FEATURE-China faces uphill battle to turn its growth Green

21 Feb 2006 01:31:13 GMT,Source: Reuters

Residents of the 2008 Olympic Games host city watch the air quality index like they do the weather forecast. POLLUTION RIOTS By Lindsay Beck BEIJING, Feb 21 (Reuters) - There are days in Beijing the smog is so thick residents can stare straight at the sun. Some Chinese cities may dazzle with gleaming skyscrapers and some rural backwaters have been transformed into industrial hubs, but more than two decades of 9.5 percent annual growth have come at a cost. Now the country is trying to calculate exactly what price it is paying for choking smog, poisoned rivers and toxic waste, floating the concept of a "Green GDP" index likely to be debated at the annual parliament session that convenes on March 5. "Green GDP deducts ecological and environmental losses. It is able to more fully test and measure the quality of economic development and avoid false achievements," Pan Yue, deputy chief of China's environment body and its most outspoken green crusader, said in an interview with local media. It's an idea that fits with the model of development that the leadership under President Hu Jintao and Premier Wen Jiabao has been trying to project, one of tempering the pace of economic growth with a focus on balanced growth. The changes are likely to be tough to implement. Local leaders are accustomed to being judged on growth above all else and would be fearful that stricter environmental controls would impact their bottom line. A first step, analysts say, is establishing a system of green accounting to get a more accurate idea of the costs associated with degradation. "It is evident to any thinking person that things need to be changed. What is not clear is what strategy to use," said Andres Liebenthal, an environment specialist at the World Bank. A number of pilot projects are under way to test green accounting systems, but there are a whole series of instruments that could be adjusted if a complete green GDP system were adopted, including pricing systems and natural resource taxes. "The price of water only reflects the transport and treatment, for example, not the scarcity value or the costs associated with pollution," said Liebenthal. GREEN OFFICIALS While Green GDP is an idea popular with top leaders trying to keep a growing gap between rich and poor in check and counter social instability, it is also likely to be less appealing to local officials after investment dollars and tax revenues. The government is trying to change that, with wide-ranging regulations that aim to integrate environmental losses into the measurement of regional development -- and into the evaluation of local officials. "If you really want to change, you need to develop a system in which the environment is a parameter that plays a more and more important role in the status or evaluation of local officials' behaviour," said Zhang Jianyu, China manager of U.S.-based Environmental Defense. But with China home to 20 of the world's 30 most smog-choked cities, with some 400,000 premature deaths a year linked to air pollution and with degradation a frequent cause of riots, the need to transform near-daily pledges to clean up the environment into action is becoming ever more acute. "Estimates maintain that 7 percent annual growth is required to preserve social stability. Yet the costs of pollution are already taxing the economy between 8 and 12 percent of GDP per year," Nathan Nankivell, a researcher at Canada's Department of National Defence, wrote in a recent report. In the Zhejiang town of Xinchang, it took a riot to shut down a local factory that had been dumping its waste into the river. The factory may have provided revenue to local authorities, but the question for residents was at what cost. "The situation has been better since the protest but of course there has still been a negative impact on us. Just look at the crops," said one resident surnamed Song, gesturing toward the poisoned fields from the window of her small shop. The Xinchang protest was one of three riots in Zhejiang alone last year over pollution. Across the country, China has earmarked $3.3 billion to clean up the Songhua River in the northeast, poisoned last November after an explosion at a chemical plant caused a toxic spill that contaminated drinking water supplies for millions. Economists vary on just how much environmental woes are costing. The World Bank estimates air and water pollution cost China about 8 percent of GDP. But different provinces may have vastly different costs. For example, in Shanxi -- China's top coal-producing province -- if environmental degradation and pollution were incorporated into GDP calculations, they would negate all growth for the past decade, a Deutsche Bank report cites officials there as saying. Despite the economic imperative, analysts say China's environmental leaders are likely to have a tough sell ahead of them to make Green GDP a meaningful policy. "It's a very good idea," said Environmental Defense's Zhang. "But the practicality of that and how applicable it is in local situations is something very hard to do."