Book Description

In this paper, Dasgupta, Wang and Wheeler analyze China's industrial pollution problem and the possibilities for significant improvement through policy reform. Their assessment is based on a large-scale econometric exercise, with data provided by China's National Environmental Protection Agency (NEPA). They focus particularly on two major determinants of changes in the pollution intensity (or pollution per unit of output) of industry: General economic reforms, and China's pollution charge system. Using their econometric equations for forecasting, they develop three future pollution scenarios under varying assumptions about policies during the next two decades: (1) Continuation of the economic reforms with no further tightening of regulation: They find that organic water pollution will stabilize in many areas, and actually decline in some. Emissions of airborne particulates and sulfur dioxide will continue growing, but at a much slower pace than industrial output. However, most of China's waterways will remain heavily polluted and hundreds of thousands of urban residents will continue to die or suffer serious respiratory damage from air pollution. (2) Continued reforms, plus 5% annual increases in pollution charges (maintaining the trend for water pollution charges since 1987): Organic water pollution will decline sharply enough to restore the health of many waterways; air pollution will stabilize or decline in most cities, saving many thousands of lives. (3) Continued reforms, plus 10% annual increases in pollution charges: This option will eliminate most of the organic water pollution from regulated Chinese factories, and induce major improvements in urban air quality. During the next two decades, Beijing and Chongqing alone will have about 40,000 fewer deaths from air pollution if this option is chosen instead of the pure economic reform strategy. Dasgupta, Wang and Wheeler conclude the paper with a detailed analysis of the benefits and costs of tighter air pollution control. For a representative Chinese city, Zhengzhou, they find that the optimum charge rate for sulfur dioxide emissions is around $90/ton -- fifty times greater than the current rate. Their analysis also suggests that air pollution control is a very cost-effective lifesaving option, yielding a social rate of return in excess of 3,000% for further abatement in large cities. At the current level of pollution control, they find that continued regulatory inaction amounts to valuing a Chinese worker's life at less than $US 500, a figure which is tragically low by any standard.