GDP that kills GDP (as well as people)

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An article appearing in The Economist last week, Don’t drink the water and don’t breathe the air (reproduced below), provides a commentary on the largely impotent State Environmental Protection Administration (SEPA) in China. The Deputy Director, Pan Yue, is one of the most outspoken Chinese bureaucrats you are ever likely to come across, but his dire warnings go unheeded, largely because SEPA does not carry much weight alongside the big Ministries.

Despite its best efforts, SEPA has been unable to secure support from the government to publish a green GDP because it was “not internationally accepted”. Interestingly, the National Bureau of Statistics (NBS) did publish one figure; namely, that environmental damage in 2004 cost 3.05% of that year’s GDP. Maybe this kind of statistic will resonate more deeply with the Chinese government than the number of deaths each year as a result of pollution. According to Pan Yue, 70% of China’s more than 2 million annual deaths from cancer are pollution-related.

THESE days China’s environmental bureaucrats know how to talk the talk. They readily admit that pollution is poisoning the country’s water resources, air and soil. They acknowledge that carbon emissions are soaring. If only, they lament, the government would give them the means to do something about it.

For all its green promises in recent years, the Communist Party has done little to build a bureaucracy with the clout to enforce environmental edicts and monitor pollution effectively. As long as they deliver economic growth without too much public protest, officials can still expect promotion, however polluted their areas.

Optimists see changes afoot. The State Environmental Protection Administration (SEPA), the government’s largely toothless watchdog, could soon be renamed and upgraded to a ministry. Some observers expect the rubber-stamp legislature, the National People’s Congress, to endorse the change at its annual session in March.

In an article last year two scholars argued that if SEPA were a ministry it might hold its own better in bureaucratic turf wars in which it is at present “marginalised”. SEPA’s weakness was evident last year during one of the country’s biggest recent environmental disasters, the choking of the country’s third-largest freshwater lake, Taihu, by toxic algae. The contaminants included emissions from small factories and crab farms along the shore. SEPA officials say they could do little: the crab farms fall under the Ministry of Agriculture, waste-water treatment plants under local governments and the lake itself under the Ministry of Water Resources.

SEPA is so weak that its officials admit it has little grasp of the impact of agriculture on water and soil pollution. The Ministry of Agriculture has discouraged it from gathering data even though, as one SEPA official sees it, Chinese agriculture pollutes as much as its industries. The country’s first national census of pollution sources is due to begin in February. The ministry is taking part in the two-month effort. But, famously secretive and protective of its bureaucratic territory, it is likely to drag its feet. Health officials would sympathise with SEPA. Their efforts to persuade the agriculture ministry to co-operate over livestock-related threats to public health, such as bird flu, have encountered stubborn resistance. And health already has a full-fledged ministry.

To impress its bureaucratic rivals, SEPA also needs a bigger budget. Officials have said that between 2006 and 2010 China will spend 1.3 trillion yuan ($180 billion) on environmental protection, an increase of more than 85% over the previous five years. But much of this is expected to be given to other agencies (the State Forestry Administration, for example, deals with stemming the spread of deserts) or to the local environmental-protection bureaus, which, being answerable to local governments, are crippled by conflicts of interest.

Little of the money, complains a SEPA official, is used to curb pollution. SEPA itself is so strapped that to finance one of its recent high-profile projects, an effort to calculate a measure of “green GDP” (GDP minus the cost of environmental damage), it begged for money from companies. The government, says an official, gave nothing. After three years of effort, including struggles with a highly sceptical National Bureau of Statistics (NBS), the project was abandoned last year. It did publish one figure: environmental damage in 2004 cost 3.05% of that year’s GDP. Last July the head of the NBS said the government had stopped using the term “green GDP” because it was not internationally accepted.

A shortage of money has similarly hobbled SEPA’s latest efforts to encourage greener corporate behaviour. These include last year’s “green credit” policy whereby state-owned banks are supposed to suspend lending to egregious polluters (SEPA circulated a list of 30 such companies in July). There is also a “green trade ” initiative, announced last October, that threatens polluting companies with suspension of their exports. Also being considered are environmental requirements for companies planning to list their shares publicly, and a tax on polluters. Resistance from local governments and powerful state-owned companies will make it hard to implement such measures.

What it lacks in resources SEPA tries valiantly to regain by appealing to public sentiment. Its deputy director, Pan Yue, is an outspoken green campaigner who happens to be a son-in-law of a famous former general, Liu Huaqing (such connections can be a big help in Chinese politics).

Last year officials reportedly asked the World Bank to remove estimates of pollution-related deaths in China from a report published jointly with SEPA. But SEPA’s website still shows a little-reported speech by Mr Pan in 2006 in which he said cancer experts believed that 70% of China’s more than 2m annual deaths from the disease were pollution-related. The World Bank had been planning to blame pollution for just 750,000 deaths from various causes.

Chinese officials were worried that the World Bank’s figures would cause unrest. But environmental awareness—and anger—is mounting anyway. Of complaints submitted to government departments, 13% relate to pollution, up from fewer than 6% three years ago. And SEPA officials say pollution-related disturbances are also becoming more common—51,000 in 2005 and more than 60,000 in 2006. Such protests are more likely than SEPA’s efforts to goad reluctant officials into action.