-down and stopped installed capacity, lack of thoroughness in disposal of eliminated outdated production capacity equipment, etc., involving installed capacity of 492,500 kilowatts; as to 121 enterprises , there existed issues of over-reporting of eliminated outdated production capacity, etc., involving iron production capacity of 23.479 million tons, steel production capacity of 20.982 million tons; as to 54 enterprises, there existed issues of failure to eliminate outdated production capacity that should have been eliminated, etc., involving cement production capacity of 9.1555 million tons.

 

2. Some enterprises built new high-energy-consuming projects in violation of regulations. 42 enterprises constructed 44 thermal power projects in violation of regulations, involving installed capacity of 9.39 million kilowatts; 97 enterprises constructed 143 iron and steel projects in violation of regulations, involving iron production capacity of 72.0199 million tons, steel production capacity of 73.698 million tons, rolled steel production capacity of 15.096 million tons; 47 enterprises constructed 47 cement projects in violation of regulations, involving 40.83 million tons of cement production capacity.

 

3.  Some special funds for energy conservation and pollution reduction were misused. Eleven enterprises diverted or misappropriated 57 million yuan of special funds for business and other expenses; 14 enterprises extracted 86 million yuan of special funds by fabricating false declaration information, multiple or repeated declarations and other means; 15 enterprises over-received 62 million yuan of energy conservation and pollution reduction special funds due to laxity in verification by the relevant departments.

 

. Audit Suggestions

After the audit, the Audit Office filed a report with the State Council, and proposed the following suggestions and compliance requirements to the entities concerned:

1. To supervise and urge local governments, authorities and enterprises to strictly implement the relevant policies, take stern actions against illegal pipeline expansion, false statement in fulfillment of energy conservation and pollution reduction, and illicit use of special funds, and hold the persons involved accountable according to law.

2. To further strengthen and improve the examination and supervision over energy conservation and pollution reduction, and standardize the implementation criteria for policies concerning eliminating outdated productivity.

3. To further study and optimize the policies and regulations concerning energy conservation and pollution reduction, increase policy support for Research Development and applications of new energy and core technology, and encourage enterprises to adopt the new technology, new processes and clean energy in a proactive and rational manner.

 

. Follow-up and Rectification

After the audit, the Audit Office conducted follow-up inquiries about the liabilities for non-compliance and the effect of rectification until the problems are resolved.

1. As of the end of March 2011, 8 enterprises have closed down or dismantled small thermal power units totaling 492,500 kilowatts, 105 enterprises have eliminated outdated iron production capacity of 16.549 million tons and steel production capacity of 14.152 million tons, 39 enterprises have eliminated or included in the plan for elimination of outdated cement production capacity totaling 6.9015 million tons.

2. The National Development and Reform Commission carried out a special verification work on irregular iron and steel projects. Relevant localities and enterprises also actively conducted rectification of other issues regarding irregular expansion of production capacity; 10 persons responsible have been punished. As of the end of March 2011, 39 enterprises have improved or are submitting approval procedures for thermal power projects totaling 9.315 million kilowatts capacity; 72 enterprises have taken measures such as eliminating equivalent capacity, improving the procedures for approval, etc., to correct the irregular construction of iron production capacity of 50.8605 million tons, steel production capacity of 61.2077 million tons, rolled steel production capacity of 3.75 million tons; 40 enterprises have stopped construction, suspended production to undergo consolidation or are working hard to improve approval procedures, involving 38.52 million tons of cement production capacity.

3. As of the end of March 2011, the relevant localities pressed the 11 enterprises to return the 57 billion yuan diverted and misappropriated in full to the original channels; the relevant unites retrieved 144 million yuan of funds extracted or received in excess by 26 enterprises; 10 persons responsible were punished; enterprises and individuals who violated regulations were fined 6.62 million yuan.