China Combining Environmental Concern and Economic Growth
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17 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com
Many lifetimes ago, I had the pleasure of advising the Master’s Thesis of a brilliant young man named Andres Edwards,
17 August 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com
Many lifetimes ago, I had the pleasure of advising the Master’s Thesis of a brilliant young man named Andres Edwards,
whose thesis has become one of the most important books of the sustainability movement: The Sustainability Revolution,
in which I was honored to be the first name in the Acknowledgments.
It was from Andres that I learned about the so-called “Three E’s” of Sustainability:
in its mainstream version, Environment + Economics + Equity;
in its more alternative formulation, Ecology + Employment + Equality.
Through this encounter via Andres, I learned there is no fundamental opposition
between Environment/Ecology and Economics/Employment –
leaving aside, for the moment, the aspect of Equity / Equality.
This is a key insight, as most discussion of environmental / ecological and economic / employment issues ASSUME – wrongly –
the two are necessarily in opposition to each other:
as the saying goes in the US, it’s tree-huggers vs. lumberjacks.
This is, of course, a totally non-productive way to approach the situation.
Indeed, the whole experience with Andres convinced me that it is absolutely imperative to COMBINE the Three E’s,
in whatever version you find most comfortable.
And while China has certainly had its problems in the area of environmental – not to mention occupational and product – safety,
that in the US, sadly, have lost almost all funding for the capital- and labor-intensive research and development stage,
that, while expensive, is absolutely crucial for the technological innovation that will – eventually – lead to “sustained” economic growth.
In this context, it’s encouraging to see that China’s Ministry of Industry and Information Technology quietly published a list last week
of 2,087 steel mills, cement works and other energy-intensive factories required to close by Sept. 30.
The larger initiative within which this takes place was announced earlier this summer by Prime Minister Wen Jiabao,
who promised to use an “iron hand” to improve his country’s energy efficiency.
And this follow-through on the rhetoric has a growing number of businesses are discovering that it feels like a fist.
Over the years, provincial and municipal officials have sometimes tried to block Beijing’s attempts to close aging factories in their jurisdictions.
These officials have particularly sought to protect older steel mills and other heavy industrial operations
that frequently have thousands of employees and have sometimes provided workers with housing, athletic facilities and other benefits since the 1950s or 1960s.
To prevent such local obstruction this time, the ministry said in a statement on its Web site that
the factories on its list would be barred from obtaining bank loans, export credits, business licenses and land.
The ministry even warned that their electricity would be shut off, if necessary.
The goal of the factory closings is
“to enhance the structure of production, heighten the standard of technical capability and international competitiveness
and realize a transformation of industry from being big to being strong,” the ministry said,
which is a MAJOR distinction that few countries – including, since the 1980s, the US –
have been able to make, either conceptually or in action.
The announcement was the latest in a series of Chinese moves to increase energy efficiency.
The National Development and Reform Commission,
the government’s most powerful economic planning agency,
announced recently it had forced 22 provinces to halt their practice of
providing electricity at discounted prices to energy-hungry industries like aluminum production.
The current Chinese five-year plan calls for using 20 percent less energy this year for each unit of economic output than in 2005.
But surging production by heavy industry since last winter has put in question China’s ability to meet the target.
The success or failure of China’s energy-efficiency campaign is being watched closely not just by economists,
who cite the campaign as one reason that growth of the Chinese economy has slowed down a little this summer,
but also by climate scientists, understandably concerned by the increase in pollution that has accompanied China’s remarkable economic growth.
China’s energy consumption rose so sharply last winter that
it produced the biggest surge ever of greenhouse gases by a single country,
as power plants burned more coal to generate enough electricity to meet the increased demand.
As China has become increasingly dependent on imported oil and coal,
its national security establishment has become more visibly involved in energy policy and energy security,
including efforts to improve energy efficiency.
Efficiency improved 14.4 percent in the first four years of the current plan,
only to deteriorate by 3.6 percent in the first quarter of this year, according to official statistics.
Mr. Wen responded by convening a special meeting of the cabinet in May to address the situation.
Energy efficiency was only 0.09 percent worse in the first half of this year than in the same period in 2009, according to statistics released last week.
Energy analysts said those statistics indicated improvement in efficiency in the second quarter
that nearly offset the deterioration in the first quarter,
although the government has not released separate figures for the second quarter.
Zhou Xizhou, an associate director for IHS Cambridge Energy Research Associates in Beijing, said that
the ministry’s new list of factory closings was a strong measure to improve efficiency.
But he added that China’s goal of achieving a 20 percent improvement by the end of this year compared with 2005
was “still a tall order for the rest of the year.”
The ministry said in its statement that the factories to be closed would include
762 that make cement, 279 that produce paper, 175 that manufacture steel and 84 that process leather.
The factories were chosen after discussions with provincial and municipal officials
to identify industrial operations with outdated, inefficient technology, the ministry said.
The ministry did not provide figures for the percentage of capacity to be closed in each industrial sector.
The ministry also did not say how many employees would be affected,
which shows how crucial it is to link ecological concerns with employment.
Closing factories is more palatable now than in the past
because a labor shortage in many cities has made it easier for workers,
particularly young ones, to find other jobs,
a dynamic we have discussed in detail in both Features and various In the News items.
The list of steel mills to be closed appeared to emphasize smaller, older mills producing fairly low-end grades of steel.
Edward Meng, the chief financial officer of China Gerui Advanced Materials, a steel-processing company in central China’s Henan Province, said that
the closing of such mills was consistent with the government’s broader goals
of consolidating the steel sector and pushing steel makers into the production of more sophisticated kinds of steel,
again pointing out how critical it is to link – rather than oppose – economic and environmental concerns.
The International Energy Agency in Paris announced last month that
China surpassed the United States last year as the world’s largest consumer of energy.
China passed the United States as the world’s largest emitter of greenhouse gases in 2006.
That milestone came earlier because of China’s heavy reliance on coal,
an especially dirty fossil fuel in terms of emission of gases contributing to global climate change –
again, a topic that we have examined in significant concept and detail.
In addition to the energy-efficiency objective in the current five-year plan,
a plan announced by President Hu Jintao late last year called for China
to reduce its carbon emissions per unit of economic output by 40 to 45 percent by 2020, compared with 2005 levels.
Carbon emissions are a measurement of a country’s man-made emissions of greenhouse gases like carbon dioxide.
Even if China meets its energy-efficiency goal this year and its carbon goal by 2020,
its total carbon emissions are still on track to rise steeply in the next decade,
according to forecasts by the International Energy Agency, cited in this article from the New York Times.
That is because of factors including rapid growth in the Chinese economy, growing car ownership and rising ownership of household appliances.
The relationship between economic growth and environmental degradation is, clearly, complex.
But the Chinese leadership – while obviously committed to maintaining a sustainable rate of economic growth –
is also CLEARLY aware that increasing prosperity MUST be accompanied by improvements in the overall environmental situation.
No one ever said such an achievement will be easy.
But of all the governments in the world, China’s is one of the few that – explicitly or not –
recognizes the absolute imperative of combining in a deeply integrated fashion environmental and economic concerns.
Now let’s see what can be done about the equality / equity aspect of those vital Three E’s.
David Caploe PhD
Editor-in-Chief
EconomyWatch.com
President / acalaha.com
