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Focus

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Environmental Health Perspectives VOLUME 110 | NUMBER 9 | September 2002 A 517

Focus China Seeks a Balance

Nearly 50 years ago, ChairmanMao Zedong introduced a Five-

Year Plan (FYP) for the Chineseeconomy based on the Soviet model ofheavy industry. At the time, China wasalmost 100% agrarian, with the exceptionof a few factories in the northeast built bythe Japanese during their World War II

occupation. But in the following decades,massive state-owned factories operatinglargely without pollution controls sproutedacross the country. The fuel that poweredthis industrial makeoverthat still powersnearly 70% of Chinese industryis coal,one of the countrys most abundantresources and the worlds dirtiest source ofenergy. By the 1960s, China was among themost polluted nations on earth, its rivers

and groundwater fouled by industrialchemicals and the air in its cities blackened

with soot.Today, Chinas environment is still high-

ly degraded, but there is room for opti-mism. An environmental infrastructure thatbegan emerging in the late 1970s nowemploys over 130,000 people, according to

the 2001 China Environment Yearbook, aChinese government publication. Thanks tosome rudimentary pollution controls, airquality has improved in a number of majorcities. Rural villagers increasingly haveaccess to ventilated stoves that reduceindoor air pollution, and the country issteadily shifting away from coal toward nat-ural gas and other gas fuels. Furthermore,Chinas 1978 move from a centrally plannedto a more market-based economy hashelped lift 60% of the population out ofpoverty, according to government sources.Poverty is widely recognized as the greatestthreat to health and the environment.

Chinese authorities recently announcedthey will commit an unprecedented sumtoward environmental protection. The cen-tral governments latest FYP for the economy,the tenth to date, devotes over the plansduration approximately 1.3% of Chinasgross domestic product (GDP)about Y700billion, or US$85 billionto its environ-mental provisions. This FYP has an ambi-tious environmental agenda: reduce theannual population growth rate to less than0.09%, halt ecological deterioration, increase

forest coverage and urban green space, andreduce emissions of major pollutants to 10%below 2000 levels.

The extent to which China followsthrough on the environmental promiseremains to be seen. As in other countries,corruption is endemic in China. Vaclav Smil,a professor of environmental studies at the

University of Manitoba, Canada, predictsthat much of the money committed to envi-ronmental remediation will be absorbed by abureaucracy that he says is merely feedingitself. Like other experts, Smil questions theaccuracy of Chinas official GDP figures, andhence the monetary value of the environ-mental commitment. The central govern-ment has a notorious reputation for inflatingindicators of economic growth. The real

GDP, he suggests, is likely to be as much as athird less than figures released by officials inBeijing. Nevertheless, he concedes that theenvironmental intentions of most Chineseofficials are probably genuine. They knowthey have severe problems, he says.

The Costs of Pollution

According to the 1997 World Bank reportClear Water, Blue Skies: Chinas Environmentin the New Century, the damages caused bypollution and degraded resources consumeup to 8% of Chinas GDP, roughly equal tothe annual growth of the countrys econo-my. This figure is the most current suchestimate available.

Despite recent improvements, 9 of the10 cities with the worlds worst air pollutionare found in China, and respiratory diseaseslinked to poor air are the leading cause ofdeath among both children and adults,according to a November 1999 report by the World Resources Institute, Urban AirPollution Risks to Children: A GlobalEnvironmental Health Indicator.

Water pollution is a serious public healthhazard in China, perhaps even more so thanpolluted air, some experts say. Nearly half ofChinas 1.3 billion people drink water con-taminated with chemicals and biological wastes, and chronic water shortages plaguemuch of the population. A popular saying inthe countrys developed eastern region isThe house is new, the money is enough,but the water is foul, and life is short.

Resource degradation is a massive prob-lem in China. Nearly a third of the totallandmass is denuded of trees, a consequenceof overlogging and erosion. According to theChinese State Environmental Protection Administration (SEPA), the countrysdesertsnow covering 2.4 million squarekilometersare expanding by 3,000 square

kilometers per year. Because of desertifica-tion, sandstorms are rising in frequency andintensity. Spring winds passing over the Gobiand Takla Makan Deserts in Mongolia andChina, respectively, produce enormousclouds of swirling dusts that travel through-out Asia and the world.

Dust storms that invade Chinese andother Asian cities can produce near-apoca-lyptic conditions. As choking sands reduce

visibility to as little as 50 meters, residentsare forced indoors, and local economies canbe shut down for days at a time. High lev-els of ambient dusts are a serious health andenvironmental hazard, linked to respiratoryproblems and contamination from toxi-cants and pathogens bound to airborneparticles. Dust storms also erode topsoil,

which robs the ground of its fertility, inaddition to blocking sunlight and affectingclimatological patterns.

Logging and erosion also leave the landmore vulnerable to the effects of floods,which occur with devastating frequency inChina. Eroded banks turned the YangtzeRiver flood of 1998 into a cataclysmicevent that killed thousands and left mil-lions more homeless and vulnerable toinfectious diseases.

Challenges of the New Economy

On a fundamental level, the new FYPsgoals pose enormous challenges, in partbecause of a growing disconnect betweenthe central and local governments. Sincethe late 1970s, small profit-based townshipand village enterprises (TVEs) have led to adiffusion of industry throughout the coun-try. According to Jennifer Turner, coordina-tor of the China Environment Forum ofthe Environmental Change and SecurityProject at the Washington, D.C.based

Woodrow Wilson International Center forScholars, the proliferation of these profit-based businesses was broadly encouraged byPh

otoDisc,

MattRay/EHP

Economy and EnvironmentChina Seeks a Balance

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the central government as a means of soak-ing up excess labor in the countryside andlimiting the urban migration of rural peas-ants. TVEs, many employing fewer than 10individuals, now account for more than30% of rural income, Turner says.

Unlike state-owned factories, which arefewer in number and accountable to centralauthorities, TVEs are chiefly accountable tothe marketplace. Therefore, market forcesand the efforts of local officials, not man-dates from Beijing, drive the environmentalperformance of TVEs. The responsibility oflocal governments over environmental pro-tection is also growing as the Chinese econ-omy becomes increasingly decentralized. Inthis new era, regionalized economic devel-opment is becoming the new driver forenvironmental change.

Experts expect that, in time, marketpressures also will favor energy efficiencyand pollution controls among both TVEsand pollution sources in general. But at theoutset, these advanced systems clearly facean uphill battle, says Robert Taylor, the leadenergy economist with the East Asia Energyand Mining Unit of the World Bank, based

in Washington, D.C. Fac-tory managers often viewenvironmental technologyas a low priority, he says. And domestic banks are wary of environmentalprojects because they cre-ate high transaction costs

and generate low short-term returns.

Furthermore, Smil says,local officials will bendover backwards to accom-modate TVEs because theyprovide employment andtaxes. If youre a local offi-cial, you dont want tointerrupt TVEs or burdenthem with environmentalcontrols, he says. If youdo that, they will just moveto the next county. Thekey is to somehow conveythe long-term profit andenvironmental benefit ofenvironmental technologyto entrepreneurs who mayinitially view these tools

with skepticism. Eventual-ly, experts say, market forcesshould enhance environ-mental benefits. But thesesuccesses will likely hingeon the strengths of localeconomies. Those that do well are more likely toinvest in environmental

quality than those that do not.In the meantime, TVEs in many ways

surpass state-owned factories as the mainsource of Chinas industrial pollution.Just about all of the wastes from theTVEs are dumpedindiscriminately,Smil says. In someplaces you can walkdown the street andevery five hundredmeters you see anoth-er shed full of younggirls making elec-tronics, bikes, every-thing for the West-ern markets. All thatelectroplating, thechromium, the restof that waste, justgoes into local rivers.No one spends mon-ey to control pollu-tion. Thats why youget such a good price.

In some areas, es-pecially in the north-

west, contamination from TVEs, state-ownedfactories, and other sources is exacerbated bychronic water shortages. According to the World Resources Institute, over half ofChinas cities cant provide sufficient water totheir populations. The problem is gettingworse because the cities are growing so rapid-ly. Recent government policies have allowed

rural peasants to gain residency in cities likeBeijing and Shanghai, leading to huge influx-es in population. Already lacking in infra-structure, treatment capacity in the cities isstretched to the hilt. Most of the new build-ings are connected to sewers, but there isntany treatment, Smil says. So about eightypercent of the sewage goes straight into thereceiving waters.

Urban Air Quality

Making definitive statements about envi-ronmental trends in China is tricky becausethe country is so big. Smil admits hes exas-perated by pessimists who claim things aregetting much worse and optimists whoclaim they are getting much better. Thereisnt any [one] China, he says. China is1.3 billion people; there are hundreds ofChinas. Are things getting better or worse?They are getting better and worse at thesame time.

A demonstration of this point can bemade with urban air quality. A heavy gov-ernment emphasis on industrial particulatematter (PM) reduction since the mid-1980shas improved urban air with respect to thispollutant. But according to JonathanSinton, a scientist at Lawrence Berkeley

National Laboratory in Berkeley, California,industrial growth since the market reformsmay be increasing ambient levels of sulfurdioxide (SO2) because most factories haveyet to install desulfurization technology.

A 518 VOLUME 110 | NUMBER 9 | September 2002 Environmental Health Perspectives


The cost of coal. The majority of Chinas energy needs are still met byheavily polluting coal-fired generating plants such as this one on theYangtze River in Dukuo, Sichuan.

Pollution gridlock. Emission controls are improving, but China isstill home to 9 of the 10 cities with the worlds worst air quality.

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Furthermore, the growth of the Chinesevehicle fleet has increased urban levels of air-borne nitrogen oxides (NOx), which are di-rect precursors to smog.

Scientists have studied Chinas urban air(but not rural or indoor air) since the mid-1980s, when the first air monitoring deviceswere installed in some of the countrys major

cities. At first, monitoring data were limitedto total suspended particulates (TSP), SO2,and NOx. Later, additional pollutantsincluding PM10 and PM2.5were alsoadded. These smaller particles areconsidered to be the most hazardousbecause they persist in the environ-ment and burrow deep into the lungs.Today, air monitoring is common indozens of Chinese cities, and the dataare regularly posted on state websitesand in newspapers.

Most studies of ambient urbanair quality conducted to date focusedexclusively on TSP. A compilation ofair quality statistics in Chinese urbanareas (in press in Chemosphere) byKeith Florig, a senior research engi-neer in the Department of Engi-neering and Public Policy atCarnegie Mellon University inPittsburgh, Pennsylvania, showedthat annual average TSP levels across140 cities fell from a mean of 500g/m3 in 1986 to 300 g/m3 in1997. Florig cautions that particu-late levels in many of Chinas citiesremain extremely high, however. Forinstance, 10% of industrialized

northern cities, which are closer tothe deserts, have ambient TSP levelsthat exceed 500 g/m3, well over theannual average standard for industri-al areas of 300 g/m3. Some 90% ofthese same cities exceed Chinasambient air quality standard for resi-dential areas of 200 g/m3.

According to Florig, TSP reduc-tions have been achieved by pluck-ing the low-hanging fruit in termsof lessening residential and indus-trial emissions by employing themost basic and simplest cleanup technolo-gies. Typical approaches include the use ofstack filters that trap up to 60% of partic-ulates from boiler emissions, conversion ofraw coal to coal briquettes (which releaseless fly ash when burned), central heatingsystems for urban buildings, and in somecases residents use of bottled gas instead ofcoal. Greater reductions can be achieved bymore advanced technologies, which aremore expensive, and by switching awayfrom coal altogether.

Another possible contributor to im-proved air quality, says David Fridley, a staff

scientist at Lawrence Berkeley NationalLaboratory, is a remarkable drop in coal usefrom 1996 to 1999. According to Fridley,government figures indicate a 24.7% drop infinal coal consumption (meaning coal useddirectly as fuel), despite a 35% rise in GDPduring this time period. According toFridley, the magnitude of the drop in con-

sumption during the same time period isreduced to 13% if final consumptionchanges are combined with reductions in

transformation uses, meaning coal used tofuel secondary power sources like electricity.The reduction in coal consumption is attrib-uted by Fridley mainly to economic reformsthat closed tens of thousands of inefficientfactories and mines, a continuing emphasison industrial efficiency, the use of cleanernatural gas, and the elimination of govern-ment subsidies for coal, which effectivelyraised the fuels price.

What air quality studies are just nowbeginning to address are the impacts ofChinas growing demand for vehicles, which grew by 30% annually between

1995 and 2000 thanks to a quadrupling ofper capita income, according to an articlein Issue 3 (1999/2000) of the ChinaEnvironment Series. Chinas vehicle fleet isstill extremely small by U.S. standards just one car for every 70 urban residents,compared to one car for every 2 urban Americans, according to Robert Paaswell,

director of the Region II UniversityTransportation Research Center at the CityCollege of New York. Nevertheless, envi-

ronmental effects from vehicles areexpected to rise sharply in the com-ing years. And experts say vehicleexhausts are already the most impor-tant sources of NOx and carbonmonoxide in urban air.

Respiratory diseases linked to airpollution are still the leading causesof death in China. Adults die mostoften because of chronic obstructivepulmonary disease and childrenbecause of pneumonia. Air pollutioncauses millions of Chinese to sufferfrom chronic ailments includingheart disease, cancer, decreasedimmune function, and fatigue. Butaccording to Florig, data gaps makeit difficult to evaluate how changingurban air quality is affecting humanhealth. Only a few such studies havebeen conducted to date, and there isno national repository for environ-mental health statistics in China.

Researchers are typically confined in theirefforts to localized assessments.

For instance, in a study published inthe January 2000 issue of the Chinese-lan-guage Journal of Environment and Health,

Xiaoming Zhang and colleagues at theSanitation and Anti-Epidemic Station in

Xiamen performed an analysis of respirato-ry disease in the city of Chengde from1983 to 1997, when the introduction ofcentralized heating greatly reduced TSPexposures from household solid fuel burn-ing. No indoor TSP levels are reported inthe study. However, the researchers report



Toptobottom:RayCheung;AndreaHricko

The coal conundrum. At a coke plant inJiexiu City, Shanxi province, (above) a womanwatches coal rocks being rinsed by water.Many of the plants, which produce coalbricks (right), are closing because of the costof complying with new environmental regu-lations, leaving thousands unemployed.

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that wintertime outdoor TSP levels fellfrom 3,000 g/m3 before centralized heat-ing was introduced to roughly 200 g/m3

after its introduction. During this sameperiod, annual mortality rates from respira-tory diseases decreased from 811 per mil-lion to 237 per million.

Junfeng (Jim) Zhang is director of the

International Environmental Health Centerat the Environmental and OccupationalHealth Sciences Institute, part of theUniversity of Medicine and Dentistry ofNew Jersey and Rutgers University inPiscataway, New Jersey. He and his col-leagues at SEPA and the U.S. EnvironmentalProtection Agency (EPA) have recently stud-ied the effects of air pollution on childrensrespiratory health in four major Chinesecities: Lanzhou in north central China, which has heavy ambient particulate levelsfrom its proximity to the northern deserts;Chongqing in southwest China, where thelocal coal is high in sulfur and poor in quali-ty; Wuhan in central China, a typical indus-trial Chinese city; and Guangzhou, a coastalcity near Hong Kong with a lot of vehicles.Their results, to be published in the October2002 issue of Environmental Health Per-spectives, show that respiratory symptomsincluding cough, wheeze, phlegm produc-tion, and bronchitis are linked more to PMthan they are to SO2 and NOx.

The data on asthma are ambiguouswith respect to exposure. Pollution levelsfrom those cities are up to one hundredtimes greater than those found in NorthAmerica and Western Europe, Zhang says.But the asthma rates were low: two tothree percent compared to ten percent inthe West. The other symptoms we evaluat-

ed are all higher in prevalence than thosefound in Western cities. According toSmil, these seemingly anomalous asthmaresults may reflect the effect of affluence onWestern children, whose immune systemsmay be weaker than those of children livingin less hygienic environments.

Chris Nielsen, executive director of theChina Project at the Harvard UniversityCenter for the Environment in Cambridge,Massachusetts, says the pervasive shortage ofenvironmental health data can make it diffi-cult for policy makers in China to targetspecific sectors for mitigation. Nielsen andcolleagues are collaborating with researchersat Tsinghua University in Beijing to aug-ment the existing data with statistical mod-els. One model, based on what he calls theintake fraction approach, is being used toestimate human health effects from expo-sure to a range of industrial pollutionsources. The model allows you to calculatethe amount of pollution emitted from a par-ticular source that actually reaches the

lung, he explains. We think itwill allow us to get a preliminaryhandle on the health effects thatcan be attributed to different pol-lution sectors in China.

Rural Air Quality

Air data from Chinas rural areasare virtually nonexistent. How-ever, anecdotal evidence suggeststhat the magnitude of publichealth effects from rural air qual-ity may exceed that of the cities.The main source of rural air pol-lution is indoor burning of coaland biomass such as wood andcow dung. This is a particularlyhigh-risk source of exposurebecause it produces high levels ofparticulates in the range of2.510.0 m, the size believed tobe most hazardous to health.

In some regions of China, coalis rendered even more dangerousby the presence of toxic contami-nants that poison rural villagers.For instance, Robert Finkelman, asenior scientist at the U.S.Geological Survey in Reston,Virginia, and Baoshan Zheng, ascientist with the Institute ofGeochemistry of the Chinese

Academy of Sciences in Guiyang, have docu-mented evidence of severe heavy metal toxic-ity among villagers from Guizhou province. According to Finkelman, the coal in thisregion is highly concentrated in fluorine andarsenic, the latter at levels as high as 35,000parts per million.

Finkelman says arsenic in coal is usually

identifiable by the presence of sulfide miner-als that villagers can easily detect. But inGuizhou, the metal is bound in the organicfraction and hidden from view. Villagerstherefore have no way to tell if the fuel is con-taminated. Many villagers in Guizhou haveclinical manifestations of metal exposure, hesays. We are seeing extensive occurrence ofkeratosis and Bowens disease, which is a pre-cancerous condition related to arsenic expo-sure. Finkelman and Zheng are currentlyanalyzing coal samples from locations all overChina for 50 trace elements, including awide range of carcinogenic compounds. Weexpect to have a comprehensive databasewithin a year, he says.

So-called smoky coal, a low-qualityproduct that releases large amounts of muta-gens, is common in Yunnan province, whereit is linked to high rates of lung cancer, par-ticularly among women in Xuan Wei coun-ty. These women have among the highestlung cancer rates ever recorded: 125.6 casesper 100,000 women, compared to Chineseand U.S. national averages of 3.2 and 6.3per 100,000, respectively, according to theU.S. EPA.



Rural risks. Evidence suggests that adverse healtheffects from rural exposures such as indoor cookingwith biomass may exceed those is urban areas.

Hidden hazards. Coal contaminants,some of which cause effects on bonesand cancer, may be difficult for villagersto detect.

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The discovery of Xuan Weis tremendouscancer burden finally sparked action fromthe central government in the mid-1980s. Anational stove improvement and dissemina-tion program, launched in 1984 and coor-dinated by the Chinese Ministry ofAgriculture, sought to provide ventilated coalstoves to rural villagers through a mix of gov-

ernment- and market-sponsored programs.Sinton and Kirk Smith, chair of the

Department of Environmental HealthSciences at the University of California atBerkeley, recently evaluated the programssuccess in 3,000 Chinese households. Sintonsays its too early to report on results. Butbased on his own observations, he suggeststhe program may not be as helpful as one would hope. People tend not to use theimproved stoves because theyre notportable, he says, referring to Chinese fami-lies tendency to cook in a number of differ-ent rooms. Youll go into a house and see avery nice new stove sitting there unused anda small portable coal stove which is used allthe time. These stoves emit horrific levels offine particulates all over the house.

The situation may be more positive inother areas of China, though. RobertChapman, a medical officer at the EPAsOffice of Research and Development inResearch Triangle Park, North Carolina, hasrecently finished a study showing that venti-lated stoves sharply cut lung cancer rates inXuan Wei. Data measured in this study andpublished in the 5 June 2002 issue of theJournal of the National Cancer Instituteshowthat stove improvements reduced the risk of

lung cancer by up to 46%. Chapman, a 20-year veteran of lung cancer research in XuanWei, says he believes ventilated stoves will cutthe risk of exposure wherever they are used.But he acknowledges the current results cantbe extrapolated definitively to other Chineseregions. We suspect there is somethingunique about the coal in Xuan Weilungcancer consistently shows up higher therethan in other parts of China. But we haventhad the resources to compare combustionproducts in Xuan Wei coal with those fromcoal burned in other areas.

Moving away from Coal

Chinas leaders increasingly cite the envi-ronment when discussing the need toreduce reliance on coal as the countrysprincipal energy source. For instance, in aspeech given to an international group ofenergy executives on 11 September 2001 inBeijing, Li Yanmeng, director-general ofChinas Department of Basic Industries,said, Too much coal is directly used forend-use consumption . . . and energy effi-ciency and environmental protection meas-ures have lagged far behind advanced world

standards and cannot meet the needs of sus-tainable development.

In the same speech, Yanmeng acknowl-edged that coal will supply the bulk ofChinas energy needs into the foreseeablefuture. But he also referred to ongoing effortsto replace coal with cleaner energy sourcesunder the FYP. To an extent, reforms in the

coal sector have been driving this shift foryears, says Jeffrey Logan, a senior researchscientist at the Joint Global Change ResearchInstitute in College Park, Maryland, an inde-pendent group of climate scientists. Forinstance, the removal of price controls andsubsidies on a glutted coal market during theearly 1990s caused prices to surge, makingalternative energy forms more attractive. Thelast several years have witnessed a decline incoal use for energy from 76% in 1990 to

67% in 2000, according to Chinese govern-ment sources. During the same period, thecombined use of oil, natural gas, hydropow-er, nuclear power, and wind and solar energyincreased by nearly 10%.

But experts believe that, with rapid eco-nomic growth, coal use will rise to earlier lev-els unless China moves quickly to developalternatives. According to Sinton, an internaldebate among Chinese officials makes thedirection of Chinas energy policies hard topredict. The debate is essentially about whether to continue relying on coal, con-suming more of it using clean-coal technolo-gies, or relying more on imported oil and gasand on renewable energy.

Recently, estimates of Chinas domesticnatural gas supply, once thought highlylimited, were buoyed by the discovery ofnew fields in the western part of the country.

A 2,500-mile pipeline extending from theremote far western region of Xinjiang to theeastern city of Shanghai is expected to aug-ment Chinas natural gas infrastructure,which now serves mainly residential cookingand heating in major cities. This US$5.6 bil-lion project will be financed in part by threeforeign companiesRoyal Dutch/Shell

Group, Russias gas monopoly Gazprom, andExxonMobil Corporationwho have eachagreed to a 15% stake. Chinese plannershope that by 2020 natural gas will supply10% of Chinas energy needs, compared to3% today. According to Logan, gas technolo-gies are up to 20% more efficient than thoserun by coal. Also, for every 30 billion cubicfeet of natural gas used in place of coal, car-bon dioxide emissions decline by approxi-mately 20 million tons. This is of key impor-

tance because carbon dioxide is the principalgreenhouse gas behind global warming.China is currently the worlds second largestemitter of greenhouse gases after the UnitedStates, but is expected to be the largest sourcewithin a few decades.

As for oil, Chinas own oil fields havebeen steadily dwindling for years. Imports, which now supply a third of the countrysenergy needs, are expected to rise to 50% by2020, making China the largest oil importerin the world. Much of the current supply,almost all of it consumed by the transporta-tion sector, is imported from Middle Eastern, Asian/Pacific, and African countries. RayCheung, a reporter with the South ChinaMorning Postin Hong Kong, says U.S. navalsuperiority in Middle Eastern waterwayscould stifle imports in the event of a con-frontation, suffocating the Chinese economy

RuSuichu/ChinaStock

The wave of the future? The need for energy to fuel Chinas vast economic growth has ledto oil prospecting, such as that taking place in the Takla Makan Desert.

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and throwing the country into chaos.Therefore, for its own energy security Chinais increasingly looking for oil sources beyond

U.S. control. On 28 September 2001, a dealsigned with the Russian government pavedthe way for joint oil exploration and develop-ment in the IrkutskSakha region of easternSiberia, nearly 1,000 miles from theChineseRussian border. If all goes asplanned, a 2,400-mile pipeline from thisregion will deliver 30 million tons of oil toChina annually within four years.

Of course, increased reliance on oil stillpresents significant environmental prob-lems, particularly from the perspective ofvehicular air pollution and greenhouse gases.The cleanest power derives from wind, solar,and water power, which are expected to con-tribute a small but significant portion ofChinas energy mix in the near term.Exploiting Chinas hydroelectric resourcescan involve some substantial environmentaltrade-offs. In the most egregious example,the highly controversial Three Gorges Dam,if completed, will provide 18.2 gigawatts ofpower, 34% of Chinas total annual elec-tricity needs, by 2009, according to Logan.This level of power is roughly equal to thatprovided by 50 million tons of coal. Thecosts, both monetary and environmental, are

huge, though: roughly US$24billion and the displacement ofas many as 1.9 million peopleand a world-class ecologicaltreasure along the dams 350-mile upstream reservoir on theYangtze River.

According to Turner, Chinas

renewable energy sector is grap-pling with market distortionsthat stifle its growth. Mostrenewable energy projects inChina are small in scale andcoordinated by the central gov-ernment. But the growth ofrenewables on a national scale isimpeded by what Turner refersto as tied bilateral aid. Thisoccurs when foreign sources pro-vide renewable technology but

then insist on exclusive ongoing rights to sellthe requisite machinery. These arrangementsslow the domestic market by forcing theChinese out of the manufacturing loop. Forlarge-scale grid-connected renewables, youneed a commercial market that is competitiveand self-sustaining, she explains.

Toward the Future

In the long run, its important that thesekinds of trade issues be resolved. China needsforeign assistance to confront its environmen-tal challenges, but on terms that allow for sus-tainable development. Taylor points to a pro-liferation of energy service companies(ESCOs) as a market opportunity benefitingChinese and foreign investors alike.Launched with assistance from the WorldBank, ESCOs are independent companiesthat help Chinese factories buy, install, andmaintain energy-efficient technology. In turn,the ESCOs are paid with the resulting finan-

cial savings. There are over a dozen of thesecompanies now, all profitable, most staffed byChinese nationals, Taylor says.

Chinas recent entry into the World TradeOrganization might also facilitate environ-mental protection, says Turner. Membershipcould, for instance, enhance the transparencyof Chinas environmental laws, lead to the

closure of heavily polluting state-owned facili-ties, and enable China to protect its naturalresources by limiting certain types of agricul-ture. Rice farming, for example, draws heavilyon Chinas limited water resources, particularlyin the west. This could provide a marketopportunity for American farmers who are ableto grow rice in the United States with ease. IfChinese farmers could switch away from rice,they could switch to vegetables, which requireless water, Turner explains. The trick is to[convince] the local government.

China is also experimenting with marketinstruments for environmental protectionthat are sophisticated even by Western stan-dards. A new system for regulating industrialpollution, known as total emissions control,switches the emphasis from the rate of dis-charge to the total amount discharged. Thisapproach opens up possibilities for market-based emissions trading programs, such asthose used increasingly for greenhouse gastrades among companies in the United Statesand Europe.

Ultimately, Western governments andindustries would be wise to help China on itspath to a cleaner environment. As an entice-ment, the market opportunities are poten-tially huge. And with nearly a quarter of theworlds population affected, the consequencesof success or failure will be truly global.

Charles W. Schmidt



Collision course? Chinas natural environ-ment and its need for energy are meetinghead-on in the controversial Three GorgesDam hydroelectric construction project.

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