China's green debt

By Pan Yue

Monday, Dec 04, 2006, Page 9

For a decade, the world has wondered when China's leaders will recognize the staggering environmental crisis confronting their country. This year, we got an answer -- a new Five-Year Plan that makes environmental protection a priority. A storm of green propaganda has followed, and the government now talks about using "Green GDP" to measure development. But will all this talk amount to real progress?

While central government admits to some of the environmental degradation caused by rapid economic growth, the picture it paints is incomplete. Consider "Green GDP." This spring, the State Environmental Protection Administration produced the country's first official estimate of GDP adjusted downward for environmental losses. According to these calculations, it would cost US$84 billion to clean up the pollution produced in 2004, or 3 percent of GDP for that year. But more realistic estimates put environmental damage at 8 percent to 13 percent of China's GDP growth each year, which means that China has lost almost everything it has gained since the late 1970s due to pollution.

China's problems, complex as the causes may be, can ultimately be attributed to our understanding of Marxism. For most of our recent history, we saw in Marxism only a philosophy of class struggle. We believed that economic development would solve all our problems. In the reform period, this misreading of Marx morphed into an unrestrained pursuit of material gain devoid of morality. Traditional Chinese culture, with its emphasis on harmony between humans and nature, was thrown aside.

As a result, China's economy is dominated by resource-hungry and inefficient polluters, such as coal and mineral mines, textile and paper mills, iron and steel makers, petrochemical factories and building material producers. Our cities are exploding in size, depleting water resources and creating horrific traffic congestion.

One-quarter China's people drink substandard water -- one-third of urbanites breathe badly polluted air. Moreover, the country recently witnessed a spate of environmental accidents. Indeed, on average, China suffers a major water pollution accident every other day.

Although China has signed the Kyoto Protocol and some 50 other international environmental accords, we do little to honor them. If we are not serious about upgrading our industrial structure, we will fail when it comes to fulfill our commitments to cut emissions. And while the new Five-Year Plan sets fine goals, many provinces have failed even to meet the major environment protection targets of the last Five-Year Plan.

True, China has made the kind of economic advances in three decades that required 100 years in Western countries. But China also has suffered a century's worth of environmental damage in 30 years. Unfortunately, unlike Western countries, we cannot afford to wait until our per capita annual GDP reaches US$10,000 before tackling our environmental problems. Our experts predict that the environmental crisis will intensify to a critical stage by the time China's per capita annual GDP reaches just US$3,000.

Making worse, while we discarded the finer elements of our traditional culture, we failed to absorb the better aspects of modern civilization. The concept of a "social contract" based on rights and obligations -- the essential values that constitute the most important precondition for effective environmental protection -- goes largely ignored. As a result, environmental protection projects often fail to be included in calculating production costs. Scarcely anyone bothers to consider the environmental costs to -- or rights of -- the country's poor and powerless.

It is imperative that environmental factors figure in China's macroeconomic planning in a real way. This requires a more rational strategy to be mapped out in the planning of major industrial projects and energy-hungry enterprises. Careful studies need to be done to determine available energy, land, mineral and biological resources before projects proceed. Land planning must be overhauled, with industrial monopolies broken up and development goals set according to population, resource volume, and the capacity to absorb pollution.

Finally, China needs a new energy strategy. Industrialized nations have developed and made great use of nuclear, solar, wind, and bio-gas and other renewable energy resources. China's technological capacities in this sector lag behind even other developing nations such as India and Pakistan, and its reliance on coal is one of the greatest threats to the global climate. For now, there is simply no alternative. But in the long run, clean energy will be the only way to bring economic growth without doing irreparable environmental damage.

Government solve these problems on its own. China's people have the biggest stake in environmental protection, and so must become the driving force. Local communities, non-governmental organizations, and businesses all must do their part. They cannot limit themselves simply to "supervision" and appeals to the authorities. They must expand into other avenues of appeal -- public hearings, welfare lawsuits, enhanced media coverage and other voluntary activities.

But ultimate power does rest with the government. China's leaders need to make several concrete moves in order to move beyond rhetoric. They must give real power to environmental officials to implement existing laws and close gaping legal loopholes. This can only be done by introducing legal mechanisms to reward those who protect the environment, while making polluters pay, and by helping to unify the environmental watchdogs scattered across different sectors. Above all, a system needs to be established to monitor officials' performance in environmental as well as in economic terms.

China dangerously near a crisis point. The country's enormous environmental debt will have to be paid, one way or another. China must exercise the foresight needed to begin paying this debt now, when it is manageable, rather than allowing it to accumulate and, ultimately, threaten to bankrupt us all.

Pan Yue is vice minister of China's State Environmental Protection Administration.

Copyright: Project Syndicate