Climate change

OECD highlights cost of growth

PUBLISHED : Wednesday, 18 July, 2007, 12:00am
UPDATED : Wednesday, 18 July, 2007, 12:00am


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For the past 20 or so years the legitimacy of the mainland government has depended largely on its ability to deliver economic growth. That criterion is now changing.

Over the next 20 years, Beijing's mandate will be judged not just by the pace of economic development, but by the government's record at providing growth without further damage to the natural environment. A new report from the Organisation for Economic Co-operation and Development underlines how difficult that will be.

Although the 340-page report's authors are careful to praise the progress Beijing has made recently in enacting environmental legislation, improving monitoring and cracking down on the most egregious abuses, their review of the mainland's environmental performance is still damning.

Beijing's efforts to control pollution suffer from what the report politely terms an 'implementation gap'.

In other words, although the central government has passed a 'comprehensive and modern set of environmental laws' and drawn up a series of plans for meeting ambitious pollution reduction and resource conservation targets, nobody has paid a blind bit of attention.

Instead local government officials with little or no accountability to their populations have cut every environmental corner possible in order to meet performance objectives and raise revenues. As the report puts it with masterly understatement, 'economic priorities have over-ridden environmental concerns'.

Anecdotal evidence tells how local environmental agencies deliberately set the cost of fines below the cost of compliance to maximise income. As a result the pollution problem is getting worse rather than better, despite all the new regulations. After falling throughout the 1990s, the concentration of sulphur dioxide in the air of mainland cities began rising again in 2002, with emissions shooting up 13 per cent between 2002 and 2004.

Similarly, emissions of carbon dioxide per unit of energy produced are rising rather than falling (see chart) while urban and industrial discharges into the country's lakes and rivers rose again in 2005 after a long decline.

The costs in both human and economic terms are grievous. According to an unpublished World Bank report, 750,000 mainlanders die prematurely every year as a result of air and water pollution. In monetary terms, the cost is about US$100 billion a year or almost 6 per cent of mainland gross domestic product.

To tackle the problem, the OECD makes 51 recommendations, including upgrading the status of the State Environmental Protection Administration to a full government ministry and extending its authority over local environment agencies.

Other key recommendations include drawing up national energy and transport policies which take account of environmental considerations, scrapping energy and water subsidies for industry and extending the use of emissions trading to boost the economic efficiency of environmental protection.

These are all eminently sensible recommendations and the central government would do well to pay close attention. Its future legitimacy is likely to depend on it.