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Is China on the Path to Equal Parts Environmental Protection and Economic Growth?

Water Pollution in China (Photo by Bert van Dijk)

It has taken a long time in China, but official policies finally aim to achieve a sustainable balance between environmental protection and economic growth in significant ways. Developments over the last several weeks and months include a draft proposal for new rules on fines for pollution, discussions of an environmental tax and increased environmental spending, new environmental standards on copper scrap imports, and the release last March of China’s 12th Five-Year-Plan, which puts environmental concerns front and center, and seeks to slow down the astronomic growth so damaging to the country in the last two decades.

The question, however, is whether these policies will achieve that balance. Together, they present a mixed view: on one hand, the 12th Five-Year-Plan clearly shows environmental protection and renewable technology development have become high strategic goals, which will attract more funding and attention. At the same time, they remain couched within China’s myriad institutional challenges – most of which these policies are unlikely to solve.

New Environmental Standards and the Challenge of Legal Enforcement

Many rules on environmental standards currently exist in China, but not nearly as many are adequately enforced. The copper rules require certificates to indicate they are not hazardous. Since they were established in August, they have been piling up in ports as Chinese customs cracks down. Imports at specific locations, however, are much easier to address than widespread environmental non-compliance.

Enforcement of pollution in China is challenging for a variety of reasons, most of them institutional: data and monitoring challenges, budget constraints, weaknesses in the legal system, and endemic corruption at the local level. Wide geographical disparities, including differences in funding between urban and rural areas, present additional challenges.

The draft rules, if implemented, would end a longstanding weakness in Chinese environmental legislation regarding pollution time limits by introducing daily fines. Currently, time limits on pollution are undefined (or arbitrarily chosen by the central government), and the fine remains at a fixed rate rather than marginally increasing, as it does under the U.S. Clean Air Act, where fines can be issued of up to $25,000 per day for a maximum of 30 days. This can result in massive overall fines, a significant pollution deterrent.

The draft rules also seeks to address two other weaknesses in Chinese environmental law: a lack of transparency, and a lack of public participation and public interest litigation. Without the ability for the public to litigate against pollution, there is no incentive for state-owned enterprises to comply with the law, and without procedural rights, the text of a law – no matter how strong – has little meaning. Currently in China, with lawsuits rarely accepted and with environmental law a relatively new field, only a handful of all cases in the country are environmentally related. Without a strong legal system, however, even an official endorsement can only go so far.

These rules, combined with increased environmental spending, including increases in annual budgets, might be significant, depending on precisely what China plans to spend the money on. While what those plans are is not yet clear, the 12th Five-Year Plan offers some guidance in this respect.

The 12th Five-Year-Plan Emphasizes the Environment, but Implementation is Uncertain

China’s 12th Five-Year-Plan contains much more emphasis on environmental policies than previous plans. It promises to invest massively in plug-in hybrid electric and pure electric vehicles; develop increased wind, hydro, nuclear, solar, biomass and geothermal energy, to the point where alternative energies reach 11.4% of total energy consumption by 2015, up from 8.3% in 2010; decrease water consumption by 30%; and increase forest cover by 1.3%. Many of these indicators, including its plan to reduce energy consumption and emissions per unit of GDP, it views as binding (as opposed to merely expected). Also notable is its plan to implement  cap and trade pilot programs, as well as its attention to the implementation of the 2008 Circular Economy Promotion Law, which defines the “circular economy” as “a generic term for the reducing, reusing and recycling activities conducted in the process of production, circulation and consumption.” Its goals are ambitious: to promote recycling at all levels, including the recycling of industrial waste, as well as to encourage low carbon and even zero emissions models.

Some of these policies, particularly in the investments into renewable energies, would be global game-changers if implemented successfully. Some researchers, however, note that even if China succeeds only halfway, the changes to global clean energy technology would be significant, with the country becoming  a price setter.

Implementation, however, remains uncertain. Research since March indicates significant challenges to both its lofty environmental and general policy goals, with one researcher pointing out that pollution targets are not enough without more emphasis on data collection. As is generally the case with China’s five year plans, implementation details are not addressed. Rather, those are found in more detailed policy documents drafted in between these plans, and are left to a large degree for local authorities. Yet local environmental protection bureaus face many challenges, not least being surrounded by (and often involved in) corruption within local enterprises and governments. For this and other reasons that are too lengthy to describe here, vague intentions to “strengthen the supervisions of law enforcement,” and other similar statements, remain an open question.

In addition, China’s central government has historically treated environmental policy with as much of a heavy hand as it treats its economy: for example, by its use of short-term campaigns that may close thousands of local polluting companies, but ultimately fail to address systemic institutional challenges; or by its clampdowns on protesters and arrests of high profile environmental activists. Most recently, it imposed electricity brown-outs in late 2010 in its push to meet energy intensity targets.

Without a doubt, China is clearly focused on a sustainable direction. It may well be that that focus will lead the world, as in the case of renewable energy. Without addressing structural challenges, however, sustainability is not guaranteed.

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