China & World Economy / pp.110-122, Vol.13, No.6, 2005
A Study of Chinese Government's Policies in Industrial Pollution Mitigation
Muhammad Arshad, Deli Ye
[Abstract] China’s rapid economic growth poses serious concerns over environmental degradation, especially in the context of higher pollution levels resulting from unprecedented industrial activity. It is commonly held that government policies are effective in the form of investment in pollution control and the imposition of a discharge fee on industrial units for the purpose of safety of environmental quality. In this study, we find that government policies do not prove to be successful in controlling air pollution in comparison to water pollution. Furthermore, air pollution is increasing, while water pollution is following a stable, decreasing curve. Hence, some reforms need to be implemented in government policies, particularly those concerning the effectiveness of investment in environmental protection and improving managerial skills in industry.
[Key words] industrial air and water pollution, government discharge fee, government investment expenditure
[JEL code] H50, Q52, Q53, Q58
I. Introduction
The dynamic tension between the quest for higher economic growth and the responsible maintenance of environment quality has fueled many lively debates around the globe. Some experts argue that the decision-makers in industry need to factor in sustainable environmental measures as every bit as important as the bottom line, while some other scholars have started to wonder whether it is the production techniques or government policy that should be applied to pollution control. It is an axiom that if economic growth runs parallel to a healthy environment, an upward spiral is the prospect for such a utopia.
Since the 1980s, the Chinese government has instituted environmental protection laws, regulations and standards on air/water and solid waste contaminations similar to those of developed countries; but they have yet to function effectively owing to a certain hesitancy on the part of administrative authorities, lack of funding, and inadequate monitoring. This is perhaps understandable, given the vast scale of the exercise. In the past three decades, China has devoted much attention to developing and strengthening environmental institutions and regulatory frameworks, largely by establishing command and control regulations, and waste treatment and disposal technologies for reducing industrial pollution.
China’s industrial growth has been extremely rapid during this period of economic reform, with the output of the nation s 10 million industrial enterprises in the 1990s increasing by more than 15 percent annually. Industry is also China’s largest productive sector, accounting for 47 percent of its gross domestic product and employing 17 percent of the country s total labor force. Unfortunately, environmental degradation has accompanied this rapid growth. In many urban areas, atmospheric concentrations of pollutants such as suspended particulates and sulfur dioxide routinely exceed World Health Organization safety standards by very wide margins. As a result, hundreds of thousands of people are suffering from pollution-related respiratory disease each year. There is no doubt that Chinese industry is a primary suspect, with many polluting industrial enterprises located in densely populated metropolitan areas. The Chinese Annual Environmental Statistics Reports of year 2001-2004, published by the State Environmental Protection Administration of China (SEPA), shows an increase of 12.6 percent in the national total wastewater emission from 2001 to 2004, whereas industrial wastewater emission accounted for an average of 46.4 percent of the national total. In the same period, the national waste gas emission increased at the rate of 6.4 percent while industrial waste gas (SO2, smoke, dust) emission contributed on average 86 percent of the national total.
Since 2003, with China’s economy growing steadily, the demand for raw materials has risen in direct proportion, placing enormous pressures on the environment. According to Zhang (2004), the intensity of environment pollutants per GDP of China, e.g. SO2, NOx waste gases etc., is 8 to 9 times higher than those of developed countries or taking in the same way as a result of per 1 percent GDP growth. Hence, these figures indicate a higher than-acceptable wastage of resources.
According to empirical evidence, when a country s per capita GDP enters the range of US$1,000-3,000, its environmental pollution becomes a source of conflict with its future economic development. In order for China to maintain its current environmental level up to 2020, when GDP growth is expected to double, an 80-85 percent reduction in the current level of pollution will be needed. Past failures of abatement policies have been blamed on the traditional environmental protection system and a general lack of infrastructure for pollution control. Although there were some recent government statements indicating that waste water management plants have been installed in some areas, resulting in a 40 percent improvement, water pollution throughout China remains serious and draws criticism from abroad.
Industrial pollution is looming as the largest single menace to people’s health and prosperity, and no province can escape its menacing cloud. The industries still operating under tradition-bound structures are burdening the population with foul and harmful air. Coking, fuel and tobacco industries are the main contributors polluting the air with SO2, CO2 and NOx. Paper, textiles and fertilizers/pesticides industries are certainly contributing to river and drinking water pollution. Hence, the polluted water is very difficult to treat and recycle, and while this remains the case, crops and plantations are at risk.
In view of the relevance of industrial production and its effect on the environment, we aim to explain the effectiveness of Chinese government policies on water and air pollution. The paper is organized as follows: in section II, we present a brief overview of the literature on the subject; in section III we describe the data and methodological framework of our research; section IV gives the interpretation of the empirical results and pollution intensity graphs; and section V concludes our study along with some policy recommendations.
II. Literature Review
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III. Data, Construction of Variables and Methodology
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IV. Empirical Results
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V. Conclusion and Recommendations
In the context of openness for international trade and huge inflow of FDI, China has generated a production economy, giving rise to big concerns over environmental degradation. The empirical results that we estimated show that the Chinese government discharge fee and investment expenditure policies for controlling the air pollution have not been successful; meanwhile the government discharge fee policies remained influential in successful reduction of the water pollution, although there is much room for improvement. We suggest that the Chinese government should focus on efficient allocation and utilization of pollution mitigation funds, as well as improve the management and monitoring mechanism of the institutions concerned. We can see from the results that the air pollution increase has not been well controlled by the policies, suggesting that inefficient implementation of the Three Simultaneity System could be the possible reason for that.
Besides, campaigns, mass communication and inter-relationship among government, civil society, and NGOs on environmental pollution mitigation should be well established and supported with the government funds in the long term so that awareness can be created among the public and industry. Hence, the allocation of pollution mitigation funds and practical implementation of the policies should go hand-in-hand to achieve the desired goals.