Surviving Success: Policy Reform and the Future of Industrial Pollution in China

Abstract

China's recent industrial growth, a remarkable success story, has been clouded by hundreds of thousands of premature deaths and incidents of serious respiratory illness caused by exposure to industrial air pollution. Seriously contaminated by industrial discharges, many of China's waterways are largely unfit for direct human use. This damage could be substantially reduced at modest cost. Industrial reform combined with stricter environmental regulation has reduced organic water pollution in many areas and has curbed the growth of air pollution. But much higher levels of emissions controls (of particulates and sulfur dioxide) are warranted in China's polluted cities. For the cost-benefit analysis that led to this conclusion, the authors developed threescenarios projecting pollution damage under varying assumptions about future policies. Their findings are: Even if regulation is not tightened further, continued economic reform should have a powerful effect on pollution intensity. Organic water pollution will stabilize in many areas and actually decline in some. Air pollution will continue growing in most areas but at a much slower pace than industrial output. The cost of inaction would be high--most of China's waterways will remain heavily polluted, and many thousands of people will die or suffer serious respiratory damage. Continuing current trends in tightened regulation for water pollution will lead to sharp improvements; adopting an economically feasible policy of much stricter regulation will restore the health of many waterways. The stakes are even higher for air pollution because regulatory enforcement has weakened in many areas in the past five years. Reversing that trend will save many lives at extremely modest cost. China's National Environmental Protection Agency (NEPA) has recommended a tenfold increase in the air pollution levy; adopting NEPA's very conservative recommendation would produce a major turnaround in most cities. For representative Chinese cities, a fiftyfold increase in the levy is probably warranted economically. To be cost-effective, heavy sources of particulate and sulfur dioxide emissions should be targeted for abatement. Reducing emissions from large private plants is so cheap that only significant abatement makes sense -- at least 70 percent abatement of sulfur dioxide particulates and even greater abatement of particulates in large urban industrial facilities.