"The pricing of energy products has long been too low, which fails to reflect the scarcity of the resources and tends to foster using them with low costs," Vice-finance minister Liao Xiaojun said according to Xinhua news agency.

Liao said the government would also create tax breaks for the use of energy-saving equipment, and study lower purchase tax for cars that use less fuel and produce fewer emissions.

Authorities will also promote research on recyclable energy, he added.

China's economic and social development blueprint for 2006-2010, which was approved by the annual session of China's parliament in March, has set a target to reduce energy consumption per unit of GDP by 20 percent by the end of 2010.

Xinhua quoted an official as saying late last month that it would be difficult to live up to this year's target of cutting energy consumption by 4.0 percent without major policy adjustments.

President Hu Jintao and Premier Wen Jiabao have called for improved macro controls, including further curbs on fixed-asset investment growth as well as on the supply of credit and land on overheating or polluting industries.

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