The mountain is high and the emperor is far away. It’s one of the oldest clichés in Chinese politics, one that harks back to China’s dynastic, pre-communist past, when local warlords ruled far-flung provinces. But despite Western perceptions of communist China as an iron-fisted autocracy where Beijing calls all the shots, the old cliché holds true. “The central government has been making some very sincere and real attempts to rein in energy use, but the levers it has to control the economy are a lot weaker than most Americans may think,” explains Yang Fuqiang, who is head of the Beijing office and a vice president at the Energy Foundation, a San Francisco nonprofit that is a leading international funder of Chinese emissions-reduction programs. “There are so many very powerful interests around the country, and with economic growth being so fast, they are very difficult to control.”

In the past year, top Chinese officials, led by President Hu Jintao and Premier Wen Jiabao, have tried to reassert their authority, issuing a series of increasingly strident demands that industry reduce its energy use. Their key benchmark has been a 4 percent annual reduction in energy intensity—the amount of energy consumed per unit of production. The target is only a minor improvement over the two-decade average annual reduction of 3.5 percent, but the government has been unable to achieve even this modest goal. Despite threats to punish local officials who fail to obey the new policy, China reported a reduction in energy intensity of just 1.3 percent in 2006 and 3.3 percent in 2007.

“It’s important to note that the Chinese are taking big policy steps to get them off the energy trajectory that they’ve been on,” says Mark Levine, director of the China Energy Group at Lawrence Berkeley National Laboratory, which has been at the forefront of U.S. energy cooperation with China since the late 1980s. “But even if the Chinese do all these things they’re doing, that’s not enough. I don’t think anybody has grounds for being happy with the situation. A lot more is needed.”

In an attempt to shore up its failing energy mandates, the government announced last year that the State Environmental Protection Administration, China Banking Regulatory Commission, and People’s Bank of China would ban any bank loans to non-compliant firms. But to its great embarrassment, the leadership was forced to admit that its demands had often been ignored. “Some provinces and financial institutions still have not implemented the green credit policy at all, and some others have made only superficial efforts,” Pan Yue, the deputy environmental protection chief, told a Beijing press conference in February. Significantly, he pointed out that in some areas many of the industries that consume the most energy and produce the most pollution are also the most lucrative industries, so local governments may refuse the order to cut off loans.

And internationally, too, Chinese corporations act more like free agents than like Beijing’s loyal servants. Take the case of PetroChina, the state-controlled oil giant at the center of China’s controversial involvement in Sudan and the genocide in Darfur. According to Trevor Houser, an energy analyst with China Strategic Advisory, a New York consulting firm, international oil data and customs receipts show that PetroChina sells most of its Sudanese output on the world spot market, not domestically. From the standpoint of a private corporation, this makes sense—Beijing sets an artificially low price for PetroChina’s domestic sales. But it also raises suspicions that the central government is not in charge. “What is perceived in the West as a very strong central government able to control the country, in reality is fairly weak,” says Houser. “The overriding metric for the oil companies is financial performance, and since parts of those firms are publicly traded, increasingly these firms are held to the same standards as ExxonMobil or BP—and they act in the same way. In terms of overseas investment, the driver there is commercial incentive.”

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