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Social Progress and Challenges Building a Comprehensive Strategy for China’s Environmental Clean-up

Post Series: 2009: Volume 8, Number 2
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Social Progress and Challenges Building a Comprehensive Strategy for China's Environmental Clean-upLast year’s Beijing Olympic Games witnessed a breathtaking makeover of the city’s environment. Beijing’s sky became blue almost overnight. Anyone who had visited the Chinese capital just a few months before would be amazed to find that the thick smog that hung over the city disappeared nearly completely, like a miracle. However, what they did not know was how much effort the Chinese government had put into the environmental clean-up in order to fulfill its promise to the International Olympic Committee (IOC) about environmental protection. It is estimated that China spent nearly $10 billion on improving Beijing’s environmental quality. Many drastic measures were taken in the months prior to the Games. Coal-fired power stations in the city were converted to gas-burning stations. More than 1,400 old gas stations and 10 oil depots were closed down for good. Another 200 major polluting factories were ordered to shut down temporarily. Capital Iron and Steel, one of the largest steel makers in China, was ordered to relocate its mills to a new industrial park far away from the capital city. Car drivers were told to drive only on alternate days according to their cars’ tag numbers. Despite these measures, the air remained foggy and unstable just a month before the games. The authorities ordered an expansion of the strict air-quality control measures to cities adjacent to Beijing and asked some of their heavy-polluting factories to shut down their production operations temporarily as well. As a result, during the first half of 2008, Beijing’s sulfur dioxide emission level decreased nearly 13% compared with the same period of 2007. During the month of August, when the games were held, the air quality in Beijing was rated as excellent for almost half of the month, and the remaining days were rated as good.

These massive clean-up efforts are unparalleled in the history of the Olympic Games. They demonstrate not only the determination of the Chinese government to meet its Olympic obligations but also the ability of the authorities to use administrative muscle to fight pollution. After years of liberal reform, it is noteworthy that the state still has so much power at its disposal. This administrative capability is almost beyond imagination in a typical western democracy. However, the desire to present to the world a clean image is only part of the story. Since 2005, “scientific development” has become the new buzz phrase in China’s political lexicon. Leaders in Beijing have apparently realized that the single-minded pursuit of economic growth at the expense of environmental and human development is not sustainable. Indeed, China has already paid a huge price for decades of neglect of its environment. In just a few decades, China quickly became one of the most polluted countries on earth. Air was filled with dirty particles, rivers and lakes became filthy and stinky, and underground water became undrinkable. Industrial pollution contributed greatly to the environmental nightmare. A report issued by the World Bank on China’s environment points out that “many of China’s waterways are close to biological death from excessive discharge of organic pollutants. In many urban areas, atmospheric concentrations of pollutants such as suspended particulates and sulfur dioxide routinely exceed World Health Organization safety standards by very large margins. Hundreds of thousands of people are dying or becoming seriously ill from pollution-related respiratory disease each year.” As a result, sixteen Chinese cities were on the World Bank’s most polluted city list, and Linfen City in Shanxi Province was cited as the world’s most polluted city in 2007. The Chinese government has no choice but to develop a comprehensive strategy to toughen its environmental policy.

Beijing’s clean-up prior to the Olympic Games followed the traditional “command-and-control” approach involving the identification of sources of environmental pollution, setting emission standards, inspecting for non-compliance, and forcing the shutdown of polluting factories. Since 2005, the State Environmental Protection Administration (SEPA) has launched several waves of an environmental “New Deal.” On January 18, 2005, SEPA ordered 30 major construction projects, mostly new power plants, to suspend construction for lack of required environmental impact reports. Among the projects put on hold were the 12,600 megawatt Luoqi Du hydroelectric power station and the underground Hydroelectric Power Station connected with the Three Gorges Dam project. On January 27, 2005, SEPA launched another strike. This time, 46 existing power plants were ordered to install SO2 reduction devices within a fixed time period. Three subsequent “storms” followed. On February 7, 2006, SEPA announced that it would inspect 127 chemical projects. On January 7, 2007, SEPA used a regional ban on new investment projects against four cities and four enterprises for their violations of some regulatory requirements. On July 3, 2007, SEPA put the ban on new projects for six cities, two counties and five industrial parks to punish them for pollution flowing into the Yangtze, Yellow, Huai and Hai rivers. This new power of “limiting approval of area development projects” gave the state environmental agency and local environmental protection bureaus veto power on new construction projects.

Aside from taking these drastic administrative measures, Chinese environmental regulators are also actively seeking a new market approach that emphasizes the use of incentives such as emission quotas, pollution levies, emissions trading, green credits, green capital markets, ecological compensation, and environmental liability insurance to force enterprises to comply with environmental standards. This approach calls for an active role of the state in the creation of a system of environmental economy but not for direct interference with business decisions. Since 2008, the government has shifted its focus from punishing polluters to institution building. As part of the environmental “New Deal,” SEPA introduced a number of new systems to help enterprises and consumers deal with environmental disputes. First, SEPA issued a circular about liability insurance on environmental pollution. The hope is that the insurance system can help enterprises deal with monetary compensation in cases of environmental disaster without causing too much financial burden on an enterprise. The system also is designed to help protect the interests of victims and prevent the government from having to pay compensation in pollution cases. A pilot program has been implemented in several provinces. It is hoped that by 2015 the trial will be completed, and the system will be promoted nationwide.

Second, SEPA has initiated a new pilot project on emissions trade. The concept of emissions trade was introduced to China by Dr. Daniel Dudek, the chief economist of the American-based Environmental Defense Fund. In September 1999, the Fund signed an agreement with SEPA to complete a pilot project on total emissions control (TEC) and emissions trading under the framework of Sino-U.S. cooperation. Benxi and Nantong were selected as the first demonstration cities. In September 2001, the first sulfur dioxide emissions trade was successfully completed in Nantong, Jiangsu Province. In March 2002, SEPA and the fund cooperated in launching the “4+3+1” project in collaboration with the China Hua Neng Group. This project was an endeavor to initiate an integrated TEC and emissions trading policy in Shandong, Shanxi, Jiangsu and Henan provinces, and the cities of Shanghai, Tianjin and Liuzhou. Each of the jurisdictions completed quota allocations, trading regulations and policy demonstrations. In December 2007, Jiaxing city in Zhejiang Province established China’s first emissions trading center. Beijing and Tianjing are in the process of setting up the nation’s first carbon trading centers. Shanghai and Beijing have also established Environmental Energy Exchanges.

Additionally, the Chinese government is beginning to incorporate cooperative governance into its grand strategy of environmental regulation. This approach emphasizes transparency of decision making and participation by civic organizations. In 2004, SEPA issued a circular on the administrative-hearing process regarding environmental protection issues. The scope of the hearings can cover small, medium and large projects that have an impact on the environment. In 2005, the Beijing government decided to invest 30 million Yuan ($4 million) to install plastic at the bottom of a lake at Yuanmin Yuan, the remains of the Qing Dynasty imperial garden widely known as the Summer Palace, in order to prevent water leakage and save money. SEPA responded to the public criticism of the project by calling the first public environmental hearing on April 13, 2006. Seventy-three representatives were allowed to attend the hearing. Many of them were professors and experts. Several representatives from non-governmental organizations (NGOs) also appeared in the hearing. SEPA eventually decided to order the project to uninstall the finished anti-filtration plastic film at the lake.

Beginning in 1998, the World Bank and SEPA established GreenWatch, a public disclosure program for polluters. It uses the Environmental Performance Rating and Disclosure System to rate firms’ environmental performance from the best to the worst in five colors-green, blue, yellow, red and black. The ratings are disseminated to the public through the media. The pilot program was initially tried in Zhenjiang, Jiangsu Province, and Hohhot, Inner Mongolia, with funds from a grant from the Bank’s Information for Development Program. After pilot GreenWatch projects proved successful in 22 Chinese municipalities in seven provinces, the Chinese national government decided in November 2006 to extend the program to every city in the country by 2010.

Environmental NGOs and activists have played a role in this area as well. Currently, there are about 2,000 registered environmental groups in China. Many more are probably unregistered. A good example of cooperation among government, NGOs, entrepreneurs and citizens is Alxa’s sandstorm treatment project. Alxa is located in the west of Inner Mongolia, which is the main source of China’s sandstorms in northern China. The ecological deterioration in the area has threatened the livelihood of more than 196,000 herdsmen and created many ecologically displaced persons. On June 5, 2004, 100 Chinese entrepreneurs pledged to donate 100 million Yuan ($14 million US) to the Environmental Protection Public Welfare Fund to Control Sandstorms. The Alxa SEE Ecological Association was established, based on this initiative. The SEE Ecological Association has engaged in several pilot projects, including the “alternative energy and natural haloxylon woods zone protection” project and the “improving the sustainability of ALEXA ecological migrants” project. Its investment model calls for multilateral cooperation on the part of the association, government agencies, herdsmen, entrepreneurs, and international organizations. The government of Alxa Meng (Meng is an administrative unit used in Inner Mongolia) launched a “migration and transfer, centralized development” project to relocate herdsmen from Helan Mountain and Tengger to Barunbielli Town of Alxa and built 100 greenhouses for them. The SEE Ecological Association was invited to be a partner of this project, and provided technology training to herdsmen and support for the relocation.

International non-governmental organizations (INGOs) also have been closely cooperating with the Chinese government in recent years in the area of environmental protection. Since the mid-1990s, the number of international NGOs and philanthropic foundations conducting or funding environmental conservation campaigns has grown at an extraordinarily rapid pace. While the number of INGOs with offices in China has grown slowly, the size and resources of these offices has grown dramatically since 2000. The World Wildlife Fund, for example, has worked constructively with government officials at various levels to protect pandas and other endangered species, to preserve ecologically sustainable development, and to promote environmental education. It currently has over 40 projects in many provinces. In recent years, another U.S.-based INGO, the Nature Conservancy, has been invited to help guide a nationwide assessment of China’s conservation priorities and help manage over 50 of China’s 2,400 natural reserves because of its successful partnership with the Chinese government.

In January 2007, under the instruction of SEPA, the China Environmental Culture Promotion Association compiled and released its first environmental protection index. The index is intended to reflect public sentiment on environmental protection. China’s first corporate responsibility index focused on the environment, called the Taida Environmental Index, was released on January 3, 2008. Forty listed companies from 10 environment-related industries compiled the index. As the first social responsibility index for China’s capital market, the index is mainly aimed at evaluating listed companies’ social responsibilities. Companies with a strong focus on social responsibility will be heralded by government and are likely to gain more opportunities for sustainable development.

To strengthen the administrative capacity of environmental regulation, the Chinese National People’s Congress recently elevated SEPA to the Ministry of Environmental Protection (MEP). As one of five new super ministries, MEP’s responsibility, departments and staff all significantly increased. From command-and-control strategy to market-based environmental economics, and from state governance to cooperative governance, the recently passed regulatory policies in China represent a new direction in China’s environmental protection. It mirrors a fundamental shift in China’s developmental strategy. The combined efforts should help produce some significant improvements in China’s environment in years to come. One thing is clear: in the prolonged battle against environmental degradation, the state is no longer the monolithic actor, and the decision-making process has become more open, with a greater degree of civic participation. These changes could help foster a participatory culture in China and teach people how to be a partner in the governing process.

References:

Susmita Dasgupta, Hua Wang and David Wheeler, Surviving Success: Policy Reform and Future of Industrial Pollution in China, World Bank Policy Research Working Paper No.1856 (Washington D.C.: World Bank, February 1997): 2.

Han Lin, “SEPA Suspended 30 Projects for Violating Environmental Regulations,” China.com.cn, January 18, 2005, http://big5.china.com.cn/chinese/huanjing/763371.htm (accessed on June 18, 2008).

Beijing Morning News, February 2, 2007.

Qi Jianrong, “Can Green Insurance be a good solution?” Legal Daily, February 19, 2008.

Environmental Defense in China, China Emission Trading, http://www.cet.net.cn (accessed on June 29, 2008).

People.com.cn, April 13, 2005.

SEE, ALXA SEE Ecological Association: Duty and Dream.

C. Chad Futrell, “Evolution of International NGOs in China: broadening environmental collaboration and shifting priorities” in Yang Dongping ed., China’s Environment Yearbook: Changes and struggles, Vol. 2 (Brill Academic Publishers, 2008): 225-257.

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