April 2008

Although China's rapid expansion fuels the global economy and reduces the country's rate of poverty, a negative outcome of this growth is the impact on the environment. The industrial growth is damaging China's natural resource base, which has been generating environmental problems all across the country. The issues include land degradation, deteriorating water quality and water scarcity, severe air pollution and declining natural forest cover. The health and prospects of current and future generations are being affected by this development and the growing global concern is whether China can continue to sustain such development without action being taken. The government has begun creating programs to cope with urbanization and clean up the damage announced in 2005 in China's 11th Five-Year Plan, which marked the beginning of a more environmentally-conscious era.

Urban Development

Demographic trends in China show that the population is continuously increasing. The urban population which was approximately 430 million in 2001 might reach 850 million by the year 2015, and the number of cities with over 100,000 people is estimated to increase from 630 (2001) to over 1,000 (2015).

China's urban population has grown in cities of all sizes. Nevertheless, townships of between 5,000 and 10,000 people are witnessing the fastest growth. Although efficient and effective improvements of water supply and enhancement of water treatment have progressed in China's large cities, environmental management in the expanding towns and townships remains a challenge. Pollution in these smaller urban settings is not well monitored and their development plans include only limited provision to concentrate on.

The most pressing problem is water. The United Nations (UN) says China is one of the 13 most water-scarce countries in the world, with about one-quarter of the world's average water resources. According to SEPA (State Environmental Protection Administration), the Chinese Government has decided to invest largely in developing technologies to treat water pollution. Three big state-funded programs for the research and development of such technologies have been approved. These programs, to last between 2008 and 2020, will support research of technologies to remedy pollution in rivers, lakes, drinking water and in water body environments.

Growing Impact of Climate Change in China

In January 2008, the United Nations Convention to Combat Desertification held their annual conference in Beijing - the city which in early spring is always clouded in dust from the ever-increasing desertification in its western and northern regions. While desertification in China is being driven by poor land management and excessive industrialization on fragile grasslands, climate change is aggravating these problems.

China emits high levels of greenhouse gases due to its economy being based mainly on heavy industries. SEPA has insisted that by the end of 2007 China would see a drop in overall emissions of such pollutants. China has targeted reducing sulfur dioxide and chemical oxygen emissions - two of the main contributors - by 10% between 2006 and 2010.

In order to reach this goal, China has started to ease the short-term effect of climate change by implementing new programs such as artificial precipitation. The Chinese government has also begun to adopt stricter energy conservation legislation with the assistance from international organizations in order to combat threats that climate change may bring to China.

Energy, Air Pollution and Green House Gases (GHG)

China is the third largest consumer of coal and oil and the second largest source of greenhouse gas emission. One would assume that there would be environmental controls implemented to prevent these emissions, but China has always been known to be the most inefficient manufacturing producer.

Small coal mines, oil refineries and other ecologically unsafe businesses will attract most of the attention in the fight to eliminate outdated production methods. Nevertheless, these actions are also taking place to encourage these companies to restart their production, but in better environmental conditions. However, according to officials, China is and will continue to close down small enterprises which waste resources and damage the environment.

Waste Reduction

In order to reduce the amount of waste produced, several programs will come into effect, starting 1st of June 2008.

A measure that will affect most Chinese citizens in their daily lives is the planned distribution-ban of free plastic bags by retailers which is a potentially major step in addressing the country's large municipal waste problem. Chinese municipalities generate approximately 190 million tons of trash per year, and that amount is rapidly increasing. Landfills are quickly reaching their capacity and China will have to create an estimated 1,400 new landfills over the next 25 years in order to satisfy the increasing amount of garbage accumulated and to make up for poorly managed existing landfills.

Leaking solid waste landfills have already rendered 50,000 hectares of land around cities useless, which poses a serious land constraint problem, as China supports 25 percent of the world's population with seven percent of the arable land. China is facing growing ecological and human health threats from brownfield sites (stemming from both older landfills that lack proper linings and some new landfills that are poorly managed). A further provocation to the problem is the illegal dumping of municipal and industrial waste. The incineration of waste also emits chemicals, namely dioxins, furans and mercury, which are harmful to human health in China and abroad.

Only a few large and medium-sized cities have adopted comprehensive municipal waste reduction programs and recycling rates in these waste producing cities remains low. Positive policies emerging in China include discharge fees on those responsible that do not comply with relevant environmental law and incentives to reduce, recycle and reuse wastes. "Landfill gas capture" projects have also begun to turn the methane gas produced during the biodegradation of organic matter into a fuel to be used by industries and vehicles. China has also implemented stricter laws on the importation of solid waste, yet illegal e-waste dismantling and ship-breaking operations continue to function.

Green Investments

China is one of, if not the most attractive renewable energy resource market in the world in terms of growth potential. At present, the vast majority of investments are coming from state-owned, nationwide power groups such as China Huaneng, China Guodian and Shenhua. The Chinese government has labeled this industry as an encouraged sector for foreign investments, allowing foreign companies to come in with no restrictions on their capital structure.

The larger manufacturers of renewable energy have to invest heavily in equipment. As an example, many of the world's largest wind-power equipment manufacturers are selling to or manufacturing in China. Wind-power concession projects offer an incentive for foreign turbine

manufacturers to set up factories in China, since they require a certain proportion of equipment to be produced domestically. Two of the world's largest wind-power technology companies, Denmark's Vestas and Spain's Gamesa, have invested in their own manufacturing plants in Tianjin. Nevertheless, these companies will have serious competitors in the future, since local manufacturers are growing very strong in the same direction.

China has become more famous as one of the world's biggest polluters, but its drive for clean power is at least boosting incentives for a greener future.

Eco-City Plan

China's urbanization program will see 60% of the population living in cities within a decade. What's more, a rising standard of living means that, by 2020, people will require 10 square meters more of living space than what they have now. The country is already home to 16 of the world's 20 most polluted cities. As housing demands continue to push urban capacity, sustainable models are being developed to ease the environmental burden.

One of the most prestigious projects is an eco-city which will ultimately house 500,000 people, designed by the UK engineering consultancy firm Arup. This eco-city is being developed on a neighboring Shanghai-island called Chongming which is situated at the mouth of the Yangtze River. It is planned to be the first truly environmentally and economically sustainable city. The island is almost the size of Manhattan and is surrounded by wetlands that form one of the most important migratory bird sanctuaries in China, known as Dongtan.

The city is expected to be finished by 2010, the same year the Expo will be held in Shanghai, which will help to attract even more tourists for this occasion. Facilities such as accommodation and exhibition centers will be provided on the island.

Dongtan eco-city will be linked to the mainland by an 18-mile long bridge-tunnel which also crosses two smaller islands. However, city planners are committed to protect the existing eco-system on the island and plans include expanding the forest areas and set aside parts of the island for sustainable farming. Some projects have been already completed such as an organic vegetable processing plant, an international conference center and a commercial office complex. Conventional cars will be banned in the city center, while the plans envision capturing and purifying water, waste management recycling, reducing landfills that damage the environment, and creating combined heat and power system.

Although, plans are moving extraordinarily fast, the final obstacle is as usual politically-related. After the quick development of the master plan for the city, final authorization of the funds for the project has paused. At the moment all big projects are waiting for approval causing some concern whether the project will go through. However, as China has a high-profile commitment towards environmental issues, it would be a surprise if the project was not passed.

Tax Plan for Environmental Protection

The Chinese government has been discussing a taxation plan to promote environmental protection. There are several key plans that are currently being studied and appraised by the Ministry of Finance and the State Administration of Taxation and State Environmental Protection Administration and may be approved and implemented later this year.

Examples of these plans include:

• The first plan suggests that the government collects tax from companies in accordance with how much they earn from the products which consume resource or pollute the environment.
• The second plan suggests that companies would pay tax according to how much pollutant they have discharged, adding that the tax will target the discharge of sulfur or sulphide, carbon dioxide, sewage, solid waste and other forms of pollutant.
• The third plan would ask consumers of potentially polluting products, such as fossil fuel, ozone-consuming commodities, fertilizer and pesticide, to pay tax.

Other than the plan for the implementation of an environmental tax, the country has already adopted laws for environmental protection and other regulations. It is encouraging domestic companies to introduce more environment-friendly technology and production models. The government is also trying to make the public aware of the growing concerns for the environment.

Conclusion

Many believe that the future of the country's environmental reform is linked to its economic expansion, as breakneck industrialization appears ever more to be at the expense of ecological protection. People blame the lack of a genuine free-market enterprise for the government's struggle in meeting its own environmental-protection goals. Fines for non-compliant factories are the equivalent to a slap on the wrist and energy reduction goals are impossible without investment in newer technologies and business innovations.

Recognition of the dire need for the governmental policies and incentives could not come any sooner. However as is usual in China many of the tax breaks and benefits are unclear and generally companies willing to "green" their businesses are unsure whether a tax-break incentive exists or how such schemes could be of an advantage. The pressure for China will intensify in 2008 as the deadline for the Olympics draws nearer and already the Ethiopian world-record holder Haile Gebrselassie will not participate in the marathon event due to possible health risks caused by the polluted air. It is everyone's hope that China is determined to disprove its reputation for economic expansion at all costs and put forward an image of a more "sustainable development".

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