SUMMARY BOX: Much has been made of the enormous environmental damage that has been done by China’s spectacular economic growth over the last three decades. But as Beijing-based environmental specialist Zhang Shiqiu explains, the country has come a long way toward addressing that damage. It knows, however, that daunting challenges lie ahead.

After three decades of almost double-digit growth, China continues to be one of the world’s most dynamic economies. The down side of this accelerated growth, however, is severe environmental degradation and resource depletion, despite great efforts being taken by the government to protect the environment. Not only is the scale of China’s environmental problems greater than perhaps any country in the world, the challenges are more complicated because they are combined with the need to pursue enormous social and economic development, continue the process of globalization and foster global-local linkages.

To balance these demands, China is urgently seeking innovative solutions in the form of leapfrog development that will be different from the industrialization process experienced by mature developed countries. A fresh approach is vital if China is to maintain acceptable environmental quality, control damage to the health and welfare of the public and respond to international pressures related to global climate change – all while ensuring continued economic growth.

Institutional Framework

The government’s concern with environmental protection is not new. In fact, over the years China has developed one of the most comprehensive regulatory and policy frameworks in the world to cope with environmental issues. Even before the economic reform period began, the Environmental Protection Leading Group was set up under the State Council in 1974 to coordinate environmental protection at the national level. Since then, numerous institutions for environmental protection have emerged with growing influence. In 1982, the Environmental Protection Agency (EPA) was established under the Ministry of Urban and Rural Construction (MURC). The EPA, which had limited authority to issue regulations and guidelines, was raised from a bureau to an agency directly under the State Council in 1988. In March 1998, its status was promoted from an agency to a semi-ministry; finally, in 2008, it became the Ministry of Environmental Protection (MEP), with its powers integrated directly into the central government, reflecting the growing importance of environmental protection to overall policy making.

China now has in place a nationwide network of legislative bodies and administrative authorities from the central government down to the local level that are responsible for environmental protection – including representatives for environmental protection within industry sector bureaus and larger factories. This provides a robust and extensive basis for strengthening environmental performance at all levels of government and the economy, including industry.1

The Ministry of Environmental Protection has focused increasingly on the development of the regulatory system, and on monitoring and supervising the environmental performance of various actors in the economy. In addition to the MEP, there is a National Environmental Protection and Resources Conservation Commission (NEPRCC) under the National People’s Congress (NPC) with the responsibility to formulate laws and regulations regarding resource conservation and environmental protection. It also evaluates conservation proposals and provides support to the Standing Committee of the NPC for supervision and enforcement of laws and regulations regarding the environment and resources.

Legal Framework

Along with the establishment of institutions responsible for environmental protection, China has also promulgated a series of related laws and policies, and developed enforcement mechanisms. The initial legal basis for environmental protection was established by Article 26 of the Constitution of the People’s Republic of China. It declares, “the State protects the environment and natural resources and prevents and eliminates pollution and other hazards to the public.” In 1997, a new section was added to the Criminal Law involving damage to the environment and the need for resource protection. This was an important breakthrough, because it was the first piece of legislation that specifically defined environmental crime in China. The Environmental Protection Law of the People’s Republic of China was promulgated on a trial basis in 1979, and became permanent in 1989. From 1979, a whole series of laws, regulations, policies and standards were issued from the national to the local level covering a wide range of issues including industrial pollution, economic planning, production processes and waste treatment. As the county"s economic reforms deepened, the regulations gradually moved from command-control to market-based instruments.

In addition to specific legislation, regulatory systems and policy developments, the government has also devoted considerable effort to crafting political messages to the public regarding the national strategic thinking on the environment and development. In 1992, for example, the concept of sustainable development was introduced as part of the national development strategy, and since then, other key messages and concepts have been strongly underscored by the government – including ideas such as cleaner production, a circular or balanced economy, scientific development, green GDP, a harmonized society, resource conservation, a low carbon economy and so on. Although one might argue that these are soft approaches to the underlying problems, the fact remains that they reflect high-level thinking and the political commitment of the Chinese government to balancing environmental protection and development.

On the issue of climate change, the State Council in May 2007 approved China’s National Climate Change Program. The 62-page action plan details the policies and measures China would take to mitigate and adapt to climate change. When China developed its 11^th Five Year Plan (2006-2010), it announced for the first time environmental and resource constraints on economic growth. Specifically, it said that annual economic growth of 7 percent could only be achieved by improving energy efficiency by 20 percent and reducing total greenhouse gas (GHG) emissions by 10 percent by 2010 compared to 2005 levels. In 2009, in the context of international talks to combat climate change, China announced its target to reduce GHG emissions 40-45 percent per unit of GDP by 2020 from 2005 levels – a very ambitious target given the need for continued economic growth and increased living standards.

China also plans to increase the share of renewable and clean energy as a proportion of overall energy consumption to 15 percent this year and 20 percent by 2020. In order to meet these commitments, China has to integrate environmental concerns into its overall sustainable development framework. This means restructuring the economy and finding the leapfrog path to growth. More efforts are also being made to enforce and implement existing policies, especially the use of market-based incentives to react to the environmental cost of economic activity.

Improving the Environment

While China has tried to control the trend toward environmental degradation resulting from economic growth, the overall quality of the environment is still poor. The government is contributing significant resources to address the problem. In 2008, total investments in measures to clean up the environment reached 449 billion yuan, or 1.49 percent of GDP. This compares to just 2.5 billion yuan in 1981, or 0.5 percent of GDP. Moreover, in the massive state stimulus package introduced to combat the effects of the global financial crisis in 2008-2009, spending on the environment accounted for 37.8 percent of the total.

Due to the sheer size and growth rate of China’s population, the total emission of pollutants has increased dramatically in recent decades. For example, from 1978 to 2008, waste water increased from 29 billion tons to 66 billion tons, while sulfur dioxide emissions rose from 130 billion tons to 250 billion tons. In addition, China is the world’s largest emitter of greenhouse gases. On the other hand, there have been significant improvements in energy efficiency. In 1978, energy consumed per unit of GDP was more than 15 tons of ton-coal-equivalent (TCE), but by 2010, this had dropped to 1 ton of TCE. In 2007, China finally reversed the trend of increased emissions of pollutants. Between 2005 and 2009, CO2 and sulfur dioxide emissions declined by 1.47 million tons and 3.35 million tons, or 9.66 percent and 13.14 percent, respectively, while energy efficiency improved by 14.38 percent.

There have also been improvements in air quality. In 2009, for example, of the 113 key cities monitored for air quality, 66.4 percent were able to achieve the government’s 2^nd grade air quality standard compared to 28.3 percent in 2001. However, 32.7 percent of the cities are still in the worse category of 3^rd grade air quality. For the 408 monitored sections of 203 rivers, 42.7 percent are defined as polluted, although this is still a large improvement over 62 percent in 2006. Nevertheless, the country’s coal and fossil fuel based economy emits a large amount of pollutants, and urban areas in particular suffer, especially due to the fast growth in vehicle usage.

Looking Forward

More challenges lie ahead on the environmental front. Given the country"s varied climatic, physical, ecological, cultural and economic circumstances, there is no “typical China.” Extremely rapid economic growth has been accompanied by problems of income gaps between east and west, urban and rural, and developed coastal and undeveloped or developing inland areas. Water, air and land resources are all under pressure. Desertification, soil erosion and deforestation are all evidence that China has been depleting its natural resource base. Many of China’s cities are still polluted, with attendant consequences for human health. Various studies show that environmental pollution exacts an annual loss of 3 to 8 percent of GDP. This severe situation is projected to continue for at least the next 10 years. Poverty alleviation is still a big challenge; and over 40 million rural people live in extreme poverty. The Gini coefficient, a common measure of income inequality, rose from 0.16 in the 1970s to 0.46 in 2004, and over 0.5 in 2009 (the higher the number, the greater the inequality). This uneven development imposes great pressures on future environmental quality. The burden of pollution has fallen disproportionately on poorer, less powerful groups. In addition, although China has successfully controlled the emission of sulfur dioxide, CO2 and other conventional pollutants, ground ozone levels and fine particulate pollution, as well as heavy metal pollution, are even more challenging because they have more severe health impacts.

While environmental awareness and demands for improvement have increased along with rising incomes, poor environmental quality has been one of the key factors leading to social conflicts. Given the impact that environmental protection can have on various social groups, more sophisticated solutions are needed than just simply controlling emissions. Meanwhile, rising incomes imply that consumers could behave in ways that will only further degrade the environment, a particular concern given the huge population in China. Current GHG emissions per capita in China are about 4.3 tons compared to 19.5 tons in the US, but given China’s projected economic growth, there is a capacity for significant increases in the years ahead.

Five Key Challenges

Given China’s demand for social and economic development alongside environmental protection, as well as global calls to combat climate change, there are five key challenges ahead:

1) How to improve energy efficiency and restructure energy supply and demand to achieve the target of reducing GHG emissions per unit of GDP by 40-45 percent by 2020, and improve local environmental quality beyond just emissions reductions. China is still in the process of industrialization; energy is the engine that drives the economy. Current development is heavily reliant on coal, both for industry and electricity generation, and this isn’t expected to change much in the coming decades. The fact that the marginal cost of energy efficiency improvements will increase and the relative cost of renewable compared with coal-based energy is still very high will impose even more difficulties in the future.

2) How to prevent the possible trend of pollution transfer due to uneven development, especially from developed regions to undeveloped regions, from urban to rural and from rich to poor, and how to balance poverty alleviation with environmental protection. There are essentially two types of poverty. First, there are those who live in very poor geographical and geological areas and who suffer from absolute poverty. For them, external intervention and assistance are needed. Second, there are those who live in sound, resource-rich but ecologically sensitive areas. Due to poor social and market conditions, their living standards cannot improve without damaging the eco-system, and so they suffer from what I call “green poverty.” Without specific mechanisms such as a regional ecological compensation system or an ecological services payment scheme based on the principle of “common but differential responsibilities,” these poor but environmentally sensitive regions may follow the same “growth by polluting” path that has been pursued elsewhere, which will offset the effects of environmental improvement in other regions.

3) How to control incremental increases in pollution while cleaning up accumulated pollution. After 30 years of breakneck development, pollution already in the environment will increase the risks to human health and well being.. This implies the possibility of huge public expenditures and a compensation fund in the future. On the one hand, great effort and expense will be needed to clean up and control existing pollution, while on the other, there is an urgent need to respond to health risks and lost income related to pollution in the name of improved environmental justice.

4) How to respond to the global-regional-local environmental challenges in an integrated way. Climate change is not only a global environmental issue, but a development issue as well. As discussed above, China is not only the biggest emitter of GHGs, it also and urgently must alleviate the poverty experienced by its own population in order to address severe local environmental issues. Separation of the issues will affect the sustainable development future of China and also have a negative impact on the world.

5) How to balance the demand for higher standards of living with the need to control pollution. The daily life of increasingly affluent Chinese consumers has already become a major source of pollution, although in per capita terms it is still low by the standards of developed countries. It is important for China to implement policies that encourage environmentally responsible consumption before it is too late, by motivating the public to change consumption patterns as incomes rise.

Innovation and Cooperation

The complicated challenges facing China require greater innovation in governance, policies and approaches, as well as international cooperation. At a minimum, the following key reforms are needed:

First, empowering civil society to enable the public to play a meaningful and active role in environmental protection is a key to ensuring a sustainable future for China. Environmental issues have already been a cause of social conflicts. Innovative governance that satisfies the desire for environmental justice is required not only to avoid social conflicts but also to provide incentives for good environmental performance by various stakeholders.

Second, a nationwide pricing policy should be implemented that reflects not only the production cost of goods and services but also the environmental and resource-depletion costs. This would involve the use of market-based instruments to provide the right price signals to enterprises and the public to encourage the efficient and equitable allocation of environmental resources.

Third, a nationwide and systematic eco-services payment scheme needs to be developed to compensate the opportunity cost borne by those people and regions who give up polluting development in favor of eco-friendly activities. . This could help ensure environmental justice and provide a more sustainable livelihood for the poor.

Fourth, a “super fund” needs to be established to provide assistance and compensation to pollution victims, especially those who suffer from serious health impacts in the future.

Fifth, a multiple pollutants control strategy should be developed to ensure that pollution control is a “least cost” solution and addresses the ancillary benefits and costs of global and local environmental worries. The only option China has is to link its response to climate change to the sustainable development framework. This is the only way it can balance the three dimensions of sustainable development – social, economic and environmental. Recent academic findings show there are shared benefits to focusing on either local pollution or climate change. That is to say, improvements in the local environment benefit the battle against climate change, and vice versa. Under such a situation, addressing climate change could be an opportunity for China to clean up and restructure its industries and economy in harmony with nature.

In summary, traditional approaches are not enough to solve China’s emerging environmental challenges. Innovative ideas and holistic approaches are needed to ensure a sustainable future. Local and global environmental problems can only be solved and addressed within the framework of sustainable development. The efforts made by China’s government and people deserve the appreciation of the world for reversing trends toward greater and greater pollution and eventual resource exhaustion. Considering its size, whether and how China meets the challenges ahead will have enormous implications not only for itself but also for the world. Although the situation is severe, China is moving on the right track to tackle its environmental and development issues.

This paper was published as Environment: Reconciling Nature and Development. Global Asia. Vol 5, Num 2, Summer 2010. Page 40-45

Ma, Xy, Leonard Ortolano. 2000. Environmental Regulation in China: Institutions, Enforcement, and Compliance. Rowman & Littlefield Publishers Inc., USA.

[2] SEPA, 1998. Report on the state of the environment in China 1997. Beijing , June 1998

China’s Environmental Status Report, June 5, 2010.

As the scope and methodology employed by studies varies, the range of the economic loss is big.

The total number of vehicles in China has grown at about 30% annually since 2005, but the figure per capita is still only at about the level of the 1920s in the United States.