Stratfor gives us the good news: Red China Goes Green

Summary: A key piece of the doomsters’ “world ending” story is that the leaders of China are fools, not seeing or acting to address their economic problems — and especially the pollution produced by their decades of rapid growth. As this report by Stratfor shows, they’re not fools — and they are taking bold steps to fix their ecology. (First of two posts today.)Stratfor

Red China Goes Green

Stratfor, 17 March 2017.

Forecast

  • Because stricter environmental policies align with its strategic goals, Beijing may be able to accelerate the pace of its environmental reforms.
  • Enforcing environmental policies across the country’s diverse regions, however, will continue to pose a challenge for Beijing as each province and municipality weighs the risks and rewards of compliance.
  • The central government will use its growing role in international climate change policy and renewable technology to reinforce its position as a world leader.

Analysis

China’s economic growth over the past four decades has been staggering. The environmental damage it has caused is no less impressive.

China is dealing with widespread pollution problems, from thick smog in the northeast to contaminated water and soil throughout the country. But now a combination of domestic pressures and geopolitical strategy has put environmental issues at the top of the Chinese government’s priorities. In the past three years, and particularly since the release of the 13th Five Year Plan in 2016, Beijing has started rolling out stricter environmental policies. The transition is hardly surprising, following decades of rapid industrialization and coinciding with the emergence of a new middle class and a shift in the Chinese economy. It will, however, be challenging. The country’s vast territory and regional diversity make enforcing national laws at the local level an uphill battle. Even so, the strategic gains that stricter environmental policies promise — both domestically and internationally — could help Beijing speed the process along.

China environment display
Lintao Zhang – Getty Images.

A Familiar Pattern.

Though the scale of China’s environmental problems is unprecedented, the process that created them is not. History has demonstrated that environmental damage is a common side effect of rapid industrial growth. Then, as economies advance, governments take on the task of environmental reform — often at the urging of a newly minted middle class concerned with its quality of life. The United States and Western Europe underwent this transition on their way to economic development. But Japan and South Korea, which experienced their own “economic miracles” in the mid-to-late 20th century, offer an even closer precedent for the evolution of China’s nascent environmental movement.

Japan embarked on its rapid industrial expansion in the 1950s in the aftermath of World War II. The country encountered its first pollution-related illness, Minamata disease (the result of mercury poisoning), by 1956. In the decades that followed, other public health crises such as itai-itai disease (caused by cadmium poisoning) and increased air pollution arose. Still, it took the Japanese government until 1970 — when the country’s precipitous industrialization was winding down — to start enacting policies to manage the environmental fallout. The first laws focused on controlling pollution and its effects on human health rather than preserving natural resources or the environment itself. Although the policies managed to get the most egregious pollution problems in check, Japan’s politically powerful manufacturing companies kept the environmental agencies in check for decades after. The country’s environmental laws were still haphazardly enforced at best even into the 1990s.

Compared with Japan, South Korea began its industrialization campaign about a decade later, in the 1960s. Its environmental reforms likewise started gaining traction in the 1980s after a series of environmental disasters and health crises. But the movement didn’t really take off until South Korea’s government transitioned from dictatorship to democratic rule in 1987.

China, like these countries before it, is now moving toward an economic model based on high-end manufacturing and internal consumption, having spent the past 30 years building its economy on low-end manufacturing and exports. As it does, it is beginning to take stock of the widespread damage that decades of industrialization have wrought on its environment. Almost half of China’s surface water sources fail to meet quality standards, making groundwater contamination a problem in nearly all of the country’s cities. Soil quality, too, is poor in many areas, and in major cities, the air can be unbreathable at certain times of the year. Thousands of environmental groups have formed in the country to try to prevent a further decline in air, water and soil quality, China’s most pressing environmental concern. And though compliance and enforcement still pose a formidable challenge for the central government, Beijing has already taken steps to improve them.

Pedestrians in Beijing brave the smog During the winter, many cities in northeast China are enveloped in dense smog as residents burn coal and other fuel for heat.

Photo of China's environment.
Greg Baker-AFP-Getty Images.

Regulatory Climate Change.

In 2016, for example, the central government instituted countrywide environmental inspections, dispatching teams of inspectors to each of China’s 16 provinces and regions, beginning with Hebei. The penalties for noncompliance included a 15-day detention sentence, fines or a complete shutdown of the facility found to be in violation. Beijing has also cracked down on enforcing its environmental policies, a perennial struggle for the Chinese government. Inspections conducted in November 2016 yielded 13,000 citations and fines totaling $22 billion for companies in Beijing alone. Similarly, the number of fines issued in Tianjin rose 56% from 2015 to 2016. Following investigations of a series of explosions that ripped through a storage facility at the Port of Tianjin in 2015, moreover, government officials and executives implicated in the incident received hefty sentences. In late 2016, the chairman of Rui Hai International Logistics was even sentenced to death for his role in the accident, which was attributed to mismanagement.

The government’s enforcement record is still far from perfect, though. Despite missing its air pollution targets in 2015, the city of Zhengzhou in Henan province got a favorable assessment, reportedly because the local inspectors performing the evaluation “failed to understand the importance of environmental protection.” And China’s Ministry of Environmental Protection has publicly admonished, rather than formally sanctioning, provinces in the northern part of the country for failing to control their smog levels this winter. Recent inspections in Beijing, Tianjin and Hebei also showed that local governments there have dragged their feet on implementing policies such as introducing traffic controls and upgrading power plants.

Nonetheless, Beijing has forged ahead with new environmental reforms this year. A draft of a government document leaked in mid-February outlined a proposal to cut steel, fertilizer and aluminum production by up to 50% in 28 major cities and provinces in northeast China over the winter. In addition, Beijing has plans to roll out a nationwide emissions trading system sometime this year after running several pilot programs throughout the country. The system, designed to reduce emissions by allowing companies to buy and exchange capped emissions allotments, will cover China’s power and industrial sectors. Of course, the gap between theory and practice will be wide for many of these initiatives. Measuring emissions is a complicated procedure, and the pilot programs found that China is short on individuals with the experience and qualifications to carry out the job. Regardless, the policies are evidence that Beijing is making a more concerted effort to address the country’s environmental problems.

Think Locally.

But getting local governments on board with the initiatives will be easier said than done. Because the central government has historically emphasized gross domestic product growth above all else, regional and municipal leaders have had little incentive to enforce environmental policy over the years. In fact, studies indicate that leaders who pursued environmental protection measures had fewer prospects for promotion. The National Development and Reform Commission, however, recently announced that compliance with environmental policies will now surpass GDP growth in evaluating localities’ performance. Adjusting to the change will be difficult for local and regional leaders; already, President Xi Jinping has had to remind Hebei’s government not to get “tied up in GDP.”

Beyond the struggles of adapting to Beijing’s new priorities, moreover, each locality will undertake its own cost-benefit analysis to determine whether it can afford to execute the central government’s environmental policies without jeopardizing its stability. Some regions may determine that the drawbacks of enforcing the measures — higher unemployment, for example, or lower economic output — exceed the penalties for noncompliance. Those that do try to adhere to Beijing’s directives will run into obstacles, from a lack of experience to a dearth of funds.

Considering the challenges that lie ahead, China’s environmental reforms will probably take longer to carry out than the government imagines. One factor that may well help to accelerate the process, though, is that many of the environmental measures support the Xi administration’s overall goals. Improving environmental monitoring and enforcement at the local level, for example, provides a perfect excuse for the central government to further consolidate its power. What’s more, since the health of the environment has become a global conversation, Beijing could use its environmental reform initiatives and advances in green technology to project its influence as a world power. And if the United States begins to disengage from international climate agreements as expected, China will have the opportunity to do just that.

Act Globally.

Addressing the World Economic Forum in Davos, Switzerland, in January, Xi highlighted China’s commitment to lead the global effort against climate change. To that end, China is working to position itself at the vanguard of low-carbon technology development and manufacturing. The country is home to five of the world’s six largest solar panel manufacturers and half of the top 10 wind turbine producers. Over the next few years, it is projected to spend $360 billion installing more than one-third of the world’s new wind and solar capacity.

Putting that capacity to domestic use, however, is a lofty goal for Beijing. Though the amount of wind and solar energy connected to the world’s electrical grids increased by 19% in 2016, demand for variable renewable energy often falls short of capacity, particularly in China, where energy contracts favor coal. In the first half of 2016, an estimated 21% of the country’s existing wind power, and 12.1% of the solar power in northern China, went unused. But that could start to change, since the National Energy Administration introduced renewable power production quotas in spring 2016. (Furthermore, evidence suggests that China’s coal consumption may have peaked in 2014.)

Given the limits of China’s domestic market — and the plans to cut wind and solar tariffs in 2018 — attracting more foreign investment into the renewable energy sector will be crucial for Beijing. The industry drew 60% more foreign investment in 2016, reaching a total of $32 billion in international deals, including 11 agreements for renewable energy projects abroad worth more than $1 billion each. The projects will not only help Beijing support its renewable energy giants, but they will also enable China to gain greater influence in the developing world, much as it has through its One Belt, One Road initiative. At the same time, China has been steadily ramping up its investment in alternative energy projects abroad for the past 15 years. Its investments in 2016 targeted developing and developed nations alike, a strategy that will enable the country to increase its clout with up-and-coming economies while also reaping the benefits of its established partners’ resources and expertise.

The rise of environmental awareness in China may seem like a departure for the country, which has notoriously eschewed international climate change agreements in the past. But Beijing’s growing commitment to protecting its environment and to combating climate change is part of its greater strategy. Though the United States seems to be stepping back from its role at the center of international climate policy, China is not necessarily interested in taking its place. Instead, Beijing is using the issue to fashion itself as an alternative to the West’s long-standing hegemony in the global order. And as a relative latecomer to environmental reform, the country has a chance to learn from the experiences of its predecessors and jump ahead to the forefront of the movement.

Red China Goes Green” is republished with permission of Stratfor.

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9 thoughts on “Stratfor gives us the good news: Red China Goes Green

  • The goal should be that all externalities become some sort of resource for another sector of the economy. Hence eradicating pollution from occurring at all. And promoting a circular economy the same way nature in many ways cycle matter through its ecosystem.

    No only saving on costs but even turning a profit.

    Like

    • infowarror,

      “Hence eradicating pollution from occurring at all.”

      An admirable goal. Not likely to be even partially achieved in the lifetimes of the next several generations. But I can imagine a future in which children are taught about “pollution”, a strange problem of the past.

      Look at living organisms. Applying only room temperature catalytic chemistry, they do complex processes that produce only biodegradable waste products. Imagine when we master such tools!

      Liked by 1 person

    • While the perfect is the enemy of the good. Approaching the perfect or ideal is good in and of itself as a perpetual pursuit.Just like a asymptote approaching the line but never reaching it.

      Hence making things better perpetually.

      Like

  • ‘Though the scale of China’s environmental problems is unprecedented’. Hardly.

    No Chinese city has ever made the world’s top ten most polluted and nothing in China’s experience comes close to the weekend in 1952 when London’s smog killed 4,000 people and hospitalized tens of thousands. Nor has China experienced anything like Love Canal or the Cuyahoga River catching fire in 1969.

    Even today, Beijing’s NOx levels are much better than London’s.

    Like

    • Godfree,

      You are comparing individual cities in China to those of the west. That’s not a measure of scale for China. The scale of China’s environmental problems results from China’s relative size. Depending on measures used, China has roughly 30% of the world’s largest cities — almost all heavily polluted.

      “Nor has China experienced anything like Love Canal or the Cuyahoga River catching fire in 1969.”

      What is the basis for this claim?

      “Even today, Beijing’s NOx levels are much better than London’s.”

      What does that mean? Do you believe Beijing’s air is cleaner than London’s?

      Like

    • Godfree,

      A few years back Jonathan Adler had a post entitled: “The fable of the burning River” that said this …”The problem with the story of the 1969 Cuyahoga River fire is that so much of what we think we know about this story just is not so. Start with the famous image published by Time magazine referenced above.”

      The fable of the burning river, 45 years later“, WaPo, 22 June 2014.

      Like

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