The People's Republic of China is the world's most populous country—it is also one of the world's most rapidly industrializing nations. Explosive growth there is being accompanied by swiftly escalating pollution. To improve living standards and safeguard the international financial assistance that drives its industrial development, China must curtail the devastating environmental effects of its growth. Through various arrangements with the World Bank and other international organizations, RFF is helping China integrate environmental management with its spectacular economic development.
In 1988, the State Education Commission of the People's Republic of China directed the People's University of China in Beijing to establish a curriculum in environmental economics. To support this initiative, the university approached Resources for the Future (RFF) for permission to translate into Chinese and publish fifteen RFF books on environmental economics and management. Through these writings, RFF had, in the words of the Volvo Environment Prize awarded to RFF Senior Fellows Allen V. Kneese and John V. Krutilla, "established resource and environmental economics as a respectable and comprehensible research discipline." In turning to RFF, the People's University anticipated that the books would open the way to similar achievements in China.
The RFF–China Book Series quickly expanded to include a new overview volume written by Kneese, as well as a commitment from RFF to help apply the economic concepts of regional environmental quality management that RFF scholars had developed. Chinese officials, facing environmental challenges of massive proportions and recognizing a unique opportunity to link environmental protection with economic development, were seeking help in identifying appropriate projects that could be implemented over time by local authorities, as well as financial assistance for such projects.
Soon, RFF was engaged in technical assistance projects with the World Bank and the China Council for International Cooperation on Environment and Development, a nongovernmental body comprised of fifteen Chinese ministers and an equal number of international members. Through these activities, RFF began to develop relationships with government agencies and academic institutions throughout the country.
RFF organized its expanding China agenda to become part of its Environment and Development Program. Through the program, RFF provides technical assistance, conducts applied research and policy studies, and helps to build indigenous capacity to analyze, design, and implement environmental strategies and policies. Since the mid-1960s, RFF staff has provided assistance with environmental planning and management to the governments of South Korea, Malaysia, Taiwan, Indonesia, Thailand, Nepal, Pakistan, Egypt, Israel, Brazil, Poland, former Czechoslovakia, Hungary, Yugoslavia, and the People's Republic of China.
RFF's work in east Asia began in 1980 with an environmental sector study of South Korea conducted for the country's principal economic planning agency with support from the Asian Development Bank. RFF subsequently helped prepare an environmental master plan for Korea's Han River Basin, which includes the cities of Seoul and Incheon. The Korean government's decision to implement the plan's recommendations was pivotal to the country's obtaining the 1988 Olympic games.
In 1986–87, RFF assisted in preparing an environmental master plan for the government of Malaysia. The plan assessed the cost-effectiveness of environmental management strategies and the capacity of the regional economy to support investments in pollution control in the river valley that includes Kuala Lumpur, the national capital.
Early projects in China: technical assistance and capacity building
The thrust of RFF's early work in China has been predominantly analytical, complemented by a sustained commitment to capacity building. Clear parallels exist between how master plan studies designed by RFF worked out in South Korea and Malaysia and how environmental planning and policy studies initiated by RFF are unfolding in China. Under a variety of administrative arrangements with the World Bank, RFF staff has initiated, designed, or conducted economic analyses for four technical assistance projects in China and has provided technical guidance for a fifth.
Beijing Environmental Master Plan Studies
By designing a study to evaluate least-cost strategies for managing air and water quality and urban refuse, RFF initiated a project that is expected to provide the foundation for investments in environmental infrastructure in Beijing through the year 2015. Referring to the success of the environmental master plan for the Han River Basin, RFF justified the inclusion of environmental master plan studies as a component of a World Bank environment loan to Beijing Municipality. These studies are expected to be completed in late 1995.
RFF pioneered the development of pollution-charge systems in the 1960s; now RFF is helping to make China's current pollution levy system more effective and efficient in controlling pollution such as this wastewater effluent in Sichuan Province
RFF is also helping to develop an indigenous Chinese capacity to integrate environmental management and economic development through fellowships, workshops, and on-the-job training.
Shanghai Environmental Master Plan Studies
Based on the study design prepared for the Beijing work, the Shanghai studies are expected to provide the foundation for environmental planning in Shanghai Municipality through the year 2015. These studies are expected to be completed by mid-1995.
Changzhou Least-Cost Environmental Planning Study
Through the design of an environmental planning study for Changzhou, a city of some 500,000 people located near Shanghai, this project assisted the Chinese in developing a capacity at the national level to establish long-term strategic plans for managing air and water quality and urban refuse in metropolitan regions. City officials are using the results of this study to guide industrial land use planning and industrial relocation in the city, as well as to design a municipal sewerage system.
Beijing Central Heating Project
As part of preparation for the World Bank's Beijing environment project, RFF analyzed a proposal for providing commercial space heat through cogeneration at a suburban electric power plant while also achieving ambient standards for sulfur dioxide and suspended particulates through elimination of building boilers in the urban area. RFF's analysis demonstrated that the project, while not the least-cost strategy for providing space heat, was the least-cost option when improvements in air quality were considered. Based on RFF's analysis, the World Bank approved a construction loan for the project; construction was completed in 1994.
Study of the Chinese Pollution Levy System
RFF, which under the leadership of Kneese pioneered the development of pollution charges in the 1960s to reduce the costs of pollution control, designed a study to improve fee formulas, rate schedules, and the monitoring, enforcement, and administrative procedures in the existing Chinese levy system. The reformed system aims to promote economic efficiency in pollution control, distribute the costs of pollution control more equitably, raise revenues for environmental management, and raise capital for pollution control.
In parallel with its technical assistance efforts, RFF is developing an indigenous Chinese capacity to integrate environmental management and economic development. Activities addressing this goal have included, in addition to the RFF–China Book Series, an RFF visiting fellowship for Chinese scholars, an RFF summer intern program for Chinese graduate students in the United States, a workshop sponsored by the World Bank on environmental economics and management, and on-the-job training of Chinese environmental economists working on RFF projects in China. As part of this capacity-building effort, RFF staff members hold academic appointments at both Peking University and Renmin University (formerly the People's University) of China.
Industrial pollution in Shanghai, such as that shown here, will be brought under control after the environmental master plan prepared by the city has been implemented
The next phase: regulatory reform
Five years of work by RFF in China paid off in 1994 with the initiation of a study for the World Bank on environmental regulatory reform in Chongqing Municipality, a heavily industrialized and severely polluted region of some fifteen million people in remote southwest China. RFF is leading a team that includes Chinese researchers from the Chongqing Environmental Protection Bureau and RFF-trained economists from Renmin University, Peking University, and Stanford University to assess the adequacy of Chongqing's existing regulatory framework for pollution control. If deficiencies are identified, the team will recommend adoption of more stringent emission and effluent standards and explore the feasibility of strengthening existing market-based instruments for controlling the region's industrial air and water pollution. The Chongqing project brings together the technical assistance, applied research, and capacity-building themes of RFF's environment and development strategy to address fundamental environmental policy issues.
Other ongoing projects
RFF's China program gained momentum with the initiation of several new projects during the past year.
Researchers at Renmin University under the direction of RFF visiting scholar Ma Zhong (see "Inside RFF," page 13) are working with RFF researchers to estimate the costs and benefits of continued agricultural development in northeast China, including the costs of damage to the natural environment.
During the past fifteen years, China has instituted a number of policies to address its natural resource and pollution problems. These include emission and effluent standards, the use of emission and effluent fees, discharge permits, forced plant closings, and more recently the freeing of coal prices. In some cities, ambient monitoring data suggest that air quality is no longer deteriorating. RFF Fellow H. Keith Florig is evaluating emissions data from industrial enterprises in eighty-two Chinese cities to determine how patterns of pollution emissions have changed over time and whether apparent improvements in air quality result from environmental and energy policies or are a consequence of industrial restructuring brought on by economic reform.
Outdoor ambient concentrations of suspended particulates and sulfur dioxide exceed national air quality standards in most Chinese urban areas most of the time. The widespread use of biomass and coal for heating and cooking results in high indoor pollutant levels as well. Drawing upon existing epidemiological evidence in China and in the West, Florig is assessing the health impacts of air pollution in China. His preliminary findings suggest that air pollution is responsible for roughly a half million premature deaths and a billion lost workdays each year.
China is experimenting with several environmental policies that incorporate economic incentives to reduce emissions and effluents, shift production to cleaner industries, and discourage activities harmful to the environment. Market reforms, such as allowing enterprises to retain a portion of their profits, have resulted in significant improvements in the pollution intensity of industry measured by reductions in the mass generation of pollutants per unit of output. Under the sponsorship of the United Nations Environment Programme (UNEP), Florig, Ma Zhong, RFF Senior Fellow Walter 0. Spofford Jr., and RFF Visiting Scholar Ma Xiaoying have prepared a description of the role of economic incentives in China's environmental policy. This report will be part of a comprehensive assessment by UNEP of the use of economic instruments in pollution control in developing countries.
One RFF researcher is assessing the health impacts of air pollution in China; his preliminary findings suggest that pollution is responsible for roughly a half million premature deaths and a billion lost workdays each year.
A review of past and present energy-related air pollution problems in China by Spofford and RFF summer intern Liu Feng assessed prospects for future control of emissions from energy-related activities. Research is addressing issues related to monitoring, the use of economic incentives, and financing for pollution control. The goal of the study is to enhance understanding of the physical, economic, and social environments within which air pollution control policies are developed. Understanding of the interrelationships among technical, economic, financial, institutional, and social factors in environment and development will assist China to develop energy and environmental reforms that are consistent with the country's ongoing industrial restructuring and economic reform and with its goals for sustainable development.
Forward thinking
RFF's program in China has recently taken new form. Through the efforts of Ma Zhong, a research institute modeled after RFF—the Beijing Environment and Development Institute—was established in China in late 1994. At the behest of the new institute, the Chinese government is setting aside increasing acreage of wetlands in northeast China that had originally been earmarked for agricultural development.
After the United Nations Conference on Environment and Development in 1992, most countries now accept that environmental protection and sustainable development are essential. This is especially relevant in east Asia, one of the world's fastest-growing regions, where sustained real annual growth rates are approaching 10 percent. With national wealth accumulating at this rate, unique opportunities exist now to coordinate environmental concerns and development goals in industrial investment decisions, policy design, planning functions, and institutional organization and responsibilities. Unless this coordination is achieved, concern for development goals will likely fail to integrate environment and development issues at local and regional levels where most decisions affecting the environment are made.
RFF has taken a comprehensive, long-range approach to assist China in achieving its twin goals of economic development and environmental protection: comprehensive, because for China to achieve these goals environment and development must be integrated in policy design and planning functions, and long-range, because it will take twenty or more years for the development process to play out and for urban areas to achieve levels of environmental quality comparable to those found in the most advanced cities of the world. China cannot afford to postpone these goals; the government policies and programs that are put in place today and the investments in fixed assets and decisions on the disposal of industrial wastes that are made today will affect the pathway of development and environmental damage well into the future.
Walter O. Spofford Jr. is a senior fellow in the Quality of the Environment Division at Resources for the Future and director of RFF's Environment and Development Program. Currently, he directs RFF's half-dozen environment and development projects involving the People's Republic of China. He was assisted in preparing this article by Richard Getrich, RFF's director of publications.
A version of this article appeared in print in the May 1995 issue of Resources magazine.
A version of this article appeared in print in the May 1995 issue of Resources magazine.
