中国欧盟经理人协会 EU-China Managers Association

Tom Murley leads the renewables team at one of Europe’s most active private-equity houses. He tells Tan Copsey about finding finance in a recession, responding to regulation – and building turbines in the Swedish forest.

Tom Murley is a leading investor in the western European renewable-energy market, with extensive experience of both renewable and conventional energy projects. Working for HgCapital, a private-equity group in the United Kingdom, he has primary responsibility for a €303 million (US$389 million) fund for European renewable-power projects.




Tan Copsey: To start with, could you give me a sense of what you do?

Tom Murley: In 2002, HgCapital identified climate change and renewable energy as major investment themes. We researched these sectors and decided we wanted to invest in the deployment of the proven technologies – wind, solar, small hydro – on an industrial scale. We concluded that owning the physical assets would provide the best risk-adjusted returns for our investors. Our investors are primarily global pension funds, European, UK and American – very long-term capital that governments want to attract to this sector to build a low carbon energy future.

TC: Could you give me an example of a particular success story?

TM: The investment for which we have received the most recognition was Havsnas, the largest onshore wind farm in Sweden and through which we opened the Swedish wind-energy sector to real project finance. Havsnas has just come on line.

Virtually all Scandinavian power generation, renewable or conventional, had been owned by state-owned utilities – Vattenfall, Fortum, StatKraft. We went into a market that had no history of long-term bank financing for this kind of project. There was also a new support system - Sweden has a green-certificate system [a national trading scheme in which certificates proving that certain electricity comes from renewable power are bought and sold] – based on the UK model.

We had to analyse the green certificate market from the ground up, something which had not been adequately done before. We developed proprietary forecasts and a view of where pricing was heading. We hedged for the power in the Nord Pool market [this allows electricity producers and retailers to secure the price of a volatile commodity] Sweden is not like the UK where utilities will sign 15 year power-purchase agreement. One has to enter the Nord Pool market.

We had to put together construction of a very complex project with our partners. There are 48 turbines on this project in a very remote, forested location. We built 50 kilometres of internal roads, lay 35 kilometres of underground cabling and string 20 kilometres of above ground high-tension grip cabling. We built a major substation connecting the high-voltage grid and put up 48 turbines, each one of which has a 700 tonne concrete foundation. All in the middle of the forest, in the middle of Sweden, where things like the medevac [medical evacuation] helicopter, should someone get injured, is two hours away. It is significant infrastructure in a very remote location.

A lot of people think that building wind farms is easy. That it is kind of “plug and play”. This is on a scale that is probably as complex as you get until you move into offshore wind. We had to put all of those elements together and bring banks to a market that had never known project financing and we did that in about four months. It really was innovative, ground-breaking financing. The project had a two year construction period and was handed over on July 9 on budget. It is operating and we’re making money. It is a real example of how the renewables industry is moving from a small industry to a larger, much more sophisticated industry.

TC: These are very difficult economic times and the upfront costs for renewable energy are much larger than traditional forms of energy. How do you finance these projects in a recession?

TM: In our view, we finance these projects the same way as when we’re not in a recession. What we have always focused on are the highest quality projects. We don’t take technology risks, we’re not going to use the latest wind turbine. We seek to invest in better resource. So we don’t do solar in Germany. They have a wonderful feed-in tariff, but there’s not that much sunshine. We believe the long-term value is with the resource, whether it is wind, sun or water. So we look to invest in better resources and put the best possible equipment on that.

What we’ve always done is to work to fairly conservative financial and contractual structures that mitigate and properly allocate risk. So, for example, in Sweden when we were building the large wind-farm, the main construction crane – 700 tonnes, 120 metre boom-- basically fell off the road. Whether it was a driver error or whether the road collapsed underneath it, no one really knows. There are only three such cranes in Europe. We had structures with a contractor so we got one of the replacement cranes on site within three weeks. This is important because you can’t erect these turbines past December in Sweden. You have to do this in the summer and the fall months.

For that quality proposition there has always been, and there always will be, a banking market.

TC: Obviously government policy and regulation is very important in this sector. How does that affect what you do?

TM: The entire energy sector – renewable, conventional, oil, gas, nuclear – it’s all policy driven and is subsidised. If you’ve been a long-term player in this sector you realise that you have to incorporate regular interface with governments and politicians. Policy is always evolutionary, so the changes we’re seeing today don’t particularly bother me.

You have to take a step back and say what is the purpose of the current renewable energy policies and low-carbon policies? It is twofold. First, to give renewables a share of the market and growth space, while we appropriately price conventional electricity. Second, to try to bring this industry to commercial scale so we can reduce its costs and it can become competitive. When you price in the true cost of conventional power, and then you match that with driving down the cost of renewable power, at some point the two will meet and the technologies will no longer require subsidy.

That will still take a long time, but if you take a look at the solar PV sector, for example, we’re actually seeing success. Germany, Spain and to a lesser extent Italy, said they wanted a solar PV industry. They wanted the jobs, the manufacturing, they wanted the scale, they wanted more of this on the grid. So what did they do? They put out an incentive. What happened was the industry responded brilliantly. The PV industry dramatically increased manufacturing capacity and efficiency over the last few years. We are seeing thin-film. We are seeing greater efficiency in crystalline panels. All of that has contributed to a 60% drop in the price of solar panels over the last two and a half years. It is probably going to drop another 20% to 30% over the coming two or three years. And in that scenario it is absolutely appropriate for governments to start reducing the solar tariff because the upfront capital cost has been halved. This is how this policy is supposed to work.

TC: You have experience in energy markets around the world. What’s different about investing in Europe in comparison to the United States and China?

TM: Let’s take the United States and western Europe versus China, Latin America and emerging markets. Europe and the United States offer a history of legal enforceability of rights, stability of regulation, an openness of markets to foreign investment and a respect of foreign investment that has not always existed in other markets. Clearly some are getting better. China has done things before that have been harmful to foreign investment. In Latin America, promises to maintain tariffs to foreign investors in the electricity sector have failed to materialise at certain times.

What I can really contrast are Europe and the United States. The United States likes to promote investment through tax-breaks and this has been particularly true in the renewable sector. So the support scheme comes in the form of tax credits and right now it is also coming in the form of grants because there are fewer people who can use the tax credits.

In Europe the support comes above the line – we get paid more for the electricity. In the US the support comes below the line – this means you get paid the same amount for electricity but they take away the tax burden for you.

What that means is the United States, because of the way the tax credit system works, attracts a smaller pool of potential capital. To take advantage of the tax credit, you have to be a US income tax payer and have taxable income to offset the tax credit. This is why large financial houses like AIG, John Hancock or even Goldman Sachs were owning wind-farms – because they would take the tax credits and offset their investment banking or insurance income with the tax credits.

But it also means that large parts of the institutional investor market, including pension funds, can’t invest in America because they don’t pay any income tax and so a tax credit isn’t any good to them. Foreign investors typically have very little US income so this system also doesn’t work particularly well for them. In Europe, because this support comes in the form of enhanced revenues, you can have a much broader investment pool. So you have pension funds, individuals, corporates, utilities. Europe is able to access a much deeper and broader pool of capital.


Tan Copsey is development manager at chinadialogue.

Tom Murley leads the renewable energy team at HgCapital.

Homepage image from HgCapital

In its quest to build a low-carbon economy, China is seeking ways to channel cash towards green schemes. Zeng Gang outlines the latest developments.

History teaches us that financial support is an essential ingredient in technological innovation and economic transformation. Finance – be it the funds required to facilitate technological invention or the rewards reaped by that invention – spurs the changes on. Meeting China’s emissions-reduction targets and developing a low-carbon economy will be no different. Recent data indicates that financial institutions are involving themselves in the development of sustainable technology. Meanwhile, the growth of carbon markets has provided some incentive for the development and application of that technology and attracted numerous businesses and financial institutions. This financial innovation is playing an increasingly important role in efforts to build a low-carbon economy.

Broadly speaking, financial innovation in the low-carbon sector is concentrated in two areas – green credit in existing markets and innovation based on the new carbon markets.

Let’s take the first of these. Many energy-saving projects and research and development activities – in renewable energy, for instance – are in line with national industrial policy and have a certain potential for profit, at least in the presence of mechanisms for distributing risk. Financial institutions are therefore happy to participate by providing financial backing. Commercial banks are currently the main participants in this sector, giving rise to the concept of “green credit”. The commercial nature of this kind of credit – it carries an expectation of profit – makes it more sustainable.

The second is linked to the emergence of carbon markets. These markets have been designed so that cutting carbon emissions (while leaving the scope of production unchanged) is no longer just a company’s duty to society – it is a profit-generating capability. This provides an incentive for firms to use low-carbon technology for manufacturing, and has therefore created demand for a range of related financial services.

This, in turn, has attracted financial institutions. Currently, carbon exchanges, government funds, investment banks, private-equity firms, commercial banks and insurance companies are active in the sector, thereby promoting innovation in financial products and services (such as trade in carbon derivatives and institutional financial products linked to carbon markets). As of the end of 2008, carbon markets globally were worth US$120 billion (814 billion yuan). Within just a few years, this has become a major commercial sector.

Meanwhile, in China, energy saving, emissions cutting and carbon–intensity reduction have been identified as future strategic choices, and good progress has already been made – including in financial-sector innovation. Some institutions have explicitly recognised the responsibility of corporations to save energy and cut emissions, while actively participating in lending to and investment in environmentally friendly projects.

There has also been substantial progress in the development of financial structures related to carbon trading. First, some cities have set up environmental exchanges as trial carbon-trading platforms – helping existing firms to participate and set prices in international carbon markets as well as acting as early trials for a localised carbon-trading system.

Second, many investment banks and private-equity firms are involved in financial and intermediary services related to clean-energy mechanisms, an area that has advanced significantly in the past few years. In 2008, Certified Emission Reductions (credits issued for emissions cuts achieved by projects under the clean development mechanism) originating from China accounted for 84% of the global total – demonstrating the huge potential and competitive advantages China has in the development of the low-carbon economy. Third, some banks have started to experiment with “green credit” and structured products linked to carbon markets, making it easier for individuals to invest.

Despite this progress, it should be noted that development of this sector is still at an early stage, and further improvement is needed. First, there is a lack of specific norms from the government for funding energy-saving and emissions-reducing projects. There are blank spots in the definition of these projects, guidance on management of loans and policy support. This limits the ability of commercial banks to develop related services. Currently, the authorities are working on a list of eligible industries and developing policy on credit for these – and this will play a major role in the development of green-credit offerings by Chinese commercial banks.

Second, in many sectors, green credit is not yet capable of creating sustainable profit – and so solely relying on commercial loans will not work. That is why, despite strong calls for the development of green credit, this type of finance still only accounts for a tiny proportion of the overall market. In the long term, there is a need for policy finance, non-banking finance and other methods to complement the existing commercial channels and distribute risk, creating a layered green-credit system.

Third, the inherent complexities of emissions trading mean that its implementation involves adjustments in overall national strategic policies, and is therefore unlikely to take place on a large scale in the near term. It is more likely that it will remain restricted to voluntary reductions. This means that, for some time into the future, innovation in carbon trading in China will be mainly aimed at overseas trading systems (currently that of the European Union, and the proposed cap-and-trade system in the United States). International financial institutions, including different international investment banks and private equity investors will continue to dominate the sector.

Climate change is one of the biggest challenges humanity faces – and perhaps also the biggest opportunity for development. The technological innovation and structural economic changes it is triggering may provide a route out of the global economic slump and act as a motivating force for a return to sustainable growth. And the financial system has both the duty and ability to play a major role in this. In China, the banking sector is by far and away the biggest player in the financial system. Therefore, guiding commercial banks towards participation in green credit, and building a layered and sustainable green financing system around that core, should be the focus of future development of green financing in China.


Zeng Gang is head of the Banking Research Office at the Chinese Academy of Social Science’s Institute of Finance and Banking. 

Homepage image from artemuestra

Hu Angang is a leading Chinese economist, government advisor and advocate of low-carbon development. He talks to Isabel Hilton about his country’s path to fiscal success – and how it can be painted green.

The distinguished Chinese economist, Hu Angang, is noted for his radical approach to economic reform and, more recently, to the political economy of climate change. On a recent visit to the United Kingdom, he explained to chinadialogue how he has been examining China’s past – including the relatively unfashionable ideas of Chairman Mao – to help him formulate policies for China’s future. 

“I wanted to understand why Mao’s first period, from 1949 to 1956, was a golden age,” he said. “Why this period was the mother of his later failure and how Mao’s failure was the mother of Deng Xiaoping’s success. I wanted to explain why China took off for 30 years in the second golden age after 1978. If we want to maintain this growth for the next 30 years, we have to change the model now. We can’t get locked in to the pattern of the past.”

In looking at China’s future, Professor Hu has adopted one of the more famous sayings of the late leader, Deng Xiaoping: it doesn’t matter if the cat is black or white, as long as it catches mice. Deng first used this aphorism in the early 1960s to contest what he considered Mao Zedong’s erroneous policies. He did not prevail then, but deployed the saying to more effect after Mao’s death, successfully breaking China’s attachment to Maoist dogma and launching his economic reforms. Now Hu is adapting Deng’s words to advocate a new set of reforms.  

“Under Mao the cat was red. Under Deng the cat was black. Now we need a green cat,” he said. “We needed different coloured cats for different moments.”

Hu draws lessons from both the successes and failures of the past in thinking about China’s new development path. Even today, he urges his students to read Mao, as he himself was obliged to do during the Cultural Revolution. “I think his ideas were highly suited to China’s culture and background,” he said. “I urge my students to have a dialogue with Mao.”

In 1956, he explained, when Mao was preparing the second five-year plan and wanted to break with the Soviet model, he thought about how to reconcile the needs of China’s coastal and inland areas, or agriculture and industry. “At that time, we also looked at the relationship between population and development, between resources, energy and development. The key idea is how to find a good road for China’s modernisation and to understand what kind of character, what kind of ideas are suited to China’s real situation.”

Hu is a prominent advocate of a new, green economy and of a pro-active approach to reducing carbon emissions. If Mao and Deng were alive today, he believes they would approve of his ideas. “If Deng was thinking about climate change, the biggest challenge we face today, I think he would come up with similar ideas to mine. We need to create an international environment that is not only peaceful but green,” he said.

The international context, he believes, has been crucial to China’s success since 1978, allowing China to catch up with more developed countries. Now, China has to think about innovation. But to achieve its green potential, he believes China needs a better understanding of the relationship between altruism and self-interest.  

“I think China owes everything to the peaceful international environment over the last 30 years,” he said. “China quickly became the biggest beneficiary of globalisation. Today the equivalent of joining the World Trade Organization [WTO] is the international effort to reduce carbon. If China joins in, it will be successful in five to 10 years.”

Today, Hu believes that the green revolution is capturing the Chinese imagination. “Private sector CEOs are very interested in the new green market opportunities – green energy, green building and so on,” he explained. “It’s the new green game and you will lose if you don’t change your colour. If per capita GDP rises to US$3,000 to US$4,000 [around 20,000 to 27,000 yuan], it will stimulate green demand and green consumption; when China gets out of poverty to middle income level, it will naturally produce a demand for green consumption.”

Hu argues that it is in China’s interest to take a proactive role in carbon reduction. Acknowledging that China’s per capita income and emissions are lower than Western countries, he believes that the total effect is equally important: “China’s rapid rise has produced two important effects – the positive contribution to global growth, trade and poverty reduction, which was very successful. But there were also strong, negative externality effects. China, as a big beneficiary of globalisation, needs to take responsibility for the global and reduce the negative effects.”   

China came under fierce international criticism for its approach to global climate negotiations in Copenhagen in December 2009, as Hu had predicted it might. “China was at a crossroads: either active cooperation with developed and developing countries or risk being the object of attack from both. This was my warning. As you know, after Copenhagen, that is what took place.” But despite the international criticism, he believes China’s leaders are taking the domestic challenge seriously. “I think the next five year plan will be based on the green development principle, and if China follows this path of green development it will make a big global contribution.”

The disparity between China’s international and domestic efforts, he thinks, is partly explained by “information asymmetry” in China’s foreign policy, a product of the relatively closed manner in which foreign policy is formed in China, which makes it harder to persuade those behind it to take climate and environmental problems as seriously as they merit: “Since 1978, debates on economic policy have been more and more transparent, with more and more experts involved. But foreign policy remains relatively closed, without expert involvement. It’s a black box.”

Hu stresses the importance of reliable data to make his case. “Data on things like GDP in China is authoritative and reliable,” he said. “But we only set up solid data for energy consumption three or four years ago, when China set its 20% energy intensity reduction target. The next step, based on the energy account, should be to set up a carbon emissions account.”

With both energy consumption and emissions accounts, he argues, policymakers can calculate green GDP for different sectors and regions to illuminate policy choices. “If we compare Shanxi [northern China] and Guangdong [southern China] for instance, we find that Shanxi’s energy consumption has a very high ecological cost because it is based on coal. Guangdong has to import energy, so the price is very high, which makes it much more energy efficient,” he said. “In 2008, Guangdong’s energy consumption per unit of GDP was 0.5715 tons. In Shanxi it was 2.554. That’s a huge difference, with very strong implications for policy. We can use taxation to stimulate efficiency.

“We need to use both cap and trade and carbon tax. Last year, we imposed a carbon tax on gasoline for the first time and it was very successful. Car numbers increased by 40%, but gasoline consumption increased by just a few percentage points and diesel consumption fell. At the same time, Beijing subsidised public transportation and increased parking charges, so people were buying cars but using them less.” 

The most effective incentives, he believes, are VAT on fossil-fuel heavy electricity at 17% and no VAT on clean energy, to acknowledge the positive externalities of renewable energy and penalise power generation that produces big negative externalities in the form of carbon dioxide and sulphur dioxide. 

As well as taxation, Hu would like to see China establish the world’s biggest domestic carbon market within the next five years: “The forest sector is the biggest carbon reducer, and electricity generation the biggest carbon source. How do you get them to make a deal? The domestic market has huge potential and we should use the market as a driver to give a strong incentive to entrepreneurs to develop renewable energy and clean-coal technology.

“It’s a two handed approach – government and the market. We hope that China will be a green innovator and, as a low cost manufacturer, will quickly become an exporter. For example, from 1995 to 2000 China was a net importer of mobile phones. Now we are the number one exporter.”

China needs to encourage indigenous green technologies but should not use this policy to exclude foreign firms from the Chinese market, he said. “Multinationals took a prominent role in technology transfer in the past, so China quickly became a major exporter and producer. We need to keep our policies open, but on the other hand we need to encourage domestic innovation and knowledge creation based on China’s real situation.”

Both foreign and domestic companies, he argued, will need to become green to maintain their market share. “For example, the CEO of Motorola  told me that Motorola’s share of the Chinese domestic market has declined and that they need to give the Chinese consumer smart, green and safe technologies to maintain it.”

Hu believes that some foreign companies have a good demonstration effect in China, though promoting fair competition to benefit from this demonstration effect is more complex. 

“Sometimes there are issues, frankly, with intellectual copyright,” he acknowledged. “But sometimes local competitors are very smart about innovation. Baidu, for example, has more than 2,000 engineers and scientists doing research. Google only has a few hundred and it can’t compete in the local market. Nokia has a huge research and development centre, not just in Beijing but regionally, because in China different regions have different cultures and demands. Foreign companies have to adapt to the market.”

Hu has no doubt that the forthcoming 12th Five Year Plan will set China on a new, green pathway. He points to his 2007 book, China in 2020, as the blueprint for a society that pays attention to health and lifelong learning as well as to such constraints as China’s energy shortage.

Hu is also optimistic about the perennial problem of aligning central policy with regional, local or provincial implementation. He believes that China’s notoriously wayward local authorities are increasingly aligned with national objectives, closing the worrying gap between China’s central policy and local implementation. Officials in such cities as Beijing and Nanjing generate their own indicators to complement the national plan and his research indicates that the overlap of local and national development indicators under the 11th Five Year Plan had risen to 85%, from less than 70% under the ninth plan. 

“It allows local government to realise both national and local targets,” said Hu. “These are Chinese characteristics – two hands and two legs! It explains why China is able to walk faster and remain stable.”


Isabel Hilton is editor of chinadialogue

Hu Angang is one of China’s best-known economists. He is professor at the Chinese Academy of Sciences and Tsinghua University and has worked as the chief editor for China Studies Report, a circulated reference for senior officials.

Homepage image from Tsinghua University

Since groundbreaking green finance laws were launched in China three years ago, the country’s banks have made admirable efforts to clean up lending practices. But, says Adina Matisoff, transparency remains weak.

Three years ago this July, the Chinese government introduced unprecedented financial regulations as a means to harness the power of China’s commercial banks to curb the country’s severe environmental degradation. The Green Credit Policy, created by the China Banking Regulatory Commission (CBRC), The People’s Bank of China and State Environmental Protection Administration (now the Ministry of Environmental Protection or MEP), was a bold idea to prohibit lending to dirty companies; and one that few governments internationally have had the power or will to pull off.

With this tool, Chinese banks have made strides in the development of their environmental policies and have started to see the green results of their implementation measures. And yet poor transparency of lending policies and practices at Chinese banks is holding the sector back from meeting the environmental-protection demands of government and society.

In 2008, I co-authored a report for Friends of the Earth and BankTrack, the international network of NGOs monitoring the operations of the private financial sector, examining the state of environmental policy and practice in China’s banking industry. We noted that the Green Credit Policy was “an entirely new way of addressing environmental degradation in China” that was “proving to be the most powerful factor spurring and influencing sustainable finance in China today”. 

Since that time, Chinese NGOs have taken up the issue of sustainable banking in China, adjudicating the first-ever “Green Banking Innovation Award” as part of the Economic Observer magazine’s annual banking awards in 2008 and 2009. In March this year, Green Watershed and eight other groups collectively issued the first Chinese NGO benchmarks of the Chinese banking sector. Their “Chinese Banking Sector Environmental Record (NGO Analysis)” examines the environmental performance of 14 Chinese banks listed on Chinese stock markets in 2008 (complete 2009 data is still unavailable).

Yu Xiaogang, the report’s lead author, explains that the study takes into consideration “national conditions” as well as the fact that the concept of sustainable banking is relatively novel in China. The report highlights the growth of green finance education within the banks, which, Yu notes, is key to creating a corporate culture of sustainability among lenders and clients. For example, Industrial Bank brought in a green finance trainer from WWF before adopting the Equator Principles (EPs), a voluntary standard for project finance modelled on the International Finance Corporation’s (IFC’s) environmental and social policies. And Industrial and Commercial Bank of China conducted research on the EPs in cooperation with the CBRC and MEP. However, many of the banks polled for the study did not disclose what, if any, learning activities they had carried out on green finance, making it difficult to tell how deeply awareness of the subject has penetrated staff and client networks. 

The report gives recognition to banks that have stepped up lending to energy-saving projects, such as a biomass power generation project in Shandong, east China, financed by Industrial Bank, and a waste heat generation project in Hunan, south China, which was backed by Bank of Beijing and named as one of the country’s top ten green credit projects by the 21st Century Business Herald. The NGOs also saw progress in the development of measures to cut lending to environmentally harmful projects. Some of the banks assessed had introduced procedures before and after loans are disbursed to better monitor or restrict lending to China’s dirtiest companies, such as those active in construction or chemical production. ICBC and a handful of other banks adopted the “one-ballot veto”, which is a catchy name for making environmental compliance a prerequisite for credit.

Unfortunately, the report found that these measures were not yet advanced enough to prevent lending to risky projects. China Merchants Bank, China Everbright Bank and others still lined up to finance the Xianglu Group in its plans to build a petrochemical plant in Xiamen that would produce 800,000 tonnes of highly carcinogenic chemicals each year within a stone's throw of residential areas. ICBC and several of its peers still lent to Huaneng Group and Huadian Corporation, both of which are involved in large, controversial hydropower projects on the middle reaches of the Jinsha River in northern Yunnan. Huaneng and Huadian were sanctioned by the MEP in June 2009 for severe violations of national environmental-protection standards, including constructing dams without MEP-approved environmental impact assessments. Without more information from these institutions on how they implement the “one-ballot veto” and other policies, we are left scratching our heads as to how Xianglu, Huaneng and Huadian slipped passed the banks’ checks.

But some banks are eager to point out that they have had success in reducing lending to energy-intensive and polluting projects and companies, and are demonstrating that with hard numbers. China Construction Bank, for example, exceeded its own expectations by cutting lending to companies in the cement, steel and other energy-intensive and polluting industries by 120% on the figure planned for 2008 and its year-on-year reductions far surpassed those of any of its peer banks in China. ICBC cut almost 50 billion yuan (US$7.4 billion) in loans to dirty industries in 2008, which was 70% better than the previous year. Again, however, disclosure was sparse. More than half the banks included in the study failed to provide any data to demonstrate their efforts to cut lending to dirty industries. And those that did supply the relevant figures seldom did so as a percentage of their total lending. 

This stark absence of data highlights the need for better disclosure of information on policies, bank-wide performance trends and projects. Yu Xiaogang notes that, “Information disclosure from China’s banking sector is a recent phenomenon, and the content of disclosed information is still very limited… key information may be hidden, especially the environmental and social impacts of specific projects of special concern to the public.” As Chinese citizens pay the price for projects such as the Xiamen petrochemical plant and Jinsha hydropower dam, society is demanding greater scrutiny of, and transparency around, corporate behaviour.

In comparison, the availability of environmental and social information is a decisive factor in the assessment of international banks. BankTrack’s “Close the Gap” benchmarking report of 50 leading global banks, released in April 2010, only rated publicly available bank policies in recognition of the importance of making open commitments and accepting societal supervision. Of the four Chinese banks included in that report – ICBC, Bank of China, China Construction Bank and Industrial Bank – only the last provided publicly available data on which it could be ranked. As a result, the cumulative showing of Chinese banks was feeble amid the field of international competitors. Commenting on the results, Jora Wolterink, coordinator of the report said, “The overall quality of policies still leaves a lot to be desired. We hope this report encourages banks to continue this process, and to disclose more information on their policies.”

The Chinese banking sector has, however, shown its potential as a sustainability leader. In December 2009, Industrial Bank – the first bank to adopt the Equator Principles in China – disclosed information on its first Equator project in a manner no other Equator bank has ever done. The issuance of this public notice acknowledged that the lending decisions of Industrial Bank are important to society and that Industrial Bank is committed to promoting good environmental governance in this project.

Three years after the introduction of the Green Credit Policy, Chinese banks should be commended for their efforts to implement the national policy. These are their first steps towards the transformation of the country’s economic development model in the interests of a cleaner environment. Now it is up to these banks to take the next step towards meeting the environmental-protection goals of the government and the expectations of society by publicly disclosing information about their environmental commitments and lending practices.


Adina Matisoff is the China sustainable finance analyst for Friends of the Earth in the United States. 

Homepage image by Track01 shows a protest against Xianglu Group’s petrochemical plant in Xiamen.

China’s commercial banks are making strides in domestic green finance but failing to show the same commitment abroad. In the conclusion of her article on sustainable credit, Adina Matisoff calls for new standards.

In the three years since the Chinese government introduced the Green Credit Policy, progress has been made in sustainable finance on China’s home front. While green finance is gaining traction domestically, however, there are no such policies governing the investments of Chinese commercial banks beyond the nation’s borders. This is the time, as China’s financial powerhouses are increasing their overseas transactions and grappling with the associated environmental and social risks, to institute such policies.

Up to now, Chinese commercial banks have not played an influential role in financing Chinese business activities abroad. Instead, Chinese policy banks have filled this financing space, often with deals arranged at the highest political level. For example, China Export-Import (Exim) Bank recently loaned the government of Ecuador US$1.68 billion (11.38 billion yuan) to finance Sinohydro’s construction of the Coco-Coda Sinclair hydropower dam, and China Development Bank provided a US$30 billion (203 billion yuan) line of credit to China National Petroleum Corporation for the oil giant’s global expansion. 

However, not all overseas investments are on such a large-scale or so complex. In cases where the Chinese government is not directly involved, Chinese commercial banks such as Industrial and Commercial Bank of China (ICBC), China Construction Bank or Bank of China are increasingly willing to step in, and hence better compete with their international peers. “We are no HSBC or Citi,” says Xiao Shaolin, head of China Construction Bank (London), “But we are following our clients as they go global.” 

This is especially true in services such as financing the outward mergers & acquisitions (M&A) of Chinese companies, where the input of commercial banks is making possible more deals like China’s Minmetals’ purchase of a US$1.2 billion stake in Australia’s OZ Minerals in 2009. In late 2008, the government introduced regulations allowing China’s commercial banks to help Chinese firms acquire companies abroad. Since then, such deals have seen a boost. According to Cai Ersheng, a vice-chairman at the China Banking Regulatory Commission, Chinese commercial banks loaned Chinese companies US$400 million (2.7 billion yuan) in the first five months the government allowed them to carry out such transactions. According to financial analysts in Beijing, this helped outward M&A deals account for close to 25% of all M&A activity in the first three quarters of 2009, compared with just 8.5% in 2007. But, says Cai, “Improving risk management remains a key challenge for the healthy development of merger and acquisition loans.”

Despite domestic progress, the three top banks mentioned above and other Chinese commercial banks do not yet have policies to address the environmental and social risks of their overseas investments. In contrast, China Exim Bank’s “Guidelines for Environmental and Social impact Assessments of the China Export Import Bank’s (China Exim Bank) Loan Projects” provides a basic synopsis of how environmental and social issues are taken into consideration by the institution and how concerns are addressed. It highlights that host country laws must be followed, impact assessments must be conducted and that the bank has the right to investigate environmental concerns at any point during the lending cycle and call in loans on environmental grounds if need be.

The policy’s eight paragraphs pertaining to overseas investments are far from comprehensive, but have shown potential to deter environmental and social risks abroad.  In 2008 China Exim Bank was considering financing the China National Machinery Export-Import Company to build the Belinga Iron Ore Mine in Gabon. This project was a favorite of Gabon’s late president, Omar Bongo, but part of the project was to be built (illegally) in Ivindo National Park, which, according to Marc Ona of the Gabonese environmental organisation Brainforest, is home to “the most spectacular waterfalls in Central Africa… [that] have become the symbol of nature conservation in Gabon.”

When presented with information about this project’s violations of Gabonese laws and negative impacts on the environment and local communities depending on its natural resources, China Exim Bank announced that it was freezing financing on the project until the results of environmental impact assessments could be verified. In the absence of China Exim Bank’s financing, the detrimental project stalled.

Without even basic policies to address environmental and social issues abroad, commercial banks are ill equipped to address similar risks in other international deals. The Rio Blanco mine in the mountainous Piura region of northern Peru is one project that deserves more careful environmental and social consideration by Chinese banks. Bank of China, China Construction Bank and ICBC made it possible for Chinese copper miner Zijin to buy this mine and its other global projects. Zijin bought the mine from UK-based Montericco Metals in 2007 amid allegations that the mine’s management tortured local community members who opposed the scheme. 

Zijin has had its own issues with the project. Peruvians opposed to the mine say it will pollute the already meagre water resources used for farming and drinking in this rugged highland. As a result, says Javier Jahnke from the Ecumenical Foundation for Development and Peace in Peru, “Polluting this area could bring about an environmental disaster for the entire region.” There have already been breaches of Peruvian environmental laws, for which Zijin was fined, and local consent to operate the mine – required by Peruvian law – was never obtained. Jahnke and other Peruvians concerned about the project wrote to Zijin’s financiers earlier in 2010 asking for a review of the scheme, but have not received a response. They are not aware of any measures the company or banks have taken to address the environmental and social risks that threaten the communities of the Piura region.

Citizen groups in Gabon, Peru and other countries on the receiving end of Chinese ventures have made suggestions for how to improve Chinese investment methods in their countries. High on some of their lists has been respecting local laws, local land and the decisions of local people. Implementing those concepts would most likely include environmental and social impact assessments, environmental planning, community development and other measures. Better communication and engagement with civil society, especially local communities, could also inform project decisions that impact on the local environment and people and diffuse possible tensions.

If Chinese banks adopt environmental and social standards such as these in their overseas lending systems, they would be able to help companies such as Zijin avoid or mitigate these project risks. The Chinese government, which has helped banks address environmental and social issues at home through the enactment of the Green Credit Policy and other measures, should work quickly to develop similar guidelines and supervision for banks in their overseas financing decisions. This would be a new take on the international model, where voluntary standards such as the Equator Principles, preferred by banks, have been the norm. However, it would follow the precedent set by the Green Credit Policy domestically.  There are rumors that China’s Ministry of Environmental Protection, Ministry of Commerce and Banking Regulatory Commission are already in the process of developing environmental guidelines for Chinese overseas investments; however such has been the talk for years, with no a draft or timeline yet publicly released.

As Chinese commercial banks follow their corporate clients overseas, developing environmental and social standards for lending abroad – like they are starting to do domestically – could keep the related risks at bay and demonstrate commitment from China to sustainable finance globally. The Chinese government should lay the framework to bring responsible Chinese investments abroad to fruition as soon as possible. 


Part one: Progress at home

Adina Matisoff is the China sustainable finance analyst for Friends of the Earth in the United States.  

Homepage image by Lengai101 show the Kongou falls in Ivindo National Park, Gabon.

Three reports on the leaked emails of British climate scientists allow a calm perspective on last year’s media storm and bring the real problems of global warming back into focus, says Øyvind Paasche.

The bitter controversies swirling around the research findings of and communication between climate scientists seem to have reached a kind of turning-point in mid-2010. After the drama (and even near-hysteria) of the so-called “climategate” affair surrounding the leaked emails of scientists from or connected with the Climatic Research Unit at the University of East Anglia, a number of reports have been published that enable a calm perspective on a bewildering storm.

These reports also make possible a more measured view of the role of the other institution that has been at the centre of the disputes of 2009-10: the Intergovernmental Panel on Climate Change (IPCC), the United Nations body charged with producing “fair, comprehensive and objectively produced assessments of climate change”. This article offers the view of one working climate-change scientist on what lessons have been learned and the way forward. 

The fourth and latest assessment report (AR4) of the IPCC was released in 2007. It documents the many shifting scientific frontiers of climate change – those dealing with the past, the present and the future. Soon after it appeared, the panel was awarded – jointly with Al Gore – the prestigious Nobel peace prize. At the time, it seemed that a profound shift was underway in public acceptance of the dangers of climate change and the urgent necessity of taking action. Many, myself included, believed that this was a historic moment; at last, politicians worldwide would seriously address the carbon dilemma.

Two years later, the hope was in ruins. The long-awaited Copenhagen climate-change summit (CoP15) in December 2009 found representatives of the United Nations’ attending 192 member-states unable to reach a meaningful agreement. The expectations there were high, the desire among the delegations and the myriad of NGOs palpable. But the gathering ended in failure.

What made this outcome so disappointing was that the science had delivered. Indeed, in the midst of this major event it was hard not to feel pride in belonging to a scientific community that had produced the data and the knowledge that, in turn, had set the agenda and, in effect, had mobilised all these people. It was the science that had persuaded decision-makers and the public alike – at least on the level of rhetoric and opinion polls – that the carbon-fuelled economy must be replaced by a greener, environment-friendly model. But in Copenhagen’s aftermath, it was the science, and the IPCC, that took the hardest battering.

If the publication of AR4 was a moment when the doubters and deniers of climate change appeared to have gone quiet overnight, the prelude and aftermath of Copenhagen was the opposite. Three weeks before the summit, reports began to circulate that thousands of emails written by and to climate scientists working at the Climatic Research Unit (CRU), several of whom contributed to the IPCC’s report, had been hacked and distributed on a publicly accessible website.

The media-frenzy that ensued, in print and cyberspace alike, buzzed with allegations of flawed science, even fraud. Many seized the opportunity once more to promote the idea that global warming is a hoax and that the evidence-based documentation of a rapidly changing climate is easily explained by natural variability. A sudden and overwhelming wave of hostility defamed not only the CRU scientists but the climate-science community as a whole.

The “scandal”, the actual content of which diminished the closer the materials at its centre were inspected, left both national politicians and international agencies frozen when a robust response was needed. Amid the febrile atmosphere after the breakdown of the Copenhagen conference, the IPCC itself – the heart of climate-change science’s legitimacy – became the perfect target.

The damage is, even at this stage, hard to quantify. But it may be that the deepest blow of the “scandal” (at least from the point of view of many scientists involved in producing research on the physical-science basis of climate change for the United Nations) is to have drawn attention away from the science itself.

For none of the revelations, including the small mistakes noted in IPCC reports, have altered the science of climate change. Humans’ role in explaining global warming – the global temperature effect that carbon dioxide has when released into the atmosphere, the ongoing acidification of the oceans, the importance of reducing carbon emissions, the receding of Himalayan glaciers – the big picture and even the small ones (notwithstanding any citation errors) are as in need of attention as ever. Yet the reputation of the climate-science community has been tainted, and with that the trust of the public has diminished.

As the weeks of accusation and denunciation receded, three professional groups were appointed to investigate the facts behind “climategate”. All have since reported:

* a British parliamentary committee, the House of Commons’ science and technology committee, concludes that the attention devoted to the CRU scientists in the aftermath of the email theft was largely misplaced, in its report, “The disclosure of climate data from the Climatic Research Unit at the University of East Anglia”, published on March 31, 2010.

* an independent science-assessment panel chaired by geologist Ronald Oxburgh and consisting of well-known researchers considered the science published by the CRU. Its report, published on April 14, 2010, found no reason to question the integrity of the CRU scientists or anything that suggested malpractice.

* a committee chaired by former civil servant Muir Russell published the "Independent Climate Change E-mails Review"; it says of the CRU scientists that their “rigour and honesty as scientists are not in doubt” and that it “[does] not find any evidence of behaviour that might undermine the conclusions of the IPCC assessments”.

The outcome of these reports is consistent and decisive. But the whole affair, in the context of Copenhagen’s failure, leaves a number of big questions hanging over the United Nations-led IPCC. In particular, can it restore public faith in climate science? Is there a more efficient and reliable alternative available? Is the position vacant?

There are two ways to answer these questions. First, in practical terms, it is very difficult to imagine another body compiling and providing up-to-date, comprehensive and readily available climate science to decision-makers. Not least as scientists contribute to the IPCC on an unpaid, voluntary basis; it would be very costly to pay for such a report if the job were “tendered out”. 

Moreover, national agencies are free to produce their own reports, but they rarely host leading groups in all fields – an important limitation since climate science consists of numerous scientific disciplines and thus demands a sharing of expertise. The need to gather scientists from different communities and discuss which conclusions can safely be drawn from available scientific literature both promotes international cooperation (which has always been one of the greatest strengths of the science community) and brings scientific ideas to a forum able to test and publish them.

Second, climate science is advancing at remarkable speed, with new frontiers being opened every month. It is tempting to explain this progress in knowledge by reference to all the excellent scientists working in this field. But the actual reason may be more related to the fact that humans’ disruption of the climate system has created an imbalance that spurs change, causing many natural processes to occur faster than they otherwise would. Thus knowledge still lags behind the natural processes at work.

The rate of change is in certain areas extremely rapid, and the faster that change occurs the harder it is to predict what the future of a particular system will look like – be it Arctic sea-ice (currently with the lowest areal extent ever measured) or the carbon dioxide uptake in the Southern Ocean. This is why IPCC reports are still vital in providing essential perspective on the changes that humans have set in motion. I foresee that this will be the case both for the upcoming AR5 report, and beyond. 

There are questions to be asked about the UN-led negotiating process. In retrospect, the idea of getting 192 countries to agree on a legally binding agreement in Copenhagen might have obstructed rather than facilitated progress, where progress could be made. But it is others, not the IPCC, that bear the responsibility for the outcome. The task of making climate science a foundation of public policy that can have positive effects in the real world remains.


Øyvind Paasche is an adviser in the department of research management at the University of Bergen, Norway. He previously worked as a scientist specialising in paleoclimates at the Bjerknes Centre for Climate Research.

This article first appeared on openDemocracy. It is translated and reproduced here with permission.

Homepage image from HikingArtist

Politicians must put fairness at the heart of domestic – not just global – climate strategies, argues David Nash, or the poor will end up bearing a disproportionate burden.

Tomorrow (23 July), ministers from the BASIC countries – the powerful grouping of developing-country heavyweights comprising Brazil, South Africa, India and China – are to meet for the third time since the bloc’s formation prior to last year’s summit in Copenhagen. The sole theme of a special session taking place during their high-profile deliberations in Rio de Janeiro will be familiar to anyone involved in international climate-change negotiations.

“Climate equity” has a long and recurrent history in talks to agree a global framework for reducing greenhouse-gas emissions to levels that are deemed safe by climate scientists. The principles of “historical responsibilities”, “respective capabilities” and the “right to development” are engrained in the United Nations Framework Convention on Climate Change (UNFCCC) and have been instrumental in cementing the dividing line between what is expected of industrialised countries and their poorer, developing counterparts. This dictates, rightfully, that rich nations should take the lead in cutting their carbon emissions and provide the finance, technology and capacity-building support to enable poor countries to leapfrog carbon-intensive growth in favour of cleaner, more sustainable development.

However, putting this burden-sharing concept into practice remains contentious (and, given doubts over the future of the Kyoto Protocol, the prospects of managing it bleak). The purpose of the BASIC meeting will be to shore up support for “climate equity” after what many developing countries considered to be a frontal attack on the very principle at Copenhagen – namely, the not so subtle attempts by the Danish hosts to ditch the two negotiating tracks in favour of a single all-encompassing agreement, in the quest to tie major emerging economies such as China and India into taking on tangible emissions cuts.

And yet, while an equitable division of labour between countries seemingly remains a prerequisite for achieving any sort of agreed outcome at Cancún and beyond, the principles of fairness and social justice have received relatively scant attention in climate-change policymaking at the domestic level. Now analysts are beginning to think in terms of national equity and, specifically, how climate-change policies impact different social groups within countries.

Not only are the poorest individuals, households and communities in society least responsible for mounting emissions and typically more exposed to heat waves, flooding and the many other possible impacts of a changing climate, they are also particularly vulnerable to the indirect effects of global warming: namely, the policy responses drawn up by governments to curb carbon-dioxide emissions.

In developed countries, consumer-funded mechanisms are playing an increasingly important role in the policy mix to meet carbon reduction and renewable-energy targets. But while the logic of pricing carbon to simultaneously curb demand and generate revenue for climate-friendly policies is an attractive one to policymakers, it tends to lead to regressive effects of the first order.

Take the energy sector. In the United Kingdom, the outgoing government estimated that the suite of low-carbon energy policies set out in its Low-carbon Transition Plan would cumulatively increase domestic energy bills by an average of £125 (US$186) each year by 2020 compared with 2009 prices. Since poorer households spend a greater proportion of their income on heating and powering their homes, racking up the costs of electricity and gas will hit their pockets the hardest. So for instance, while the flagship European Union Emissions Trading Scheme (ETS) has led to higher energy bills for all consumers as suppliers pass on the costs of buying ETS permits, poorer households, as a proportion of their income, pay more.

Measures that indirectly increase the price of energy, such as requirements for electricity companies to source a proportion of supply from renewables (the Renewables Obligation as it is known in the United Kingdom) and roll out smart meters, are all the more regressive as they are funded by passing costs on to consumers at a flat rate.

Introducing a carbon tax – a measure that has been endorsed by both parties in the new UK coalition government, the Conservatives and the Liberal Democrats – would, on the face of it, have similar repercussions for the least well off. Modelling carried out using the tax-benefit calculator created by UK think tank the Institute for Public Policy Research (ippr) suggest that a levy on domestic fuels including electricity, set at £25 (US$37) per tonne of carbon dioxide, would, as a proportion of income, hit the poorest households in the United Kingdom the hardest – taking 1.07% off their average weekly income before housing costs and 1.68% after housing costs (see table below). Put another way, those in the lowest income decile would, in proportional terms, lose almost four times as much from a carbon tax as those in the highest decile.

Undeniably, these sorts of measures would be more socially acceptable if increased energy costs for low earners were offset elsewhere in the tax system, for instance through cuts in VAT. Poverty campaign groups might also be more enthusiastic if the benefits of climate policies were shared out in a more progressive manner. In some cases they have been. The previous government’s Warm Front programme has helped to bring energy efficiency retrofitting to low-income households, as has the Carbon Emissions Reduction Target (CERT), which obliges energy providers to make carbon savings by fitting insulation and renewing heating systems in the poorest homes.

On the other hand, the feed-in tariff for microrenewables, which became operational in the United Kingdom in April this year, is realistically-speaking, only accessible to households that can afford the high upfront costs of installing solar photovoltaic panels. The same is true of electric cars, highly-efficient home energy appliances and other expensive green innovations that promise net savings, but which currently remain the preserve of the better-off. In the case of the feed-in tariff, payouts for generated electricity are funded from energy bills, meaning that poorer households are paying disproportionately more towards a scheme that they are unable to benefit from. The result: a double whammy of disadvantage.

At the regional level, climate policy needs simultaneously to take steps to curtail the pain and maximise the gain in the transition to a low-carbon economy. Proactive and well-targeted government policies to stimulate clean energy technology markets promise new job creation and an opportunity to diversify local economies and it is essential that these opportunities are targeted foremost at those regions most at risk from decarbonisation, such as, in the case of the UK, the few remaining industrial and manufacturing hubs of north England and south Wales.

In view of the tough times ahead for poorer communities in the United Kingdom, and many other countries, given the impending cuts in public spending, blanket emissions-reduction policies cannot be left to mirror the mistakes of 1980s economic restructuring and further exacerbate Britain’s marked regional disparities. Instead, government should support innovation in manufacturing to help at-risk firms lower the carbon footprint of their operations, increase efficiency and protect jobs.

Just as equity will be crucial to a successful global emissions reduction settlement, as BASIC ministers will reiterate at their meeting this week, ensuring fairness is at the heart of national climate-change policy should be a key priority for governments. The challenge for climate progressives is to develop new thinking and solutions that rapidly and effectively reduce emissions but do so in a way that ensures the costs are not disproportionately borne by lower-income groups, either within developed countries such as the United Kingdom or developing nations. Yet, if the conventional way of doing climate policy is anything to go by, we have yet to truly grasp the nettle when it comes to national climate equity.


David Nash is a researcher in international climate change at the Institute for Public Policy Research (ippr).

Homepage image from Shelter

In his new book, When a Billion Chinese Jump, Jonathan Watts tells the story of an unfolding ecological crisis as seen from the ground. Here, he talks to Sam Geall about its economic and cultural implications.

As the Beijing-based Asia environment correspondent for the Guardian, Jonathan Watts has reported on environmental issues in China for several years. His new book, When a Billion Chinese Jump, is a travelogue that tells the story of China's breakneck development and its consequences, from melting glaciers in Xinjiang and cancer villages in Henan, to dam projects in Sichuan and skyscrapers in Shanghai.  





Sam Geall: The urgency of China’s environmental situation has struck many people in the past year or so, especially since the Copenhagen climate conference, but you have been writing this book for four years. How did you become convinced of the importance of this topic?

Jonathan Watts: The book grew and it changed. Because the country is so big and changing so fast, I found that this kind of road-trip reporting was a good way to capture that dynamism. And I found myself writing more and more environmental stories – whether it was a protest against a proposed factory development; a pollution spill into a river; Beijing’s air quality ahead of the Olympics; or the loss of another species. The subject almost chose itself.

But if I had to choose one moment when it really hit me in the face – that the environment situation in China is a matter of global, species-wide concern – it would be the story of the [now-extinct] baiji dolphin. When I went out to report it, I didn’t think it would be an epic story. It was only when I sat down and did the research and tried to put it in context, that I realised how incredibly significant the loss of something is after 20 million years – something that has been on the earth more than twice as long as humanity. That really hit me.

The situation is still changing. When I started the book four years ago, everyone was talking about pollution – also perhaps about climate change, political systems and how they influence governance. But I found myself shooting at a moving target: as I looked more into the story my priorities changed, and the story changed. It’s about pollution, climate change and one-party governance, but it’s even more about consumption and biodiversity and the long-term trend of human development. This is not just about China. In a sense, China is extraordinarily unfortunate to be hitting this stage of development at this time in human history.

SG: The book points to some of the deeper dynamics at play in China’s response to the environmental situation. One is the tension between the Daoist tradition, with its desire to find harmony, and Confucian philosophy, with its tendency to impose order on the natural world. How did you find this shaped China’s response to this stage of development?

JW: Looking for a solution to the predicament we are in, of living unsustainably, the importance of values comes up again and again. The focus in China is mainly on science and technology, on hardware – on things that if you drop them will hurt your toe. The importance of values hasn’t really kicked in, but it’s absolutely essential. Where do you get these values? Clearly western values haven’t stopped the west from screwing up the environment. So, it’s worth looking to China’s philosophical and cultural roots.

One of the sub-themes of the book is an exploration of China’s Daoist side. There have always been competing philosophies in China. It intrigued me that you can’t really have a Daoist civilisation – it’s almost an embrace and acceptance of the wild, of anarchy and chaos. Most of the time Confucianism has been the predominant philosophy, though there have been times that China is more Legalist. However, in Chinese history, you hear that some Mandarins were Confucians while working in their official positions, but when they went home they tended their gardens, or wrote poetry, and gave space to their Daoist sides. Maybe that's one of the secrets of Chinese civilisation and why it has lasted so long: that balance of the two sides.

I spoke to the popular philosopher Yu Dan, who has made her name writing about Confucian ideas – which is very much in line with Party orthodoxy at the moment. She told me that she is more of a Daoist, but that she doesn’t think “China is ready for Daoism yet”. Certainly in the last 60 years, that Daoist side has faded. The trend has been to order things.

SG: One ecological example you give is the contrast between the traditional irrigation system at Dujiangyan and the large-scale hydro-engineering project at the Zipingpu Dam, both in Sichuan province.

JW: I was first in Dujiangyan around the time of the Sichuan earthquake in 2008, but it was only afterwards when I interviewed the environmental philosopher Tang Xiyang that I realised its significance. Tang is the one who says: “If China is going to solve its problems, it needs more Daoism.” He told me that if I wanted to see how that would work in practice, then I should look at Dujiangyan. It's an example of how things can be: they can last, they can endure – you can work with nature, rather than against it.

This is the long-term view. The other type of development is brittle. The hydrological engineering solutions are very impressive – when I saw the Three Gorges Dam I was amazed and knocked out by what humans can do – but they create new instabilities, which build up. And China has learned this painfully in its history: the events of 1958 come up in the book – that height of human hubris, the sense that you can overcome nature and impose your will on nature.

The Maoist view of nature hasn't gone completely. There are lots of questions being asked about it, but the mega-projects have a certain momentum. Even some of the projects I have seen completed in the last seven years are the fulfillment of Mao's dreams. The railway to Tibet, the south-to-north water diversion scheme, the Zipingpu Dam – these were all Maoist ideas. It's almost like Mao Zedong was the big dreamer, and now there is a government of implementers.

But I don't think that old vision of conquering nature is as strong as it once was. At the exhibition centre at the Three Gorges Dam, there are no pictures of the current leaders, premier Wen Jiabao and president Hu Jintao. The top leaders of the country did not attend the topping-off ceremony for the dam. This suggests to me that there are reservations about the wisdom of that project and concerns about where it is going.

SG: Do you think a new set of values is starting to take root?

JW: I see a search for new values – a real yearning for new values – and a sense that solving environmental problems needs to be part of any new set of values. I don't see a clearly defined new ethos, or even the reinvention of an old ethos, that completely gets to the heart of this. There are causes for optimism – the growth of green NGOs, the increased coverage of environmental issues in the media – but these do not represent the prevailing ideology.

However, China's history of the last 100 years is one of dramatic change, with some ideas catching on so quickly that it's almost terrifying. Whether it's the fervour of political revolution, or the fervour to make lots of money, the country has been able to make 180-degree turns. I have to hope that this might be the case with the environment.

SG: So, could China become the world's first green superpower?

I wanted to ask that question in this book. We are heading into a difficult 30 or 40 years for our species. We are over the limit already by just about every ecological measure. And yet our population is probably going to rise by another two billion in the next 40 years. We need to get through this rough period and over that 40-year hump: after that, populations should start to fall and there should be better technology and economic models too. But now, the country that is in the best position – and the worst position – is China. 

China is in the best position because its economy is growing so quickly that it does have a lot of resources. It's in the worst position because it's reached this supercharged phase of growth at a very unfortunate time in terms of the history of global development. China can't outsource its problems like other countries have been able to do. This is a country that has to reinvent itself.

The big contrast between China and the United States, particularly in renewable energy for instance, is that China is trapped by momentum, it has to keep moving forward. By contrast, the US is trapped by inertia – it's trying to protect what it already has. This is also why China is in a better position to become a green superpower.

SG: One intention of your book seems to be to introduce a note of scepticism amid much western optimism about China's ability to save the world economy.

JW: There is still a widespread assumption that one model has proven itself again and again over the past 200 years: the get-rich-first, clean-up-later model. But what worked for Britain in the nineteenth century, for the US in the twentieth century and for Japan and South Korea in the late twentieth century, may not work for China, because of scale and because of timing.

In a sense, Britain and China may prove to be bookends on this phase of development that will be seen as abnormal in the long-term scale of human development. Britain was one small country producing an awful lot of pollution and extracting and using resources unsustainably. At that point it didn't really have a great planetary impact, but then this moved to Europe, and to the US, and the number of countries that were unsustainable and producing too much got bigger and bigger. Meanwhile, the number of countries left to absorb the impacts gets smaller and smaller. Where does China dump its waste? How does China extract enough from the rest of the world to provide for its people? I believe this is where economic development hits an ecological wall.

The environment and the economy, which used to run pretty much in parallel, have become so detached from one another. The economists, the governments and the corporations all think the solution to the world's problems is more consumption in China, whereas the environmentalists are all saying: be careful what you wish for. If there is to be any solution, it is in the reattachment of economy and environment. China is moving in the right direction with its recently discussed ecological compensation scheme: this would require that economically rich parts of China, like Beijing, Shanghai or Guangzhou, pay the ecologically rich parts of China, like Yunnan, Heilongjiang and Guangxi, for “environmental services”. This means directly giving a value to forests because they absorb carbon, or wetlands because they absorb pollution.

This would mean that a laptop would become more expensive, but the price would be at a much more realistic level in terms of reflecting ecological limits and what things are really worth – which brings us back to the importance of values.


Sam Geall is deputy editor of chinadialogue.

Jonathan Watts is Asia environment correspondent for the Guardian. His book, When a Billion Chinese Jump, is published by Faber and Faber.

Homepage image by Shreyans Bhansali

In March, David de Rothschild set out on a mammoth Pacific crossing aboard the Plastiki to highlight ocean pollution. As the journey ends, even he was shocked by what he found, writes Tim Adams.

“After 100 days at sea,” David de Rothschild suggests, “you realise that it should be called planet Ocean rather than planet Earth.” De Rothschild was speaking from the island of New Caledonia – “an odd little bit of France in the South Seas” – the night before his boat, the Plastiki, embarked on the final leg of a voyage that should finish in Sydney harbour any day now.

The Plastiki, a revolutionary catamaran, is kept afloat by 12,500 plastic bottles in its hulls; the "eco-adventure" has been designed to draw attention to our systematic pollution and over-fishing of oceans. Since de Rothschild, the 31-year-old son of the banking dynasty, and his crew of five set out from San Francisco on March 20, they have discovered many things, but mainly, he says, they have learned about the sea, about its power and about its fragility.

The power was amply demonstrated on the leg of the journey completed in early July, the 2,735 kilometres miles from Samoa, during which the vessel's unconventional construction was rigorously tested by four-metre swells and 35-knot winds for days on end. It is hard not to be reminded of your insignificance in the universe, de Rothschild says, when hanging off the side of a yacht made partly of plastic bottles, 1,600 kilometres from land in the pitch dark, while the Pacific breaks over you.

The ocean's fragility they witnessed in the place where much of the world's discarded plastic ends up, the Pacific’s "eastern garbage patch". This, the focus of their voyage, is a floating "continent" of debris. Nothing that the crew had read in advance could prepare them for what they found navigating an area twice as large as the North Sea. "You don't see it at first," de Rothschild says. "But when you get into the sea, and under the water, you realise that it is all like a soup, millions and millions of tiny fragments of plastic, suspended in the water. It is mostly microscopic, but once your eye adjusts you start to see the reflectiveness of some of the larger pieces. The red fragments stand out most clearly."


The Plastiki in San Francisco Bay, before setting off across the Pacific.
Photo courtesy of the Plastiki team.
 
The garbage patch was first identified 12 years ago within the "North Pacific gyre" – a vortex where the ocean circulates slowly because of light wind and extreme high pressure systems. Oceanographers have since suggested that perhaps 100 million tonnes of plastic are held in suspension in these waters. One of the things that the Plastiki voyage has demonstrated is just how durable modern polymers are: the pressurised bottles of its hull have hardly been knocked out of shape, let alone broken up by the nearly 13,000-kilometre voyage. "That's why just about every plastic bottle that has been made still exists," de Rothschild says.

The voyage has been overshadowed by the more graphic pollution of the BP oil spill, but even that is dwarfed by the scale of the problem the Plastiki highlights. While the deaths of seabirds and marine life in the Gulf of Mexico are still being measured in the hundreds, according to the United Nations Environment Programme (UNEP), plastic debris causes the deaths of more than a million seabirds every year, and more than 100,000 marine mammals. Back in 2006, the UN concluded that every square mile (2.59 square kilometres) of ocean contains 46,000 pieces of floating plastic. Since then the problem has only grown.

"One of the difficulties in conveying it to people," de Rothschild says, "is that you can't photograph it; the flecks are too small. What perhaps makes it most relevant and real for individuals is the health aspect of it. These particles are ingested by marine life and pass into our food chain. We all do it: we throw this stuff, this packaging, what I call “dumb plastic”, into the bin, and we think it has gone. But it comes back to us one way or another. Some of it ends up on our dinner plates."

The voyage was inspired by Thor Heyerdahl's Pacific journey on the raft Kon-Tiki in 1947. Olav Heyerdahl, the Norwegian explorer's grandson, has been aboard for part of the Plastiki adventure. The comparison between the two voyages illustrates other aspects of the ocean's fragility, de Rothschild believes.

"When you watch the film of Kon-Tiki and read Heyerdahl's account, you are struck by how alive the ocean seemed then," he says. "They were literally having to throw fish off the raft." That has not been the Plastiki experience at all. "For us it has been much more, where is everybody? We have seen a couple of dolphins, a couple of distant whales, a few flying fish, [but] other than that, nothing." Heyerdahl could survive on fish, but on board the Plastiki they have caught only a couple of tuna in three months, despite having their lines in the water every day. "When you start reading about 80% of the world's fish stocks being gone, it's hard to believe," de Rothschild says. "But then you come out here."

Even in the middle of the world's largest ocean it is hard to avoid some of the habits that have created the problem. At Christmas Island, where much of the food arrives in American packaging, "popsicle bags are a scourge". On Samoa, villages compete over recycling plans, but as soon as villagers were out of their backyard, de Rothschild watched young and old throwing plastic bottles into the sea.

One of the more gratifying aspects of the voyage has been the way that the message seems to have been communicated. Plastiki has a vivid ship-to-shore blog – "talking about the ocean from the ocean" – and there has been excitement wherever they have docked. In New Caledonia, de Rothschild says, perhaps three-quarters of the people who have seen the boat in the harbour said they had read about it and supported the project. That didn't stop him witnessing one "supporter" subsequently chucking bags full of rubbish over the side of his boat. "None of us likes the idea of fouling our own nest," he says. "But we are not good at thinking of the whole world as our nest."


About 12,500 reclaimed plastic bottles keep the vessel afloat. 
Photo courtesy of the Plastiki team/Luca Babini.

The Plastiki team does not do pessimism, though sometimes de Rothschild admits he feels like he is banging his head against a brick wall. Their own on-board efforts at self-sufficiency have gone well -- composting waste, powering batteries with a mixture of solar panels and bicycle-powered turbines. Even so, he is confronted by the fact that, however good your intentions, it is hard to live a life without plastic. When we spoke, de Rothschild had just done the shopping for the Sydney leg of the voyage. In the supermarket all the vegetables and all the salad were wrapped in plastic.

"It's like a disease," he says. "But we have to believe the argument can be won. Getting rid of “dumb plastic” -- bags in particular -- could be a very simple piece of legislation; making supermarkets use reusables is not so hard."

The crew's website is full of stories of people "doing their own Plastiki", pledging to eliminate plastic bottles from their school or workplace, or creating a zero-waste policy. De Rothschild hopes the voyage can be a metaphor for this. "We are just a bunch of citizens. We are not scientists or marine biologists, but we want to show that if we work together we can do something."

That sense of teamwork has no doubt been tested on board the catamaran. I saw the Plastiki in San Francisco before it set off, and was struck by how limited the space – a tiny geodesic dome of a cabin – was, not least for the 1.9-metre de Rothschild. How have they coped?

"Usually you are so exhausted by the end of the day that you could sleep anywhere," he says. "It's a really odd contrast; you are on this tiny platform and yet you have this enormous space around you. It becomes a little dance, in a way: you are fantastically aware of the other people, how they move. But we have a rule that if you say ‘you are annoying me’ -- which we all do -- then it has to be done in a spirit of jest."

Sydney is not so far away, but he is trying not to look too far ahead. "It will be a chapter over," he says. "But we are only just beginning to get this message across. The boat will go around the world, I hope, as a symbol of that. I feel, in every sense, that we are in the calm before the storm."


www.guardian.co.uk/

Copyright © Guardian News and Media Limited 2010

Homepage photo courtesy of the Plastiki team shows David de Rothschild aboard the catamaran in the Pacific Ocean
 

The Gulf of Mexico oil disaster is a symptom of a sickly political economy, argues Tang Hao. Without wholesale reform of global structures, he says, the environment will always suffer.

BP’s catastrophic oil spill in the Gulf of Mexico has unleashed a chorus of criticism. Some people say it was humanity’s desire for riches that forced open the earth’s crust and brought about disaster. But we cannot change human nature and overcome the urge for profit. The only real way to solve environmental problems is to improve political systems and our mode of economic development. (Likewise, we cannot do away with the human desire for power, but democratic systems have gradually helped to solve what were once vicious political struggles.)

To find the true cause of the pollution, we should look to the basis of the international political economy: that current global economic growth is oil-powered. This has led to economic problems, such as shortage of supply, as well as endless problems with environmental pollution (an oil spill triggered by last week’s pipeline explosions in China’s north-eastern port city of Dalian, is one of the latest examples). And with such a grave systemic issue, even if businesses, governments and NGOs act exactly as they should, environmental disasters will still occur.

Globalisation has seen ever more capital and technology concentrated in the hands of multinational companies. But this has not been matched by an increase in corporate social responsibility. Multinationals have neither the inclination to use technology responsibly, nor the ability to control how that technology develops. Meanwhile, multinationals can easily move their production around the world – avoiding the democratic oversight of any one country.

Operating in an economic structure where ability and responsibility are out of balance, businesses cannot resist the profits to be made by ignoring environmental protection. BP’s slogan is “Beyond Petroleum”, and it strives to create a green corporate image. But it could not prevent itself misusing its power, wealth and technology. This accident was caused by an extraction strategy aimed at turning a quick profit. The gulf between BP’s corporate advertising and the results of its actions shows that the standard procedure – of profiting from environmental damage, then using a small portion of those profits to improve your image – is defunct. Responsibility needs to be exercised while making money, not afterwards.

If multinationals are unable to exercise environmental responsibility, what about national regulations? In this case, US president Barack Obama’s administration chose to allow BP to handle the oil leak. The government lacked the capacity and the funds to stem such a spill: you can’t send the coastguard a kilometre beneath the sea to close a ruptured well.

Moreover, when it comes to the environment, states are not necessarily any more trustworthy than corporations. After the spill began, media reports revealed that members of both the upper and lower houses of US Congress – and particularly members of the Senate Committee on Energy and Natural Resources – had received large political donations from BP. Over the last two decades, BP has made donations to presidential candidates, including Obama, totalling US$3.5 million (23.7 million yuan). And of the 64 federal judges in the five states surrounding the Gulf of Mexico, 37 have links to the oil and gas industry. Close, long-term and institutionalised cooperation between government departments and big business ensures that BP can always enjoy political protection. A system that relies on the power-hungry to solve the problems caused by the money-hungry hardly gives cause for optimism.   

Since the Cold War, political and economic expansion have become intimately linked. This is the main reason why globalisation has been so vigorously promoted by the world’s major powers. US might and multinational expansion have inevitably merged – even if BP is not an American firm, it has many shared interests with the US government. And so the current economic and political framework cannot allow a multinational such as BP to go bankrupt; that would help no one. Obama’s administration cannot do anything to BP, as it needs the company to plug the leak and pay compensation. If BP collapses, there is no party directly responsible for the worsening pollution. The British prime minister, David Cameron, publicly defended BP, not only because of the huge stake in the company held by British pension funds, but because the company’s rise or fall impacts directly on the UK economy and the fate of the Eurozone.

Besides corporate responsibility and government intervention, some put their environmental hopes in the public. But in the current mode of development, the public are more likely to be part of the problem than the solution. In developed nations, consumers’ pursuit of cheap oil drives companies to take risks in extraction and, in the United States, government attempts to regulate the oil sector have struggled to find popular support. In developing nations, the public do not think first about the long-term harm caused by environmental destruction – they are more concerned with the immediate economic benefits. So although the public are, in the long term, the victims – and some have organised a boycott of BP filling stations, for instance – they are still themselves a cause of environmental woes.

The political economy has become unbalanced. Multinationals have no internal motive to protect the environment; government and business are closely linked; the public’s interests mean they indirectly harm environmental protection efforts; and there is a lack of independent oversight – measures that wreck the environment far outstrip those efforts to restore and improve it. And the situation is getting worse: oil firms are moving their wells from the land to offshore and deep ocean locations – a frenzied exploitation driven by declining oil reserves. Resolving the situation requires a systematic response from the international community, not the kneejerk reaction of the United States. This could include: creating a higher technological barrier to entry for oil firms and tighter international environmental standards; strengthening the ability of international organisations to manage the environment and solve issues at a transnational level; and, since clean energy is unlikely to succeed in the market on its own, introducing government policies to limit the use of fossil fuels and subsidise cleaner energy sources.

The Gulf of Mexico oil spill is an ecological disaster caused by humanity’s pursuit of profit – but it will not be the last. Reforming our inadequate international political-economic system and strengthening the supervision of transnational actors will not be easy. But it must be done to solve our environmental problems – and should become the focus of the international environmental movement.


Tang Hao is an associate professor and a columnist. He is currently Fulbright scholar-in-residence at Randolph-Macon College in the United States.

Homepage picture from DigitalGlobe shows an enhanced satellite image of the US oil spill.

Zhang Song is a Shanghai-based planning professor and urban-preservation expert. In the first half of a two-part interview, he talks to Zhang Chuanwen about the death of vitality in China’s flash new cities.

Despite the “Better City, Better Life” theme of the 2010 Shanghai World Expo, many argue China’s cities are becoming ever less habitable. Southern Metropolis Daily reporter Zhang Chuanwen discusses the problems facing China’s cities with professor Zhang Song of Shanghai Tongji University’s College of Architecture and Urban Planning (CAUP).


Zhang Chuanwen: For the first time, the theme of the World Expo is “the city”. What does that signify for China?

Zhang Song: China needs to pull together the mistakes made and lessons learned from building cities and look at advanced practices in foreign countries. The Expo has many showy buildings, but it doesn’t seem like any of them will become classics. The former dean of CAUP, Wu Zhiqiang, was the chief planner for the Expo, and at the start of planning proposed a focus on the city rather than landmark buildings.

His proposal for the Expo was to create an “eco-positive” urban concept focused on purifying water, producing energy, increasing greenery and reducing temperatures. Buildings, spaces and landscaping would demonstrate this concept and, at the same time, showcase the latest methods of reducing urban energy and resource consumption. But given the time available for construction, I’m afraid it wasn’t easy to achieve this ideal. Maybe some buildings used some sustainable technology, some energy-saving materials, but the Expo is huge and limited by available funds and technology. So there was a big gap between the original plan and the actual outcome.

The site of the Expo was originally home to hundreds of thousands of square metres of factory space. If that had been made full use of, perhaps things would have been simpler, or have better embodied environmental principles. But, while a few old buildings were kept, the majority were demolished. Outside of China, a huge proportion of large cultural facilities are housed in old buildings. Paris’s bid for the 2008 Olympics included plans to remodel old factories as stadiums. 

China is currently urbanising very rapidly – the number of urban dwellers is approaching half of the country’s total population and there is a significant rural population that is temporarily resident in cities. Despite China’s massive efforts, there are still many problems with cities of all sizes, even in the “New Villages”. There’s a real need for an examination of how urbanisation in China should proceed. 

ZC: Many people complain about unsatisfactory transportation, environment, housing, public facilities and buildings. Many places suffer from congestion and polluted skies. Cities are changing at an incredible pace, with many modern and post-modern buildings appearing, but lacking any sense of intimacy. I fear there is a common feeling of oppression arising from unfamiliarity and dislocation.

ZS: China’s cities are becoming ever less habitable, there’s no debate about that. It’s due to overdevelopment of urban areas.

At the start of reform and opening up, special economic zones such as Shenzhen [a city in south China] were established to boost industry, and planning rules were applied flexibly. This spurred local economies, particularly in industrial development. At that time, it wasn't possible to consider issues like the environment. Some industrial zones might not have given enough consideration to their local environment, but they did promote rapid industrial growth – and so have historical significance.

Since then, large scale rebuilding programmes have transformed the appearance of old cities. For years we neglected preservation of older areas, and so the environment declined and facilities decayed. China’s approach to development is also extremely backward. Developers take a piece of land they believe will be profitable and then completely rebuild it as they see fit. 

If the government’s main function cannot shift toward the social – concentrating on things such as housing provision – then it will be led by the market. Currently, a completely commercialised mode of development is gaining strength and the quality of urban spaces is declining. And, of course, the government makes no small income from land development.

After World War Two, the west also saw many of its old cities rebuilt. The war had left many old houses empty or ruined, and some cities reconstructed these areas or built new areas to solve housing issues and improve the environment of the original city. But in Europe, the United States and Japan, this was done through special legislation, with the state or public companies taking the lead. In Japan, a housing corporation under the construction ministry was responsible – it obtained local government land and used it principally to provide housing.

In China, development was originally carried out by companies owned by the housing authorities, but this has changed, with Hong Kong developers, private corporations and listed companies now taking the lead. Of course, state-owned firms also exist, but market competition and the pursuit of productivity means they act no differently from the others. So China currently has no city with government-led housing provision and, as land becomes more expensive, profits from development increase and house prices go up, the authorities are often left powerless.

ZC: Does the single-minded pursuit of maximum profit mean that China’s cities are bound to be unpleasant to live in? Is there anything we can learn from other countries?

ZS: Why did the west change its approach after a decade or more of large-scale and intense urbanisation? Because it was causing environmental destruction across entire cities. Densely packed, tall buildings were spoiling the ecological balance; and rebuilding old cities was failing to solve transportation pressures, housing costs and unemployment.

They realised what was happening and very quickly shifted policy toward the protection and restoration of old cities, emphasising the reinvigoration of communities and public participation in planning and construction. Protecting and changing the use of old buildings is better for the environment and saves resources and energy – and also touches on hidden issues such as social structure.

ZC: People get the feeling that cities are all identical, that they lack individual characteristics and are just emotionless giants.

ZS: A city isn’t a mechanical thing, but an organic life form with history and culture that needs to grow. The identification of residents with their city is also extremely important. But China views cities as machines to be dismantled and put together at will. That has created numerous problems, including the loss of urban characteristics and a crisis of urban culture. 

Urban-rural planning issues have not been solved at root, and the disparities in economic levels and welfare across cities are increasing. Within cities, social segregation and stratification are intensifying and there is a very clear problem when it comes to identification with cities – residents move too frequently, old areas have been developed and destroyed and the original architecture lost. Many new arrivals cannot integrate into the city and so feel alienated and have no sense of belonging.

There is an expert in Japan who says that, where planning is concerned, the difference between Japan and China is that the Chinese consider things visually – since reform and opening up, China’s metaphorical path has widened, and so the roads in cities have to be wider too. This kind of idea is deeply rooted in the minds of many leaders, with planning often aimed at creating large spaces, restricting or removing the vitality of the city. Beijing is a classic example. Huge roads make it difficult for citizens to get around, and there are major transportation problems. After the reunification of Germany, West German planners found the work of their colleagues over the border to be dehumanising. But when I went I thought it was actually not bad – because our roads are even wider.

Many new districts are even more open, are drawn in even larger strokes. This increases the cost of maintenance. For example, the large lawns running through the middle of Guangzhou [south China] are an example of an artificial environment – maintaining that grass carries a huge annual cost. A good environment will look after itself without a great deal of human intervention and, therefore, will not cost much. Many cities are looking for a quick impact and so they just go for superficial projects.


NEXT: the need for an urban awakening

This article was first published by Southern Metropolis Daily on May 9, 2010. It is adapted and used here with permission.

Zhang Song is professor and PhD supervisor at Tongji University’s College of Architecture and Urban Planning. In 1996, Zhang was awarded a PhD in urban design and historical preservation from the University of Tokyo. He is also a member of the China Urban Planning Association’s Historical Culture Preservation Committee and Shanghai Building Association’s Historical Building Preservation Committee

Zhang Chuanwen is a journalist at Southern Metropolis Daily.

Homepage image from Jakob Montrasio

Wide roads and vast buildings are contributing to a metropolitan malaise in China, Zhang Song tells Zhang Chuanwen. Public engagement in planning is, he says, the only way ahead.

Zhang Chuanwen: China used to criticise the “urban disease” of the west, but now it seems to be suffering from the same affliction.

Zhang Song: In some respects, it’s more serious. In the past, China avoided talking about such things as “urban disease”. During Mao’s time, the government didn’t want the cities to develop – it wanted to move city residents to the countryside, and right up to the 1980s the focus was on developing smaller cities. It was only later that the scale effects of large cities were realised.

You can’t say that China’s cities suffer from all the same symptoms as those in the west, but there are definitely bigger problems with the urban environment. Large-scale urban developments only have a little artificial landscaping and greenery, there’s no ecosystem to talk of. You need to remember that greenery and landscaping aren’t just to look nice, they actually improve the ecological environment.

Also, problems relating to employment and urban culture in China are different from those in Europe, the United States, Australia and Japan. China just focuses on the economic impact, measurable in hard cash. Social and environmental impacts are not easy to quantify and are taken into account last, if at all. Think about it – how many social networks and jobs have been lost as a result of large-scale reconstruction? How hard is it to rebuild those networks? And how will the government deal with that?

The issue of reconstruction aside, China’s cities are also too big and there’s a real problem with urban sprawl. All the cities in the Yangtze River and Pearl River deltas are expanding outwards, and if you include industrial zones, villages and towns, plus all the highways and rail lines, human construction may have already reached an ecological limit.

ZC: What are the reasons for these failings?

ZS: First, there are underlying errors in the government’s understanding of cities. For example, there is a misconception that bigger cities are better cities. But it isn’t a question of size, it’s a question of comfort, efficiency, environmental quality, liveability and, in particular, suitability for different types of people to flourish. The government needs to recognise the nature of cities, rather than treat them as a source of prestige or as a copy of other urban centres like New York. And when there’s a change of leader, there are new ideas, and things chop and change – something that central government has actually spoken against.

Second, urban planning is a social activity that citizens can get involved in. City party secretaries and mayors place huge importance on planning, but only listen now and then to expert advice and there are no channels for public opinion to influence planning. There’s a lack of legislation to support this, a lack of process for public participation and a lack of professional input. Urban planning has become a case of simply doing what the leaders say. The market economy has caused planners themselves to lose their way, to abandon their professional knowledge and ideals. They have become mere draftsmen. 

Third, you can’t treat urban land simply as a source of economic gain. The land is also part of the environment. And, in old places, it has its own history and culture. If people can live successfully on a piece of land, then it becomes a community with beneficial social networks. If land is seen as a commodity to be bought and sold at will, much potential social, economic and cultural benefit is lost – this is the root issue.

In the west, land is largely privately owned and, if a piece of land needs to be protected from development for reasons of history, culture, natural beauty or public interest, then the government purchases it. This is how national parks work in the United States, and how historical buildings are protected in much of the west. Cities take shape over time, as the work and wisdom of generations accumulate. They are the crystallisation of the public’s pursuit of betterment. To let those with money and power play around with this as they wish is extremely rash.

ZC: How do you bring about an urban awakening? How did it happen in the west?

ZS: I’m sure that China’s leaders and developers already know everything we’ve been discussing here, but for the sake of their political records or particular interests, they want this pattern to continue. So, if it’s left to them, our cities are done for. The future of the Chinese city depends on the citizens waking up, not just a few officials. Our urban problems show that we need to change mistaken ideas and methods. It’s time to put a stop to such crude notions of development.

In the Museum of Modern Art in New York, I saw photos of environmental pollution from the 1960s – scenes that I fear can be found in every Chinese city today. At that time, a vigorous environmental movement got going in the west. Later it developed into an urban conservation movement and became an important part of western social activism. The issues themselves are nothing to be scared of – if you first recognise the seriousness and gravity of the situation and take it seriously.

ZC: Perhaps it was a lack of knowledge about urban planning that led to these failures, to the wrecking of our cities. Are we ignorant?

ZS: The public lack relevant knowledge about urban planning and don’t have much opportunity to go abroad and see anything different. The media’s view of planning is that it’s government business and they just go on about how China’s cities are becoming more beautiful. In fact, cities do not need to reinvent themselves so often, at least not when the changes are only on the surface.

The appearance of many European cities hasn’t changed for a century, but internal and underground facilities have been modernised in order to save energy, protect the environment and increase comfort. When Europeans design new areas, they do so on a human scale, as far as possible using pedestrianised zones, cutting down on car journeys, reducing energy use and making the city diverse and green. Although China also has slogans about putting people first, it doesn’t happen that way.

The marker of liveability for a city is its human scale. The biggest issue for Chinese cities is the roads – they are too wide, and the density of the network is too low. In Shanghai’s Lujiazui [a major financial district], the roads are too big, the huge buildings leave people feeling alienated, the space is badly organised and living and travelling are extremely inconvenient.

China has managed to turn urban planning into something mysterious. In other countries, everyone from elementary school students to pensioners discusses it, and community meetings to talk through the issues are often held. Everyone has a right to pursue a high quality of life and everyone has the right and the ability to participate in urban planning. The necessary awareness and ability to do so are not lacking in China. And if they were, the government and expert community would have a duty to open up the necessary channels to improve the degree and quality of public participation.

The Shanghai Expo slogan – “Better City, Better Life” – has raised a question. To answer it requires more pragmatic urban planning.

Part one: China’s dying cities

This article was first published by Southern Metropolis Daily on May 9, 2010. It is adapted and used here with permission.

Zhang Song is professor and PhD supervisor at Tongji University’s College of Architecture and Urban Planning. In 1996, Zhang was awarded a PhD in urban design and historical preservation from the University of Tokyo. He is also a member of the China Urban Planning Association’s Historical Culture Preservation Committee and Shanghai Building Association’s Historical Building Preservation Committee. 

Zhang Chuanwen is a journalist at Southern Metropolis Daily.

Homepage image by Antonis SHEN

Ignoring the real costs of doing business, the energy industry has long dumped its damage on the environment, making scant provision against disaster. It’s time to pay up, argues George Monbiot.

Has BP ever made a profit? The question looks daft. The oil company posted profits of US$26 billion last year. There’s no doubt that BP has been pumping money into the pockets of its shareholders. The question is whether this money is what the company says it is. BP calls it profit. I call it the provision that the firm should be making against future liabilities.

Despite an angry letter from two US senators and a warning from president Barack Obama about spending big money on their shareholders while nickel-and-diming coastal people, despite the fact that it has no idea what its total liabilities in the Gulf of Mexico will be, BP had been planning to pay a dividend this year. It was likely to amount to more than US$10 billion.

On June 16, however, BP announced it would not pay any further dividends this year and agreed to a “$20-billion commitment to ensure that all legitimate claims for which BP is responsible are met fairly and promptly”. As the two senators noted earlier in June, by moving money "off the company's books and into investors' pockets", BP would “make it much more difficult to repay the US government and American communities".

Pollution has been defined as a resource in the wrong place. That's also a pretty good description of the company's profits. The great plumes of money that have been bursting out of the company's accounts every year are not BP's to give away. They consist, in part or in whole, of the externalised costs the company has failed to pay, and which the rest of society must carry.

Does this sound familiar? In the 10 years preceding their crash, the banks posted and disposed of stupendous profits. When their risky ventures failed, they discovered that they hadn't made sufficient provision against future costs, and had to go begging from the state. They had classified their annual surplus as profit and given it to their investors and staff long before it was safe to do so.

Recently, the British government bumped into another consequence of failing to take future costs into account. Chris Huhne, the new secretary of state for energy and climate change, revealed that nuclear decommissioning liabilities will cost the government nearly US$6 billion more than it was expecting to pay over the next three years. This will cancel out two-thirds of the vicious cuts the government has announced and swallow most of his department's budget. As Huhne pointed out: "It is a classic example of short-termism. I cannot think of a better example of a failure to take a decision in the short run costing the taxpayer a hell of a lot more in the long run."

The decommissioning costs imposed on society by nuclear power will be dwarfed by those that are imposed by the fossil-fuel industry. They include, but are not confined to, the money that will have to be spent on adapting to climate change. The United Nations estimates this cost at US$50 billion to $170 billion a year, but a report last year by British scientists suggested that this is around three times too low, as it counts only a small proportion of likely impacts.

The UN has hired the consultancy Trucost to estimate the costs dumped on the environment by the world’s 3,000 biggest public companies. It doesn't report until October, but earlier this year The Guardian published the interim results. Trucost had estimated the damage these companies inflicted on the environment in 2008 at US$2.2 trillion, equivalent to one third of their profits for that year. This too is likely to be an underestimate, as the draft report did not try to value the long-term costs of any issue except climate change. Nor did it count the wider social costs of environmental change.

A paper by the New Economics Foundation (nef) in 2006 used government estimates of the cost of carbon emissions to calculate the liabilities of Shell and BP. It found that while the two companies had just posted profits of about US$37 billion, they had incurred costs in the same year of nearly US$69 billion. The oil leaking into the Gulf of Mexico from the Deepwater Horizon well is scarcely more damaging, and its eventual impacts scarcely more expensive, than the oil that is captured by neighbouring rigs then processed and burnt as intended.

The total costs imposed by the oil companies, which include the loss of human lives and the extinction of species, cannot be accounted. But even if they could, you shouldn't expect the companies to carry them. They might be incapable of capping their leaks; they are adept at capping their liabilities. The Deepwater Horizon rig, which is owned by Transocean, is registered in the Marshall Islands. Most oil companies pull the same trick: they register their rigs and ships in small countries with weak governments and no international reach. These nations are, in other words, incapable of regulating them.

Flags of convenience signify more than the place of registration: they're an unmistakable sign that responsibilities are being offloaded. If powerful governments were serious about tackling pollution, the first thing they would do would be to force oil companies to register their property in the places where their major interests lie.

US lawyers are drooling over the prospect of what one of them called "the largest tort we've had in this country". Some financial analysts are predicting the death of BP, as the fines and compensation it will have to pay outweigh its earnings. I don't believe a word of it.

ExxonMobil was initially fined US$5 billion for the Exxon Valdez disaster, in 1989. But its record-breaking profits allowed it to pay record-breaking legal fees: after 19 years of argument it got the fine reduced to $507 million. That's equivalent to the profit it made every 10 days last year. And after 25 years of deliberations, an Indian court triumphantly convicted Union Carbide India Ltd of causing death by negligence through the Bhopal catastrophe. There was just one catch: Union Carbide India Ltd ceased to exist many years ago. It wound itself up to avoid this outcome, and its liabilities vanished in a puff of poisoned gas.

BP’s insurers will take a hit, as will the pension funds that invested so heavily in it; but, though some people are proposing costs of US$40 billion or even $60 billion, I will bet the price of a barrel of crude that the company is still in business 10 years from now. Everything else – the ecosystems it blights, the fishing and tourist industries, a habitable climate – might collapse around it, but BP, like the banks, will be deemed too big to fail. Other people will pick up the costs.

There is an alternative, but it is unlikely to materialise. Just as Norway has treated its oil money not as profit but as provision against a tougher future, so the governments in whose territories oil companies work should force them to pay into a decommissioning fund. The levy should reflect the costs that economists are able to calculate, plus a contingency for those we can't yet foresee.

This would outrage the oil firms, as it would render many of them unprofitable. But there's a simple answer to that: the money currently defined as profit is nothing of the kind.


www.guardian.co.uk/

Copyright Guardian News and Media Ltd, 2010

Homepage image from Greenpeace UK

In his new book, R Edward Grumbine explores the tangled relationship between conservation and development in China. Here, he talks to Olivia Boyd about the dam-building freeze on the Nu River and other lessons from Yunnan.

Olivia Boyd: As a US-based conservationist, why did the 2004 dam-building moratorium on the Nu River capture your attention?

R Edward Grumbine: There were two reasons. First, I wondered why the Chinese government would voluntarily stop economic development when they have all the power to do whatever they see fit. Obviously, there was more to the story than “authoritarian regime”. And if this was one example of change in China, were there other changes that I was missing that would also not match my foreigner assumptions?

The second reason was that I knew that the Nu River area was a biodiversity hotspot and I wanted to know if that made any difference to the government – namely, what kind of planning was or was not done in important ecological areas. Change occurs so rapidly in China; was the Nu going to become like every other place or was it going to remain special?

I started reading more around the subject and realised the Nu would be dammed at some point – this was a moratorium not a ban. And that led me needing to go there to see the river and the watershed and the people and the plants and animals at risk before development proceeded.

OB: Policy on damming the Nu is still being hammered out. Are dam building and environmental protection simply incompatible in Yunnan?

REG: I think they are right now. It doesn’t mean they will remain so into the future. The original moratorium was stimulated by an outcry against the dams by international and Chinese environmental groups. The local governments were completely against the moratorium against hydro development. And if they had their way, they would do away with it today. But the central government in this case – because hydropower development is something that is more closely controlled by Beijing than other aspects of conservation and development – had enough political authority to make that moratorium last. And the moratorium is still on.

The original plan was for 13 dams on the Nu River. Now that plan has been reduced to four. The question is: will four dams do the same amount of damage as 13? And no one knows because the environmental documents that would answer that question are not available for public viewing. The good news is that the government is yet to act to replace the moratorium.

One key problem moving forward is the severe lack of communication throughout China, south-east Asia and the third pole region. It’s a profound challenge to operate in an environment where people do not talk with each other. Hydropower development needs to be contextualised – it’s not just about what China needs, it’s about what the downstream countries need. They can’t have water diversions in Yunnan impeding the rice-growing sector in Vietnam or the agricultural sector in Laos and Cambodia. And until there’s a regional watershed-based conversation going on, progress will be difficult.

OB: Do you think the campaign that led to the Nu construction freeze was a one-off or could it provide a model for resisting other projects in China?

REG: The short answer is that nobody knows. But there is some story to fill in since the moratorium was put in place in 2004. One is that China’s leaders are getting a greater sense of the importance of climate change and a green economy to combat climate change. And that is a deeply influential learning curve that was lacking when the moratorium was put in place.

Since 2004, China’s civil society has also been granted more space to operate – there are more environmental groups and there are more options for those groups to pursue in influencing the government to take a better environmental policy stance on dams or virtually all other aspects of China’s development. There are more citizens that care.

Another key factor is that the Chinese middle class is also growing more rapidly than any middle class in history. Many scholars believe the Chinese middle class will be larger than the entire population of the European Union in five or six years. Historically, as a middle class grows, its political power also increases. People have money and time enough to care about the civil space that they may inhabit. The question is how much action will that middle class demand as they gain more voice? That remains to be seen.

OB: That emerging middle class is also bringing more tourists to Yunnan. What are the impacts?

REG: Most of the world tourist projections have China replacing the United States as the number one tourist force in the world economy some time seven or eight years from now. In Yunnan, in 2004, there were 61 million tourists – many more than visit Paris, the number one urban tourist destination in the world. Of that 61 million, only one million were foreigners and 60 million were the growing Chinese middle class who now have the money and leisure time to explore the country. And those figures are now five years out of date.

In deep, rural, back-country Yunnan, the impact is still minimal. In some of the more developed areas, most obviously Lijiang, the number one tourist attraction in Yunnan, the tourist visitation is off the scale and continuing to grow. To deal with that rate of growth, they’re essentially growing out from the original core of the World Heritage Site, replicating the preserved traditional buildings in suburban satellite developments. All the satellites being constructed in 2008, 2009 and 2010 still qualify if they follow the architectural standards that the UN has placed on the initial World Heritage Site. It still counts, even though the buildings, instead of being 200 years old are two or three years old.

OB: How did your time in Yunnan challenge your views on conservation?

REG: From an American perspective, we tend to have our nature set over here – we may protect it, but it’s still removed from the normal interaction with people unless you’re on holiday. So Americans visit their national parks to get away from it all. We don’t have numbers of people living inside US protected areas. In China, the opposite is true. No expert even knows how many people live inside the boundaries of Chinese protected areas. The most dependable number I’ve seen is in the order of 30 million. And the Chinese are happy with that because it fits in with philosophies that people and nature are interpenetrated. So that’s a challenging place to be for an American conservation activist or researcher.

OB: With Pudacuo, Yunnan is experimenting with the national park model. What will thismean in the Chinese context?

REG: That is being discovered as things move along. China’s protected-area model is based to a great extent on a United Nations import, let’s call it the biosphere reserve model, where humans are actively discouraged from visiting the core of protected areas. Think of it as a bullseye – the target is where everyone is kept out and as you move toward the periphery, more human use is allowed until finally at the edge you can build some hotels and create a tourist economy. When people are living in the core before the protected area is marked out, that model obviously has limits.

So China is experimenting actively with the US national park model to see if that might be appropriate – protecting the core and allowing visitation and also allowing some development of tourist areas. Like anything in life, the model never quite matches the reality. The fact people are living everywhere in China’s protected areas is one reason why it might be difficult to have the national park model. It’s not just a matter of a protected area system, it’s a matter of the space that the agro-pastoralists depend on for their livelihoods. You can’t just relocate them forcibly – so how are you going to continue to allow those people to get a living at a sustainable level, through grazing, fuel collection and all the things that it takes to maintain a household?

There are many unresolved issues, which is why China looks at this as a pilot project. If after a few years of experimentation, some of these on-the-ground problems can be resolved, then the central government might want to roll this model out to some other provinces. But I don’t see the government embracing the national park experiment until it has been proven several times over in different areas of China. That’s a good thing actually because China is taking it slow and maybe they’ll iron out some of these issues as they go along.

Another issue that many foreigners don’t quite get about China is the difference between what central government would like and what local governments can actually implement. Beijing may ask for it, but they won’t necessarily get it.

OB: One of the ideas in your book is “conservation with Chinese characteristics”. Can you explain it?

REG: Essentially, an alternative path for China might be to let go of some of the conservation models that have been imported into the country from the west and focus more specifically on home-grown ideas that continue to be important in Chinese culture, many of which have their base in Confucianism. One of those ideas might be social unity, which is a key characteristic of Chinese social discourse. Social unity right now is a concept that’s not used well within Chinese conservation or within the government’s approach to sovereign state negotiations. If it was used more explicitly, that might create more transparent communications within the Chinese bureaucracy and between China and neighbouring countries.

Another example might be hydro development on the Nu River. The economy was explicitly hoisted over the environment in the original dam proposal. But the local people were not going to benefit from that hydropower development – they already have electricity. That electricity was going to be sold downstream to power the economic growth of south-east Asia. Instead, if you used “conservation with Chinese characteristics”, you might build very few dams and create local benefits from that development instead of selling it off on the global electricity market.


R Edward Grumbine chairs the masters in environmental studies programme at Prescott College, Arizona, and teaches the undergraduate environmental studies programme. His latest book is Where the Dragon Meets the Angry River. Read an excerpt here.

Olivia Boyd is assistant editor at chinadialogue.

Homepage image by Yunshan Yehua

China’s Go West campaign is launching Yunnan into the global economy, but new infrastructure carries an ecological price tag. R Edward Grumbine reports on the green dynamics of a rural transformation.

This article is excerpted from Where the Dragon Meets the Angry River by R Edward Grumbine. Copyright © 2010 R Edward Grumbine. Reproduced by permission of Island Press, Washington, DC.


When Deng Xiaoping determined that China’s future lay with a state-directed market economy, he also realised that the People’s Republic of China would have to begin the transition where development was most likely to succeed. The eastern and southern coast of China already had much of the basic infrastructure for global communications and commercial exchange – this would be the place. Western China would have to wait.

Yunnan waited 20 years. During these decades, economic growth in China pulled hundreds of millions of people out of poverty and created a rising world power. Some 150 million rural residents moved to east coast factory jobs, the largest human migration ever recorded. But this loss of labour from the country to the cities only added to east-west social disparities.

In 1999, Beijing announced a solution: xibu dakaifa, “great western development strategy”, or the Go West policy. Then-premier Zhu Rongji summed up the plan: it would “strengthen national unity”, “safeguard social stability” and “control border defence”. But what did premier Zhu’s rhetoric really mean?

For Yunnan, Go West means the end of the frontier. The margin will become modernised, poverty will shrink, incomes and education levels will rise. The provincial government has no intention of stimulating economic development just for tourists. For China, Go West will reduce the east-west wealth gap, slow down the stream of migrant labour and spur a domestic market of consumers that will make the PRC less dependent on selling computers, toys and furniture to the rest of the world.

While the domestic benefits of Go West are many, China is also looking beyond its borders. From the times of ancient emperors to the Communist Party, frontiers have always insulated the Middle Kingdom from foreign influences. The traditional role of government has been to seal frontiers; Go West punches holes in them. By constructing a vast array of road, rail and hydro/powerline links to its south-east Asian neighbours, Yunnan is joining the global economy.

I have a difficult time grasping the sheer scale, speed and style of Go West in Yunnan. Let’s start with roads. From 2006 to 2010, the PRC national road plan calls for building and paving 180,000 kilometres of all grades of roads each year. For comparison, the United States interstate highway system is about 76,000 kilometres long. In Yunnan, I have witnessed three villages make the transition from “roadless” to “connected”. Imagine going from walking, biking or maybe hitching a ride on a tuo luo jie (a village tractor) to continuous paved road access. You can now negotiate a better price for your tea or vegetables. Your kids can go to school beyond sixth grade because you no longer have to be concerned about boarding expenses.

The environmental consequences of all this road building are another matter. The government is spending tens of billions on roads and, within a decade, Yunnan will be linked by modern highways with Tibet, Myanmar, Vietnam, Thailand and India. Yunnan will soon have direct road access to saltwater ports in three separate countries. Bereft of access to the sea for its entire existence, the province will be landlocked no more.

Railroads have always been expensive to build in Yunnan. The mountainous terrain keeps construction costs high. But now China is flush with cash. When Go West is complete, there will be three new rail lines connecting Kunming with Singapore, India and Lhasa. Some of the new rail cargo will be precious metals and industrial minerals. Yunnan has China’s largest lead, zinc and phosphate deposits, most of which still lie underground. There has never been a modern transportation system to haul them to market.

As for dams, there are 33 separate hydro projects proposed for Yunnan’s three great rivers, the Nu, the Lancang and the Jinsha. Any observer can do the math – Yunnan doesn’t need that much electricity. Why build so much hydropower capacity? In the mid-twentieth century, one could have asked the same questions about the Colorado or Columbia rivers in the American West. Much of the electricity generated by damming these rivers is shipped to California. Without this power, California could not have created the eighth largest economy in the world.

Go West hydro companies will sell a portion of the energy of Yunnan’s rivers to power growth in Bangkok and Hanoi. The rest will be shipped to south-east China. The next chapter after the Go West strategy is implemented is to link Yunnan with Guangdong and the industrial supercities of the Pearl River delta on the far side of China. This will create a European-style common market powerhouse across the southern half of the PRC. Designs are already being drawn up to construct 20 new shipping ports the size of Seattle or larger on China’s eastern seaboard. The irony is inescapable: the ultimate goal of Go West-style development is to “Go East”.

How will the ethnic nationality peoples of Yunnan survive the coming transitions? How can conservationists support people and nature in Yunnan when Go West development is “reinventing another China”? The PRC has already answered this question. Go West will stop ecological degradation and foster shengtai jianshe, “ecological construction”. But this mandarin phrase is vague; I believe it masks more than it reveals. “Ecological construction” is so broad that it can mean building 13 dams on the Nu, or it can mean erecting only a few. In China, building no dams at all is not an option.

The question is not whether to develop, but how. One way to proceed is to embed basic environmental-planning practices into Go West projects, but this is not happening on a large scale. Of course, there is the political problem of gaining access to information about the dams. Details about road construction projects are also lacking. Though Chinese law is clear, none of the new roads that I saw opening up access to villages came with environmental reviews. And it shows – design and construction are so shoddy that many roads are impossible to keep open year round.

Basic conservation biology principles could also guide Go West. Ecological planning could influence where a railroad or highway gets sited, thereby reducing habitat loss so that an elephant or monkey population might not be eliminated. But as with integrated environmental assessments, conservation biology is not yet featured in large-scale Chinese planning. The roads, dams and powerlines are simply getting built.

At the conclusion of The Retreat of the Elephants, his magisterial survey of environmental history in China, Mark Elvin searches for reasons why unique Chinese attitudes about nature might have dampened the drive toward environmental destruction over the course of 3,000 years. He can’t find any that worked for very long.

What Elvin does discover is that the impetus to compete for scarce resources is common throughout human history and that, in China as elsewhere, “What might have been more viable long-term patterns counted for little or nothing faced with short-term choices for power.” After nations gain strength and influence, pressures to reach outward to control more resources almost always swamp long-term environmental protection.

Maybe it can be different in Yunnan. Maybe Go West can yet be steered toward keeping Yunnan ecologically intact. The only way to find out is to search for what is happening on the ground in the backcountry villages and the protected areas, to meet people in the growing group of Chinese conservation leaders and, when an opportunity arises, to offer assistance.


R Edward Grumbine chairs the masters in environmental studies programme at Prescott College, Arizona and teaches the undergraduate environmental studies programme. He is author of Ghost Bears: Exploring the Biodiversity Crisis and editor of Environmental Policy and Biodiversity.

This is an excerpt from his new book Where the Dragon Meets the Angry River. It is used here with permission.

NEXT: R Edward Grumbine talks to chinadialogue

Homepage image from Yuxi.gov.cn

A policy U-turn in Russia once again gives an industrial behemoth the freedom to dump toxic waste in the country’s greatest lake. Wang Qiuxia and Zhang Yadong report.

Early this year, Russian prime minister, Vladimir Putin overturned a nine-year-old ban on dumping toxic industrial waste in Lake Baikal. This will see a paper mill that was closed down in 2008 reopening and, once again, discharging pollution into the lake’s waters.

Baikal is the world’s deepest freshwater lake and the largest by volume and its aquatic life is among the world’s most varied and rare. But this natural treasure has been under constant threat from the Baikalsk Pulp and Paper Mill. In April 2010, with representatives from four environmental groups – Green Beagle, Green Longjiang, Beiyun Waterkeeper and Rivers without Boundaries – we travelled to Baikal to study the local environment.

Environmental NGO Baikal Environmental Wave is located in Irkutsk, Russia. Since the organisation was founded in the 1990s, the all-women NGO has been fighting Lake Baikal’s biggest polluter – the Baikalsk Pulp and Paper Mill. On January 29 this year, the group was “looted” by the government, with local police confiscating office computers in a strike against “pirate software”.

“It was just an excuse,” says Marina Rikhvanova, the organisation’s leader. “They refused even to look at our software licenses. The government’s aim was to stop us working, to force us to stop action against Decision No. 1.”

Decision No. 1 is the revision of regulations on human activity in the Central Ecological Zone of Lake Baikal, signed by Putin on January 13 this year. It rescinds the ban on cellulose and paper manufacturing by firms unable to treat their own wastewater and allows the dumping, burying or even burning of waste on the shores of the lake. This move gave the green light to Baikalsk Pulp and Paper Mill, the largest polluter on the lake, to resume production.

Baikal, known as the Pearl of Siberia, appears like a crescent moon in the mountains of Russia’s eastern border. When our group arrived in mid-April, the lake was still covered with a thick layer of ice, reflecting the clear blue of the peaceful sky. But between the lake and the dark green mountains stood two huge chimneys pouring out fumes and blanketing the area in haze. This is the Baikalsk Pulp and Paper Mill; the blemish on the pearl.

The mill was founded in 1966, when it produced mostly rayon for use in fighter-jet tyres. After the cold war, production shifted to viscose fibre and paper pulp, 90% of which was exported to China. Russia’s richest oligarch, Oleg Deripaska, has a 25.1% stake in the plant (he used to have majority ownership but sold a quarter of the business to pulp and paper firm Continental Invest in March). The Russian government holds the remainder. In 2008 poor management and pollution forced the plant, which could not afford to comply with new rules introduced in 2001, to close. It remained shut until early this year, when preparations began to restart production.

The plant has caused massive damage to the local environment and public health. When in production mode, it pumps up to 120,000 cubic metres of wastewater into the lake and releases thousands of tonnes of waste gas every day. To date, it has produced a total of six million tonnes of solid waste. Chlorides are the main pollutant in the wastewater, with 130 square kilometres of the lake bed now thought to be affected.

A Greenpeace investigation into the environmental impact on the town of Baikalsk in 2003 found that dioxins – highly toxic compounds – were present not only in the lake’s plants and wildlife, but also in locally produced milk, butter and other foods, at levels two to three times higher than those considered safe. Dioxins and furan (a toxic liquid) in the wastewater are broken down extremely slowly, and easily accumulate in organisms. This process is believed to have been responsible for wiping out huge numbers of Baikal seals in the 1980s and 1990s, with the chemicals damaging their immune and nervous systems.

Some also believe cancer and mortality rates have risen in Baikalsk – and that the mill is to blame. “We asked the government to publish data on cancer over the last few decades, but they refused,” says Rikhvanova.

Two years after the mill finally closed, as local government, NGOs and researchers were working on solutions to the environmental and employment problems left behind by the plant, Putin paved the way for it to re-open. While protection of the lake is, of course, very important, jobs and livelihoods also need to be considered, he said.

But can equipment and techniques dating back to the 1960s really provide a decent living for the locals?

For long, the paper mill was Baikalsk’s only significant source of revenue. At one point it employed 2,200 people. In 2008 it accounted for 84% of local GDP, 60% of tax income and employed 1,300 people (including non-locals) according to a local government report. But it has not been paying wages for some time, and workers have found other livelihoods. During our trip, we happened across a protest outside the local government offices. Former employees of the mill were demanding redundancy payments to use as capital for new ventures – they did not want to go back to the mill, they said.

Official statistics say that 45% of the mill’s workforce came from the local area when it shut down in 2008 and most were around the age of 40. After the mill closed, some families left to find work elsewhere. By 2009, the number of former mill workers still out of work had fallen to 551.

In spite of this shift, Putin swept away the major legal obstacle to the plant’s reopening. And since the beginning of the year, the mill has been busily preparing to re-start production. The first thing the management did was to wall off the waste outlets, meaning changes cannot be observed from the outside. A written request from our group to visit the manufacturing and waste-treatment facilities was also turned down on all sorts of pretexts.

At one point, the manager’s flustered secretary told us there had been “an explosion”. This time it was not an excuse. On April 21, at the town hall two kilometres away, we could smell an odour from the plant and see a yellowy-green haze in the air. One of Rikhvanova’s sources told her the mill had purchased chlorine gas to bleach pulp. But old equipment had caused one of the cylinders to explode and gas to escape.

And that is not all. There is evidence showing that, during trial operations, the plant was secretly releasing wastewater. When Baikal Wave informed the local government that it planned to monitor the waste outlet, they were told it was private and could not be tested. Soon after, the police came and confiscated their computers.

The fight is still going. Russian NGOs have joined forces with Greenpeace and WWF to form Baikal Activity, a network aimed at protecting the lake and stopping the paper mill through worldwide petitioning. Russian scientists have also drafted a letter to Putin, calling for a ban on paper-making on Lake Baikal.

Meanwhile, the old 1960s factory is calmly spewing out smoke, while sales staff travel to China to find new buyers for its products. As soon as that happens, production will start, no matter who stands in the way.


Wang Qiuxia is a project officer at Beijing- based environmental organisation Green Beagle.

Zhang Yadong is the director-general of Heilongjiang environmental organisation “Green Longjiang” and China coordinator of Rivers without Boundaries.

Homepage image by Wang Qiuxia

Washington shows foreign companies such as BP the big stick, but offers a big shield for its own multinationals abroad, argues Randeep Ramesh. We are doomed, he warns, to repeat historical mistakes.

While US president Barack Obama is lambasting BP for spreading muck in the Gulf of Mexico, he should perhaps pencil in a date with the people of Bhopal when he visits India later this year. While 11 men lost their lives on BP’s watch and the shrimps get coated with black stuff, the chemicals that killed thousands of people in Bhopal in 1984 are still leaching into the ground water a quarter of a century after a poisonous, milky-white cloud settled over the city.

The compensation – some US$470 million – paid out by Union Carbide, the US owner of the plant and now part of Dow Chemical, was just the cash it received from its insurers to compensate the victims, a process that took 17 years. But it’s one rule for them and another for anybody else.

Obama wants “British Petroleum” to pay back every nickel and dime the Deepwater Horizon disaster costs. To make sure BP gets the message, the president says he backs congressional plans to retrospectively raise the liability limit for claims from US$75 million to $10 billion. That’s real money.

While foreign companies in the United States are shown the big stick, Washington offers a big shield for its multinationals abroad. In the case of Bhopal, it was the US that blocked India’s requests to extradite Warren Anderson, the former chairman of Union Carbide who accepted “moral responsibility” for the accident until a short spell in an Indian jail changed his mind. June 7, 2010, saw just the prosecution of local Indian managers – 26 years after the event.

That was then. Surely India, which says it is an emerging power that wants to shape the world, would be able to stand up to the United States today? And wouldn’t a more moral president see that foreign lives are as precious as American ones? Apparently not.

India’s still playing a craven toady to a US that is ruthlessly pursuing an agenda where commercial interests are put above the lives of others. Delhi has stripped a flagship nuclear bill of a clause that allowed companies to be sued for negligence in the event of a – God forbid – accident.

It is bizarre to see a leader of the developing world offer up its citizens’ lives cheaply to secure investment from foreign companies and governments. Under the civil liabilities for nuclear damage bill -- central to a deal on the controversial nuclear pact with the United States -- costs for cleaning up a catastrophic failure would end up being paid by the Indian taxpayer.

Sure, India is desperate for the nuclear deal – which will see it become the only nonpermanent member of the United Nations security council to keep its atomic weapons and trade in nuclear know-how. But at what price? Today we know.

Washington made it clear it wanted India to set the bar low on liability – so that shareholders of large US corporations would not be forced to pay out for sloppy, deadly mistakes. So any future victims in India would be left at the mercy of the country’s justice system, like those poor souls who lost lives, loved ones and their health and were condemned to spending years lost in the courts with little to show but false hope.

Delhi had argued that international suppliers would not be willing to enter the Indian nuclear market without such a bill. But has Russia been willing to do so? And Germany accepts no cap on nuclear liability. In the United States the nuclear lobby accepts a liability set at US$10 billion.

In Bhopal, what happened in the years after the leak was a bigger scandal than the original accident. Although Delhi was cack-handed, the United States bears most of the blame. Unlike BP, Washington did not threaten US companies for deaths in the past and is actively working to ensure they evade responsibility in the future. Obama’s administration has not learned the lessons of history. It means we are doomed to repeat its mistakes.

www.guardian.co.uk/
Copyright Guardian News and Media Limited 2010

Homepage photo shows people affected by the Bhopal disaster protesting at Dow Chemical offices in Mumbai. Copyright © Greenpeace / Kadir Van Lohuizen
 

The launch of environmental disclosure rules was hailed as a turning point for eco-protection in China's business world. But two years on, they have all but been forgotten, says Huo Weiya.

When chinadialogue organised a talk last May to mark the first year since publication of China’s environmental transparency regulations, “Measures for the Disclosure of Environmental Information” (or “Measures” for short) Ma Jun, director of the Institute of Public and Environmental Affairs (IPE), said the biggest problem had been “the almost total lack of action from business”.

China’s firms may be unwilling to reveal environmental data, but when it comes to green marketing, there is no shortage of enthusiasm. In public, top executives never doubt the importance of environmental protection, nor do they deny their social responsibilities.

The Annual Summit of China Green Companies is a discussion forum established by such “environmentally aware” firms. Since the first meeting in 2008, the member companies have ceaselessly flagged up their concern for the environment with their choice of conference topics, ranging from “green competitiveness” to “green transformation” to this year’s “green evolution”.

April’s summit saw the publication of the China Green Companies Top 100 – one of the products of three years of this “evolution”. The list, compiled by the organisers of the meetings, the China Entrepreneur Club, indicates which enterprises have the most foresight, best meet their responsibilities and take most action on the environment, according to the organisation’s chief consultant, Yang Peng.

When he launched the list, however, Yang also revealed that the compilers, who examined almost 1,500 enterprises during their research, had found that Chinese firms were not in the habit of revealing data. A severe shortage of corporate environmental information had been the biggest obstacle, he said.

But China’s businessmen are never stingy when expressing their enthusiasm for environmental protection.

The attendees at this year’s meeting made constant reference to their personal efforts to protect the environment. Yu Minhong, head of the English education firm New Oriental, said that he had stopped flushing on night-time visits to the toilet, preferring to save water by flushing just once in the morning. And Guo Guangchang, chairman of investment firm Shanghai Fuxing enthusiastically promoted the practice of taijichuan, claiming it to be the most environmentally friendly of sports because people only need a small space to practise it. Some put forward more extreme positions. Alibaba Group chairman Jack Ma said before the meeting that e-commerce aimed to eradicate paper; while Zhang Yue of air-conditioning manufacturer Broad once said that his goal was to eliminate air-conditioning.

In 2004, the ALXA SEE Ecological Association was established by 100 businessmen to work on issues ranging from sandstorm prevention to setting up ecological awards. They now also fund other Chinese NGOs. Some have started investing in private environmental funds. One of the founders of ALXA SEE, property developer Feng Lun, set up the Vantone Foundation, which is modelled on philanthropic funds in the United States and operates independently of its parent firm.

Such open expressions of environmental concern and participation in environmental events have improved the public image of these businessmen. But this does not mean the companies themselves are environmentally friendly. There is plenty of evidence that the greening of Chinese firms has gone no further than the mouths of their figureheads.

In 2009, a report on China by United Kingdom-based charity the Carbon Disclosure Project (CDP) concluded that the gathering and management of data on carbon emissions would be one of the main obstacles for Chinese companies taking a low-carbon route.

Each year, CDP requests the disclosure of carbon data from several thousand companies. In 2008, Chinese consultancy Syntao started working with CDP, asking for data from 100 of China’s largest firms by market value. In 2009, only 11 firms filled in the questionnaire, with 18 listed companies providing related information. In 2008 those figures were five and 20 respectively. Although the situation is improving, the ratio is still very low. In October last year, Greenpeace China carried out a survey of the world’s largest 500 firms and the biggest 100 listed companies in China, finding that none of the 25 factories owned by those 18 listed firms had released pollution data within the time limits set in the “Measures”.

Work by the IPE offers further dismal statistics. Since 2006, the IPE has published and updated maps of air and water pollution in China, having collected a range of official environmental data from 2004 onwards. By March this year, the two databases contained over 58,000 cases of firms being placed under supervision or sanctioned for environmental violations. And, in a report published in March on the role of Hong Kong in overcoming these failures, the IPE found that 175 firms listed on the Hong Kong stock exchange had committed over 750 known breaches of environmental rules on the mainland.

Chinese firms are greening only their image – their actual businesses remain unchanged. The reason is clear: going genuinely green costs, while a change of image is much cheaper. As economist Zhang Weiying said at the annual meeting, “If there’s no green business model, it’s all just slogans.”

One way to change this would be to ensure that firms can make money at the same time as being green. China’s government and many academics view green development as the key to maintaining both economic growth and sustainability, and so the state is currently offering various methods of support. This is the carrot.

At a sub-forum on green financing at the April summit, a number of investors expressed confidence that there was money to be made by backing environmentally friendly projects. But if the government does not change its approach and spur green development, that carrot will not be of any use.

In his article, “A paper victory”, chinadialogue’s Beijing-branch deputy editor Liu Jianqiang explains that certain government departments are sending out false signals that the environment is improving, thus providing cover for the polluters. This is bound to slow down the greening of China’s businesses.

Many environmentalists have placed their hopes for improvement in the “Measures”, as they benefit public participation and, therefore, oversight of corporate pollution. In an interview in April, Ma Jun said “The ‘Measures’ lay the foundation for the regulations and policy for openness of basic environmental information.” But there has been little action to report, and no firms have released information in line with their requirements.

There has also been a marked lack of interest from the Chinese media in noting the second anniversary of the publication of the regulations. The Institute of Environmental and Public Affairs published the Hong Kong report already mentioned, but the government ignored the event. It seems the document has been forgotten.

If there is no carrot to tempt businesses into becoming green, the “Measures” will fail to work. The public will be unable to put pressure on the corporate sector, and nothing more than greenwashing will have taken place.


Huo Weiya is associate editor in chinadialogue’s Beijing office.

Homepage image from daonong.com shows a poster for the 2009 Annual Summit of China Green Companies

A novel approach to innovation – where social redefinition of existing technologies is taken as seriously as new inventions – could boost our ability to fight climate change, say David Tyfield, Jin Jun and Tyler Rooker.

Big hydro, big solar photovoltaic (PV) and big wind – these are the usual focus of accounts of low-carbon technologies in China. But a very different type of innovation, ranging from a farm cooperative in Yunnan, to woodchip and corn pellets in rural Beijing and air-conditioning using just salt and water in Hangzhou and Shenzhen, could be even more significant as examples of how to achieve a low-carbon economy and society for China and the world.

Low-carbon innovation in China is an issue of key global significance. This is not just because of the large and growing carbon footprint of the Chinese economy as a whole, but also because China’s spectacular social and economic growth represents a unique opportunity to develop and roll out low-carbon innovations. China’s capacities in science and innovation are also improving rapidly. And, following the financial crash of 2008, it is clear that China’s growing geopolitical influence has entered a new phase, which will be a crucial determinant of global efforts to respond to climate change.

However, it must not be forgotten that China is still a developing country. Indeed, just as the United States economy (let alone its military) continues overwhelmingly to dominate all other countries and is still over twice the size of China’s with a population one-fifth as big, caution is needed not to exaggerate the current strength of China’s science and innovation.

In particular, hi-tech innovation capacities, while undoubtedly improving, are still comparatively modest in most sectors. Despite (or rather, precisely because of) these modest capacities, China’s current policy regarding low-carbon innovation focuses squarely on hi-tech innovation. To be sure, this focus is achieving some significant successes, such as China’s global solar PV companies or its leading coal combustion technologies. But these alone, even where they are widely adopted (and over 90% of Chinese PV is currently exported), will be unable to produce the wholesale transition to low-carbon systems that is needed.

One form of low-carbon innovation that offers considerable opportunities, but that is usually overlooked is “disruptive innovation”. Disruptive innovation challenges many of our common assumptions about innovation. As originally developed by US business professor Clayton Christensen and applied to low-carbon innovation by a previous report by the National Endowment for Science, Technology and the Arts (NESTA), disruptive innovation involves “cheaper, easier-to-use alternatives to existing products or services often produced by non-traditional players that target previously ignored customers” and/or use in novel contexts and combinations. It is primarily characterised by a social redefinition of a technology, as opposed to improvement of the technology along established trajectories. Disruptive innovation will likely offer lower than cutting-edge functionality, according to established definitions, but for different uses and to neglected customers.

As set out in a report by the United Kingdom’s Royal Academy of Engineering in March, the exceptionally tight time constraints for the necessary low-carbon transition mean that “only the low-carbon technologies that are already known can make a significant contribution to meeting the 2050 targets. They are already in the marketplace, close to it or close to being demonstrated at scale.” In short, we must do the best with what we have.

But from the perspective of disruptive innovation, which makes use of just such established technologies, this maximisation of climate impact need not be limited to current uses and familiar sectoral definitions of these technologies. Rather, disruptive innovation offers a potential route to substantial improvements in the societal impact of low-carbon technologies that is not dependent on their radical technological upgrade.

This argument becomes even more important in the case of China. This is not just because China’s capacities for hi-tech, low-carbon innovation are not yet fully developed, as demonstrated by the continuing dominance of intellectual-property ownership of major low-carbon technologies by OECD-based – developed-world based – companies. But also because Chinese companies are already transforming global competition through their low-cost disruptive innovations, as business scholars Ming Zeng and Peter Williamson have shown.

For instance, Haier has developed a range of fridges with relatively low-tech adaptations that serve a variety of niche, but highly profitable, markets, including student rooms (doubling up as desks) and wine collectors. Similarly, China International Marine Containers Group (CIMC) has achieved unrivalled global dominance in their industry through a low-cost strategy. Other examples of successful low-cost disruptive innovators include car company Chery, piano makerPearl River, consumer electronics maker TCL, computer company Dawning and port-equipment manufacturer ZPMC. The list goes on and on.

While these and other examples listed by Zeng and Williamson are not low-carbon innovators (at least not in all cases and not yet), high profile examples of the latter are increasingly apparent. BYD is using its global leadership in battery manufacturing and technology to develop low-cost electric cars and has won the attention (and investment) of legendary investor, Warren Buffett. Himin Group is now a global leader in solar-thermal technology, a sector dominated as a whole by Chinese companies.

By focusing on low-cost products and services for the Chinese market, this also has the advantage of developing technologies that are appropriate not only for Chinese society but for other developing countries worldwide. And with over 70% of total costs of abatement and hence low-carbon investment to 2050 likely to come from developing countries, servicing this market would also be to focus on the major business opportunity, not merely to make a virtue of necessity by targeting secondary sources of demand.

A policy that effectively supports the existing Chinese competitive strength of disruptive low-carbon innovation would also expedite a Chinese low-carbon systems transition, responding to the unprecedented timescale. Conversely, banking primarily on the improvement of hi-tech innovation capacities will incur substantial (and climatically consequential) delays, given the need to develop institutional, social and cultural conditions that are hard to short-circuit.

Similarly, incorporating disruptive low-carbon innovation into policy could support a broader public redefinition of low-carbon, away from its current identification with expensive equipment. This tends to embed a perceived opposition between low-carbon innovation and socio-economic development and hence to slow down the former, while it is clear that a low-carbon shift must attend to both. China cannot and must not be forced to choose between “environment” and “economy”, and disruptive low-carbon innovation is an important way to sidestep this false choice.

Finally, disruptive innovation offers the most plausible route to establishing world-beating companies, while simply pursuing existing leaders directly through hi-tech improvements along established pathways sets up a perpetual game of “catch-up”. Globally competitive hi-tech companies may be more effectively fostered by sponsoring disruptive low-cost innovations than by focusing on high-technology itself. This has significant implications for national economic growth as much as it does for business strategy, and this, in turn, is crucial for China’s low-carbon shift.


NEXT: Learning by example


This is a summary of the report “Game changing China: Lessons from China about Disruptive Low-Carbon Innovation”. It was commissioned by the UK’sNational Endowment for Science, Technology and the Arts (NESTA) and written by David Tyfield (Lancaster University), Jin Jun (Zhejiang University) and Tyler Rooker (Oxford University). It is summarised and used here with permission.

Homepage image by bzuberi
 

In the second instalment of their report on disruptive innovation, David Tyfield, Jin Jun and Tyler Rooker consider seven Chinese case studies and the lessons they hold for policymakers.

In the Chinese game Go, a single unexceptional move may alter the direction of play such that it turns out to switch the game in a player’s favour, no matter the odds against him when it is played. This move is described as poju (破局), which literally means “game-breaking” and can be roughly translated as “game-changing”. The lessons from seven Chinese low-carbon game-changers could catalyse some even bigger changes towards low-carbon systems both in China and beyond. 

The Chinese “game-changers” have each developed a low-carbon innovation that has the potential to make a significant contribution to emissions reductions and the move to a low-carbon society. In five years time, five of these innovations could together be saving up to 66 million tonnes of carbon dioxide per year, while the other two will be important players in markets that could have total savings of 270 million tonnes of carbon dioxide per year, according to our calculations. These are equivalent to the greenhouse-gas emissions of 25 million and 100 million Chinese homes respectively, or 4% and 16% of total Chinese emissions in 2006. 

Introducing the game changers 

* Global Environment Institute (GEI) is a Chinese NGO that has set up a full low-carbon agriculture system for poor farmers in the south-western province of Yunnan. There have been many national and international programmes to encourage the use of anaerobic biodigesters by Chinese farmers to produce methane from animal slurry that can then be used for cooking and heating. Many of these projects, however, have failed or have had only temporary effect because the use of the biodigester has not been successfully integrated into the farmers’ everyday practices. GEI has therefore established the necessary institutional mechanisms to make use of biogas socially sustainable, in the process also shifting these farms to organic agriculture with further emissions reductions. 

* Himin is one of China’s largest producers of solar-thermal water tanks, a market that is in turn dominated globally by Chinese companies. The business strategy has been to produce low-cost solutions to energy and heating that directly attract customers and so do not depend upon government subsidy. In the process, Himin has transformed the local economy of its home town, Dezhou in Shandong province, eastern China. Over 90% of families now use solar-thermal energy in the area and 30% of the workforce is in industries related to the sector. The real challenge for the future, says chief executive and founderHuang Ming, is whether the company is ready for the continuing growth in demand over the next decades. 

* Hangzhou ISAW Technology Corporation (ISAW) has a range of products that build on chief executive Yuan Yijun’s scientific expertise to exploit “psychrometric” principles, regarding the different physical and thermodynamic properties of vapour mixtures, to provide low-cost, relatively low-tech and low-carbon alternatives to a range of processes that are usually extremely energy intensive, such as air-conditioning and solar desalination of salt water. These innovations have attracted the attention of the major Chinese real estate company, Vanke, and Masdar eco-city in the Persian Gulf. 

* Lüyuan is a major manufacturer of electric bicycles and was the first Chinese company to develop an e-bike. The e-bike is a hugely popular form of transport in a country in which commuting distances are growing as people move to the burgeoning mega-cities but cars are too expensive and, in any case, face daily gridlock. Some 120 million e-bikes are estimated to be on China’s roads, and Lüyuan is a major player in this market. And with annual savings of about one tonne of carbon dioxide equivalent per year, this adds up to a huge overall saving in emissions, even before systemic effects of discouraging private car ownership are included. 

* Pearl Hydrogen is also targeting the e-bike sector, amongst its various products, but using its innovative, but low-cost and simplified, fuel-cell technology. Recognising the extraordinary challenges associated with the familiar goal of a fuel-cell vehicle that could compete with existing car models, chief executive Brian Tian and team have been focusing on novel uses for their fuel cell, including providing back-up power to telecom-base stations needing the guarantee of uninterrupted power supply (UPS). And in collaboration with an Italian partner, they have been busy creating a full energy system for their fuel-cell bicycle that allows production of the hydrogen fuel from high pressure electrolysis of tap water in the user’s home. 

* Shengchang Bioenergy is making high-quality pellets from agricultural residues that would otherwise simply be burned in the field, as well as the stoves and boilers to maximise the efficiency of combustion. By offering an attractive substitute for current coal burners, therefore, a double emissions reduction is provided. Furthermore, by positioning pellet factories to service farmers within a short 20 kilometre distance, Shengchang is establishing a model of reliable and locally-sourced energy. 

* ZNHK (Beijing Sinen En-Tech) offers a water purification system that allows the high temperature recycling of water in industrial processes. By keeping the water at elevated temperatures, energy that is normally wasted through cooling and reheating the water is saved, while the purity of the filtered water meets the highest national standards. And by allowing for efficient water recycling, the water demands of the industrial processes are also reduced. Cost savings from reduced energy and water use typically allow recovery of the capital expenditure of fitting the equipment within one year. 

Current policy – in China and many other countries – tends to focus on research and development for high-technology “solutions”. The innovations highlighted here instead suggest that waiting for “perfect” technologies would be a mistake. A broader understanding of innovation would also be particularly compatible with the needs of developing countries such as China; these innovations are more appropriate to the Chinese domestic market and that of other developing countries. 

A greater focus on such technologies would help to engage all stakeholders, including the world’s poorest, in low-carbon innovation. It would also overturn the assumption in vital international collaborations that developing countries can only follow the lead of developed nations. In collaboration with its partners, disruptive low-carbon innovation represents an opportunity for China to set the agenda. 

First, policy could create more opportunities for these types of innovation to develop and spread. The diversity of China’s provinces and the relatively devolved government structure could be a significant strength in incubating a wide range of experiments, with successful ones leading to broader support at higher tiers of government – a process that would match the pragmatic approach of the last three decades of economic “reform and opening up”. Current financial support and initiatives establishing “low-carbon zones” could also be opened to these forms of innovation, beyond the familiar focus on hi-tech innovation and research and development (R&D). 

Second, policymakers could provide the right kind of governance, that is, as an enabler rather than director or controller. This will require new ways for government, innovators and stakeholders to interact, regardless of their existing guanxi (connections or relationships). Refocusing of fiscal and other supports from “hi-tech” to “innovative” companies, more broadly defined, could also significantly help many innovative companies that are excluded under current definitions. 

Third, policymakers could also exploit the opportunities of low-carbon innovation policy to improve governance. Traditional modes of governance are seriously challenged by the need for wide social participation in the transition to a low-carbon society. Building on China’s indigenous strengths for low-cost and low-carbon innovation and encouraging widespread participation could help to develop governance in the medium term. 

Finally, policymakers both within and outside China (including the UK) could maximise the opportunities for intra-national and international learning by involving small and medium enterprises such as these in partnerships, rather than just academics and large multinational corporations. This will require establishment of new platforms for both formal and informal interactions on a regular basis that can in turn stimulate substantive international collaborations in innovation, not just R&D projects. By explicitly addressing these issues and developing its existing strengths in low-carbon innovation, China could lead the global low-carbon transition that we need in the next 40 years. 


Part one: disruptive innovation explained

This is a summary of the report “Game changing China: Lessons from China about Disruptive Low-Carbon Innovation”. It was commissioned by the UK’s National Endowment for Science, Technology and the Arts (NESTA) and written by David Tyfield (Lancaster University), Jun Jin (Zhejiang University) and Tyler Rooker (Oxford University). It is summarised and used here with permission. 

Homepage image from Haikou.gov.cn