March 16 (Bloomberg) -- China may be letting “green” goals fall by the wayside as it trims spending on energy and emission- reduction projects in a 4 trillion yuan ($585 billion) economic stimulus plan, two environmental groups said.

The decision to cut environmental funding by 40 percent in the economic-aid package is “worrying,” officials of Friends of Nature and Greenpeace China said in interviews, calling on the government to clarify its objectives.

As world economic data shows a darkening outlook for recovery, many governments have curbed plans for new environmental measures in a rush to spur growth. British lawmakers today said allocations for public transportation and home insulation in the U.K. fall short of a “Green New Deal” needed for environmentally friendly growth.

The Chinese economic stimulus plan “should be used as an opportunity to help society to transform to low-carbon and green economic models,” said Li Bo, head of Friends of Nature. “We are concerned that those projects are not properly evaluated against relevant polices and laws, so that inappropriate projects get approved.”

Chinese leaders have said that maintaining 8 percent expansion in 2009 is their top priority, compared with goals such as meeting energy-use and pollution-reduction targets.

Figures last week showed Chinese exports plunging by a record, German factory orders sliding 38 percent in January and U.S. consumer confidence near a 28-year low.

Obama Comparison

In the U.S., President Barack Obama has pledged to spend $150 billion over 10 years to combat climate change and create “green” jobs. China needs to take a similarly transformative approach, according to Alex Wang, a Beijing-based senior attorney for the Natural Resources Defense Council.

“Rather than cutting back, we think a massive investment in energy efficiency and clean energy technologies in China would not only improve energy security for China, but also save firms money and make China’s economy more competitive,” Wang said.

Parliament, which rarely criticizes government policy or achievements, noted that the country had failed to meet its environmental targets. Reduction in energy consumption per unit of gross domestic product and in total emissions of major pollutants fell “far short” amid “mounting pressure on resources and the environment,” Wu Bangguo, head of China’s legislature, said in his annual work report on March 9.

The same day, the government’s top planning agency, under pressure to show how China will spend the stimulus, released a breakdown of seven broad categories that showed 210 billion yuan allocated to energy saving, emissions reduction and ecological projects. That’s 40 percent less than the 350 billion yuan announced in December for such projects.

‘Worrying Signs’

The government will also reduce the time needed for environmental-impact assessments of projects to 2 days from 5, the Ministry of Environmental Protection said on March 11.

“There are worrying signs, including that they just downscaled the amount of money earmarked for the environment,” said Sze Pang Cheung, interim campaign director for Greenpeace China.

China plans to lower the amount of energy consumed for each 10,000 yuan of GDP by 20 percent in the five years ending 2010, and to reduce greenhouse-gas emissions by 10 percent in the same timeframe.

The breakdown from the National Development and Reform Commission last week included a doubling of funds for technology innovation and structural adjustment to 370 billion yuan.

Insulation, Better Grid

Some of that is likely to go to more efficient technology, with potentially significant benefits for the environment, according to Deborah Seligsohn, China program director for the World Resource Institute’s Climate, Energy and Pollution program.

Funds going to housing construction and infrastructure projects such as improving the electrical grid system may also have a “green” impact. Old housing in China generally has no insulation, making it extremely energy inefficient, so “building new stuff, no matter what the standard, you would assume it’s going to be better,” Seligsohn said.

Sze agrees that there are probably funds in other parts of the stimulus package that will have a positive impact on cleaning up polluting industry and promoting energy efficiency. It’s just difficult to know based on the information released so far, he said.

“There’s a huge amount of money going into restructuring or upgrading of industry, and it’s anybody’s guess what that means,” Sze said. “We just don’t have enough information.”

Car Sales

The country’s revival plan includes a 10-industry support package covering autos, steel, shipbuilding, textiles, light industry, nonferrous metals, logistics, petrochemicals, electronics, and machinery, manufacturing. Some industries are already seeing the effect, with car sales surging 25 percent in February after the government cut taxes on some models.

The few details that have emerged so far suggest that the plans will include some measures beneficial to the environment. Under the steel-industry plan, China will shut down 25 million tons of obsolete steelmaking capacity and 72 million tons of iron-making capacity, according to a speech presented at a closed meeting of the China Iron and Steel Association last month. Blast furnaces smaller than 400 cubic meters must be closed, increasing the cut-off threshold from 300 cubic meters.

The auto plan aims to build up to 500,000 units of production capacity for electric vehicles by 2011.

To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net

Last Updated: March 16, 2009 05:00 EDT