Maintaining China's growth in an environmentally friendly manner

China is facing severe air and water pollution, heavy metal pollution in soil and acute water shortages. The root cause of the escalating environmental crisis is the combination of rapid expansion in energy-intensive heavy industries with predominantly coal-based energy use, inadequate policies and institutional measures for safeguarding the environment, and weak enforcement of environment regulations.1 China's challenge is to change the mindset of ‘grow first and clean up later' that has prevailed at all levels of government in China. The good news is that social awareness of environmental problems is now unmistakable, and the trend is rising.

Water: in crisis

The World Bank has warned that water scarcity will become an increasingly pressing issue in China.2 The country's water shortage is a consequence of overuse and declining supplies. From 2000 to 2009, China's total water reserves fell by 1.5% annually, about 35 billion cubic metres of water a year, the Ministry of Water Resources said. Average annual water availability is only about 1,850 cubic metres per person - less than one-quarter of the world average. Among the top 600 cities by size, 400 suffer from water shortages, according to the Organisation for Economic Co-operation and Development's (OECD) Environmental Performance Review: China (2007).

The deterioration of water quality caused by widespread pollution further aggravates water shortages in China. According to the OECD report, about 30% of the rivers monitored are classified as worse than grade V (that is, highly polluted). Three-quarters of the country's major lakes are also considered to be highly polluted (grade V or above). One-quarter of China's coastal waters are very polluted (grade IV or above).

Water pollution in China has been caused primarily by chemical fertilisers and pesticides, industrial waste and raw sewage. China's first pollution census, published in 2010, revealed fertiliser use was a bigger source of water contamination than factory effluent. China's intensive use of both chemical fertilisers and pesticides is three to four times higher than the OECD average.

Air quality: among the worst in the world

Air quality in Chinese cities is among the worst in the world.3 According to official statistics, in 2013, the concentrations of PM2.5 - the tiny airborne particles considered most harmful to health - were more than 30 times the World Health Organization's recommended standard in many Chinese cities. A World Bank study shows that 16 Chinese cities are among the world's 20 most polluted cities. Only 1% of China's 560 million of city dwellers breath air considered safe by European Union standards. About one-third of 113 surveyed cities failed to meet national air-quality standards in 2009, based on official Chinese data (air-pollution levels set by China's national air-quality standards are four to five times less strict than OECD standards).

The main sources of outdoor air pollution in China are coal combustion, motor-vehicle exhaust and the massive scale of urban construction, generating particles of soot, organic hazardous material, heavy metals, acid aerosols and dust, in addition to emissions of sulphur dioxide (SO2) and nitrogen dioxide (NO2). The particulate matter that is less than 10 microns (PM10) poses the biggest health threat. In China, PM10 accounted for about 72%, SO2 8% and NO2 0.3% of primary pollutants of concern between 2000 and 2007.4

Coal is the number-one source of air pollution in the country, and is also the principal source of energy. About 80% of electricity and 70% of total energy in China was produced from coal (much of it the highly polluting high-sulphur coal), compared with 45% in the US.

The rapid growth of private-car ownership in recent years has escalated air pollution problems in urban areas. Studies have shown that 45-60% of NO2 emissions and 85% of carbon monoxide (CO) emissions are from mobile sources in most Chinese cities.5 It was estimated that by 2010 in Shanghai, vehicular emissions would produce 75% of total NO2 emissions, 94% of total CO emissions and 98% of total hydrocarbon (HC) emissions.6 Even with stricter emissions controls and cleaner fuels, mobile-sourced pollution is likely to continue rising because of the increased use of individual vehicles and longer trip lengths. Respiratory diseases, such as infections, asthma and decreased lung efficiency, are common in polluted urban areas.

Energy: inefficient use

Along with China's structural transformation and rapid growth, the energy efficiency or intensity (measured by energy use per unit of GDP) has also evolved over time. China experienced rapid improvement in energy efficiency from 1978 to 2000. On average, the energy use of one unit of GDP is eight times less today than in 1980.7 China's growth pattern prior to 2000 was characterised by labour-intensive light manufacturing. However, the trend in energy efficiency improvement reversed in the early 2000s. Between 2000 and 2008, total energy consumption increased twofold, with energy imports rising from 1% of total energy consumption in 1990 to 13% in 2008. The growth of energy consumption outpaced GDP growth, with energy demand elasticity (the ratio of energy demand growth to GDP growth) increasing from less than 0.5 between 1978 and 2000 to 1.5 between 2000 and 2006.8

Since 2000, China has embarked on a growth path dominated by energy-intensive industries, relying on scarce resources, including water and raw materials, while creating relatively fewer jobs and less GDP. These industries produced energy-intensive products, such as steel, aluminium and cement, to meet China's massive domestic demand for housing construction, transportation and infrastructure development, as well as exports to international markets. China now accounts for 48% of global cement production, 49% of global flat glass production, 35% of global steel production, 28% of global aluminium production and 11% of passenger car production.

Clearly, China is on a development path that features unsustainable energy-use patterns. Based on current energy consumption, the International Energy Agency (IEA) has raised its China 2030 forecast by 1.2 billion tonnes of oil equivalent, a 63% upward revision. 9 Under this scenario, China would account for 20% of global energy demand - more than Europe and Japan combined - and easily surpass the US as the world's largest energy consumer within the next decade.

Greenhouse emissions

In 2007, China surpassed the US to become the largest greenhouse gas emitter. China produced 6,200 tonnes of carbon dioxide (CO2) in that year, compared with 5,800 tonnes from the US, although Chinese CO2 emissions per capita remain relatively low - about one-quarter of that in the US and half that of the UK. Two factors are particularly important for the level of overall emissions: rising energy intensity and the carbon content of energy use.

Hidden health costs

The economic cost of disease and premature deaths associated with the incidence of diarrhoea and cancer in rural China is about 0.49% of GDP.10 Recent studies suggest that drinking water contamination is a major factor for digestive system cancers, including stomach, liver, oesophageal and colorectal cancers. These cancers have the highest mortality rate of malignant neoplasms in China at 73 per 100,000 cases in 2005 (China Health Yearbooks).

Studies also show that outdoor air pollution is associated with a significant health cost. Based on existing evidence, outdoor air pollution in China is associated with about 300,000 deaths, 11 million cases of respiratory illnesses and 5.5 million cases of chronic bronchitis each year. The overall cost of health damage is estimated to be 1.8-4.7% of GDP,19 and projected to reach 13% of GDP by 2020 by some estimates.12

Pollution as a growth barrier

Many studies have also shown that pollution also acts as a constraint on future economic growth. The increasingly fierce competition between energy and water has brought China to a choking point, limiting the country's future development prospects.13 Agriculture and the coal industry are China's two largest water users, and consumed about 85% of the 599 billion cubic metres (158 trillion gallons) of water resources in 2010. The costs of cleaning up may also limit the country's future growth. In addition to the cost of cleaning up contaminated water, land and air, pollution is costing China billions of yuan in additional health costs, lost productivity and early mortality. According to World Bank estimates, China's environmental costs could come to around $100 billion a year, or about 5.8% of GDP, including the impact on mortality.

Measures to tackle the environmental challenges

China has become a key player in global climate-change negotiations. Contrary to suggestions by some that the country does not take climate change seriously, in recent years, the government has devoted enormous resources to the reduction of energy use and emissions, and to improve energy efficiency.

In the Twelfth Five-year Plan (FYP), the government set an array of targets to reduce CO2 emissions. These included reducing energy consumption per unit of GDP by 20% by 2010, increasing the share of renewable energy to about 10% of total energy use, as well as covering roughly 20% of the nation's land with forest by 2020.

President Xi Jinping and Premier Li Keqiang have both reiterated on many occasions China's determination in the war against environment pollution. More actions are coming, as the costs of environmental and resource degradation in China have already been astonishing.

The Chinese government has responded to the serious environmental challenges on several fronts:

• First, in recent years, it has committed to develop a comprehensive framework of environmental laws and regulations.
• Second, it has focused on how this legislation can be effectively implemented and enforced. To this end, a major effort has been made to clarify the roles of national and provincial governments and to strengthen the operation of the legal system.
• Third, it has significantly improved access to government-held environmental information, with the introduction of the Environmental Information Disclosure Decree in 2008.

China's Eleventh and Twelfth FYPs have incorporated binding environmental targets into national development policy. During the period of the Eleventh FYP (2005-2010), important progress was made in several areas: chemical oxygen demand and SO2 emissions decreased by 12.45% and 14.29% respectively, exceeding the emission-reduction targets.

Despite this progress, the overall trend of environmental deterioration in China has not been halted, highlighting the urgent need to continue efforts at all levels of government and the private sector, including enterprises, farmers and consumers. In the Twelfth FYP (2011-2015), the Chinese government placed a high priority both on climate change and environmental issues. Conserving energy and cleaning up the environment are among the five key goals set for the next five years (in addition to encouraging domestic consumption, developing the service sector and moving to higher-value-added manufacturing). Binding targets for a range of environmental and energy issues, including important air- and water-quality pollutants, are included for the first time in the national FYP.

1 Yang XL, LM Wang, Yan Wang (2014), The Quality of Growth and Poverty Reduction in China, Social Science Academic Press (China) and Springer 2014.

2 World Bank (2009), Addressing China's Water Scarcity: Recommendations for Selected Water Resource Management Issues.

3 Zhang, J, Denise L Mauzerall, Tong Zhu, Song Liang, M Ezzati and JV Remais (2010), "Environmental Health in China: Progress Towards Clean Air and Safe Water", The Lancet 375, pp1,110-1,119.

4 Andrews, SQ (2011), "Beijing's hazardous blue sky", chinadialogue.net/article/4661-Beijing-s-hazardous-blue-sky

5 Walsh, MP (2000), "Transportation and the Environment in China", Technical Report 3, Wilson Center, Environmental Change and Security Program, wilsoncenter.org/sites/default/files/CES%203%20Feature%20Articles%20(p.28-50).pdf

6 Jiang Y, Feng Liguang (2006), "Transport-related Resource and Environmental Issues in China", World Transport Policy & Practice, Volume 12.4.

7 International Energy Agency (2006), World Energy Outlook.

8 Rosen, Daniel H and Trevor Houser (2007), China Energy: A Guide for the Perplexed, "China Balance Sheet" project, Center for Strategic and International Studies and the Peterson Institute for International Economics, https://www.piie.com/publications/papers/rosen0507.pdf

9 International Energy Agency (2006), World Energy Outlook.

10 World Bank (2008), International Trade and Climate Change: Economic, Legal, and Institutional Perspectives.

11 Millman A, Tang D, Perera FP (2008), "Air Pollution Threatens the Health of Children in China", Pediatrics, September 2008; 122 (3): pp620-8.

12 Ho P, 2006, "Trajectories for Greening in China: Theory and Practice", Development and Change 37 (1): pp3-28".

13 Wilson Centre (2010), Choke Point: China Research Briefs.