GENERAL REPORT

INTRODUCTION

1. The Inaugural Session of the "China Council for International Cooperation on Environment and Development" took place in the Diaoyutai State Guesthouse, Beijing, from Tuesday 21st April to Thursday 23rd April 1992.

2. Forty two members of the Council attended. (lists of Chinese and International Members, Special Guests and Observers are provided in Annexes 1 and 2.)

3. The discussions were informal and frank. They covered: priorities and policies; implementation and organization; and practical opportunities for cooperation in the fields of economic development and the conservation of the environment in China.

4. The Members also had the privilege of presenting their views at the highest level of the Chinese Government in a discussion with Premier Li Peng at the close of the Council Session.

5. The members of the Council attended the Inaugural Session at the invitation o f State Councillor Song Jian, on behalf of the Chinese Government. State Councillor Song Jian is Chairman of the Environmental Protection Commission under the State Council and also Chairman of State Science and Technology Commission.

6. The host institution was the National Environmental Protection Agency (NEPA), under the leadership of Administrator Qu Geping. NEPA has been made responsible for inter-ministerial coordination and for supporting the activities of the Council. It has established a small Council Secretariat to maintain and develop international and domestic contacts and to carry out the functions necessary to en sure proper follow-up within China to the suggestions made by the Council.

7. Arrangements have also been made for the Council Secretariat to obtain support in the international aspects of the Council's activities. For the first years of the Council, this support will be provided by a Canadian Executive Agency, funded by Canada, and known as the Vancouver Support Office.

8. The preparations and the organization of the Council on the international side were financed by the Ford and Rockefeller Foundations which also contributed, together with the Chinese Government, to the costs of the Inaugural Session.

9. In July 1991, the Government of Canada decided to provide financial support in the amout of 5 million Canadian Dollars to make possible the rapid initiation of the Council's activities. This early and generous contribution has made it possible to inaugurate the Council and to begin a substantive programme of activities in line with its objectives.

10. The Chinese authorities asked Mr. Martin Lees to act as international coordinator of the preparations for the Inaugural Session of the China Council. This Summary Report represents his interpretation of the discussions, and not necessarily the views of all the participants. It is based on a more detailed record pre pared by Ms. Barbara Finamore. In order to ensure frank and direct discussions, it has been agreed that the Summary Report of the session should present an over view of the discussions without attribution to individual speakers in the debates.

Ⅰ. BACKGROUND AND PURPOSE

11. In the course of 1987, the Chinese authorities initiated a programme of private, high-level meeting s between carefully selected groups of international personalities and the leaders of China. The first such meeting was held in May 1988 on the topic "China and the World in the Nineties". It provided an opportunity f or frank discussions about the relationships between the processes of economic reform and modernization in China and the trends and changes in the wider world economy. The participants had the privilege of extensive discussions with China's three top leaders.

12. The second meeting in the programme was held in December 1989 on the subject of "Economic Management and Foreign Investment for the Continued Openness and Reform of the Chinese Economy". On this occasion, the participants had the privilege of meetings with both General Secretary Jiang Zemin and Premier Li Peng for extensive discussions.

13. Following the success of these two high-level meetings, in January 1990 the Chinese Government decided to take an international initiative aimed at increasing cooperation between China and the world community in the fields of environment and economic development. They therefore decided to convene the "International Conference on the Integration of Economic Development and Environment in China" which was held in October 1990, also as part of the programme on "China and the World in the Nineties".

14. The initiative was taken jointly by three top-level Chinese personalities, Dr. Song Jian, State Councillor, Chairman of the State Science and Technology Com mission (SSTC) and also Chairman of the National Environmental Protection Commission under the State Council; Professor Ma Hong, President of the Development Re search Centre of the State Council (DRC); and Professor Qu Geping, Administrator of the National Environmental Protection Agency (NEPA).

15. In taking the initiative, they intended that "the private high level meeting will help us, in a spirit of openness and cooperation, to define a strategy and to initiate action which will enable us to combine economic growth, modernization and reform with the long-term conservation of the environment".

16. Following this Conference, the State Council decided in April 1991, to establish the "China Council for International Cooperation on Environment and Development" to facilitate cooperation between China and international community in the fields of environment and development.

17. The main purposes and specific objectives of the Council are set out in its Terms of Reference. These include details of its organization, membership, secretariat support and financial arrangements.

18. The Council is a high-level advisory body which will make proposals for consideration by the Chinese Government on the integration of environment and development. It will meet regularly for an initial period of five years. It will assist in developing an integrated, coherent approach to environment and development, and it will encourage systematic cooperation between China and other countries.

19. The Council is a non-governmental body but with strong governmental involvement. It is composed at present of around 24 Chinese Member and 22 international Members, all chosen for their expert knowledge and experience.

Preparations for the Inaugural Session.

20. The principal aims of the inaugural session were:

(1) The Council should take all the necessary decisions to initiate its activities as rapidly as possible.

(2) The Council should undertake a first substantive discussion on a number of priority issues.

(3) The Council should agree on the priorities and approach to be adopted its work programme.

(4) The Council should select a number of priority issues and establish Expert Working Groups of Chinese and international experts for each one.

21. To provide a sound basis for the discussions of the Council, a number of procedural and substantive papers were prepared as follows:

Procedural Papers:

— The Agenda for the Inaugural Session (provided in Annex 3.)

— The Draft Terms of Reference of the Council, now adopted.

— The Draft Rules of Procedure of the Council, now adopted.

Substantive Papers:

— "Environmental Protection in China".

— "Investment and Development of Environmental Protection in China".

— "A Preliminary Analysis of the losses caused by Environmental Pollution in China".

— "Strategic Alternatives for Coordinated Development of Energy and Environment in China".

— "A Brief Introduction to China's Environmental Management System,"(Background Paper).

22. Three further steps were taken to prepare the Inaugural Session. In September 1991 a small meeting was organized in Ottawa to plan the preparatory process. Then, in January 1992, a Bureau of the Council was established, composed of the designated Chairman and Vice-chairmen of the Council. Also, immediately before t he Council Session, a preparatory meeting of the international Members was organized in the Diaoyutai State Guesthouse.

23. At this preparatory meeting, presentations were made by Dr. Marcel Massé, P resident of the Canadian International Development Agency (CIDA), nominated as International Vice Chairman and by Mr. Martin Lees, international coordinator. Background briefings were then given by Mr. Attila Sonmez, Chief of Mission of the World Bank, Beijing, and by Mr. Peter Harris, Representative in China of the For d Foundation. This preparatory meeting provided the international Members, on arrival in Beijing, with a clear view of the economic and political situation in C hina and reviewed the state of preparations for the Inaugural Session.

Ⅱ. OPENING CEREMONY

24. The Inaugural Session of the Council was opened by Vice Premier Wu Xueqian. He emphasised that the Chinese Government will welcome constructive suggestions and recommendation from the Council, particularly regarding the proper balance between environment and development for the future of China.

25. Vice Premier Wu officially nominated Dr. Song Jian, State Councillor, Chairman of the Environmental Protection Commission under the State Council and Chairman of the State Science and Technology Commission, to be the first Chairman of the Council. This nomination was endorsed by the Council by acclamation.

26. Accepting his nomination, Dr. Song Jian proposed three Vice Chairmen for the Council: Mr. Qu Geping, Administrator of the National Environmental Protection Agency; Mr. Gu Ming, Vice Chairman of the Committee of Legal Affairs of the National People's Congress; and Dr. Marcel Massé, President of the Canadian International Development Agency (CIDA), Canada. The Council endorsed these nominations by acclamation.

27. Under the chairmanship of State Councillor Song Jian, the following participants then made introductory statements to mark the inauguration of the Council:

(1) Chairman Song Jian

(2) Vice-Chairman Marcel Massé

(3) Vice-Chairman Qu Geping

(4) Vice-Chairman Gu Ming

(5) Professor Federico Mayor, Director-General, United Nations Educational, Scientific and Cultural Organization (UNESCO)

(6) Dr. Kenneth Prewitt, Senior Vice President, The Rockefeller Foundation

(7) Professor Gurgulino de Souza, Rector of the United Nations University, Tokyo

(8) Mr. Peter Harris, Representative for China, the Ford Foundation, Beijing

(9) Mr. Attial Sonmez, Chief of Mission, the World Bank, Resident Mission in China, Beijing

(10) Mr. Martin Less, International Coordinator of the Council

(11) Mr. Ni Tianzeng, Vice Mayor of Shanghai

28. In the course of these opening remarks, the following points were made:

29. The Council is a unique consultative body which has three distinguishing features: it encompasses both environmental protection and economic development, be cause these are intimately related; it invites Chinese and international expert s to deliberate together and to learn from each other's experiences; and it has a five year mandate, because it would be unrealistic to expect the Council to deal adequately with such a huge, complex and important subject in a short time.

30. With the Council's assistance, China has the potential to become a world leader in facing the overwhelming challenge of our time: how to achieve economic growth and improved standards of living for the world's people without further dam age and destruction to the resource base on which life depends. China can achieve an impressive economic growth rate with a relatively small growth in per capita energy consumption, through judicious use of energy conservation and energy efficiency practices, technological breakthroughs in solar and biomass power generation, and state-of-the-art coal gasification technology. Through an enlightened policy of technological development, technology transfer, and scientific training it can also set the pace in biodiversity preservation; management of soils, water and forests; and other global environmental issues.

31. In 1972, the United Nations Conference on the Human Environment in Stockholm , brought home the problems of environmental degradation to China. Now the Earth Summit in Brazil has highlighted increasing worldwide concern about global environmental issues. If the Council can help China to achieve a sustainable balance between economic development and environmental protection, and to make a positive contribution to global environment protection, it may serve as a model for other countries.

32. UNESCO is ready to cooperate closely with the Council in its elaboration of an integrated approach to policy making for sustainable development. It is well placed to contribute to the Chinese effort, not only in some of the disciplines relevant to sustainable development, but also in the intersectoral and interdisciplinary domain. Three main pillars of such an intersectoral approach are: education at all levels; science, including access to and transfer of knowledge; and social and humanistic sciences.

33. The United Nations University, through its worldwide network of research and training centres, programmes, initiatives, conferences and publications, is ready to cooperate with China and the Council in seeking economic and social development without degrading the environmental resources upon which all life depends.

34. China has an ancient social, political, cultural and technological tradition of caring for the environment. For several millennia it has sustained a large population on a small area of cultivable land in a balanced way. In the last 40 years, however, rapid change and economic achievement have led to unprecedented growth in environmental problems and to many difficulties in reconciling economic development and environmental protection.

35. The Council cannot only provide an important model of cooperation between major countries and the rest of the world. It can also provide an opportunity for its international Member to learn form the achievements of China in this important field.

36. The City of Shanghai has achieved significant results in the last decade in the areas of economic development and environmental protection. The next decade will pose even greater challenges, as Shanghai opens up further to the outside world and strives to become a major financial and trade centre of the Far East. Environmental assessments are prepared for all development projects and programmes, including the environmental protection programme for the development of the Pudong Special Economic Zone. Shanghai recently hosted a successful meeting concerning the integration of economic development and environmental protection.

Ⅲ.DISCUSSION OF AGENDA ITEMS

ITEM 1:AN OVERVIEW OF ENVIRONMENTAL ISSUES IN CHINA

(a) Introductory Statement by Professor Qu Geping, Administrator, National Environmental Protection Agency

37. Under the chairmanship of State Councillor Song Jian, a substantial introductory statement on "Environmental Protection in China" was made by Professor Qu Geping, Administrator of ENPA, covering the following main points:

China's efforts in environmental protection.

38. China's reform and opening to the outside world have promoted its efforts in environmental protection. GNP has increased by an average of 9.5% a year in real terms in the past ten years. Yet, under such rapid economic development, environmental conditions in China have remained stable and not deteriorated. This is the result of the implementation of a series of effective measures and policies.

39. For example, the volume of waste water and solid matter discharged for every 10,000 yuan in industrial output value has been reduced. In 1990,9% more discharged industrial waste water was treated up to the state-set standard compared with 1985; the utilization rate of industrial solid waste was increased by 3%, and the purification of waste steam has also made good progress. Urban environmental conditions have also been improved, with dust and floating particles reduced to some extent and the water conditions in come cities improved.

40. The water quality of the country's main rivers and coastal waters has generally remained satisfactory. The afforestation drive on the plains and in the coastal areas has achieved rapid progress. China has completed over 9.4 million hectares of its greening project in north, northwest and northeast China, and has no w achieved a national forest coverage rate of over 13%. It has established more than 600 nature reserves covering over 30 million hectares, and has constructed over 2000 pilot agricultural bases for research into methods of sustainable agricultural development.

41. Environmental protection is included in the overall state policy of China. It is integrated at every stage, in the planning, implementation and operating of economic construction, urban and rural projects. Environmental protection is specifically included in overall and long-term planning for national economic and social development. And three major policies have been formulated and implemented: strengthening environmental management; stressing prevention; and adopting the "polluter pays principle".

42. China has promulgated and implemented more than 20 laws and regulations on environmental matters, and set up a five-level management network for environmental protection which employs over 70,000 people. A system has also been established for scientific research in environmental protection and for environmental supervision and inspection, including 148 scientific research institutes and over 2000 environmental supervision stations.

An overview of environmental problems.

43. China still faces many environmental problems: it is a developing country with a huge population that is still growing by 16 million each year. This exerts great pressure on environmental protection and development. Some of the main problems are:

44. There are serious problems of soil erosion, desertification and salinisation, a decrease in arable land and an increase in grassland degeneration. This pose s great difficulties for agricultural development. A major problem is the shortage of forest resources, with a coverage of only 13.4%. The habitat for rare and nearly-extinct animals gradually shrinking and the species population is decreasing.

45. Although water resources are abundant, they are unevenly distributed in the country. Many regions are short of water for farmland irrigation and their agricultural development has been affected. China has 300 cities with water shortages. In 50 of these, the shortages are serious, affecting industrial production and human life.

46. Water pollution is mainly caused by the discharge of industrial waste water. In 1991, the total discharge of waste water was 345.4 billion tons, and 24.9 billion tons of this was from industrial production. Of this amount, some 80% was poured into rivers without treatment.

47. The air quality of large and medium cities is poor, often failing to reach t he established national standards, and falling far short of the standards set by the World Health Organisation. The pollution is mainly caused by carbon dioxide and sulphur dioxide from burning.

48. The volume of industrial solid waste and garbage has kept increasing and the rate of treatment and utilization is very low. China has now accumulated a total of 6.75 billion tons of garbage, occupying 56, 000 hectares of land. This garb age also contains large quantities of heavy metals and poisonous and harmful materials.

The economic costs of pollution.

49. The economic losses caused by environmental pollution in China are serious. China suffers about 95 billion yuan of economic losses each year caused by environmental pollution, which is equivalent to 6.7% of GNP.

50. These losses can be broken down as follows: annual economic losses caused by water contamination, 40 billion yuan; air pollution, 30 billion yuan; and solid waste and pesticides, 25 billion yuan. The losses are mainly manifested as follows: about 32% in damage to human health; 32% in losses in agriculture, forestry and animal husbandry from pesticide use; 30% in losses in industrial and building materials; and 6% in losses in other areas.

51. The economic losses caused by environmental pollution may continue to get worse, with improvement in some areas but deterioration in the overall situation. It will not be possible to bring environmental pollution under control by the en d of the century. In the meantime, China's national economy is continuing to develop, and thus the opportunity cost of environmental resources will be relatively higher.

52. Even if the losses from environmental pollution can be kept at the present level of 6.7% of GNP, the annual economic losses during the next five years will amount to 130 billion yuan, with a five-year total of 600 billion yuan or more. Such huge economic losses will not only seriously hinder social and economic development, but they will also affect the improvement of the people's living standards.

53. China has managed to allocate a certain level of resources for environmental protection efforts although it is not yet strong economically. During the Seven the Five-Year Plan, total investment for environmental protection amounted to 48 billion yuan, an increase of 160% over the previous five-year plan. This amount was equivalent to 0.7% of GNP.

54. China is now making efforts to increase the financial input to the environmental protection field. However, it is a developing country, not economically strong, relatively backward in science and technology, and tight in finance. Thus it will be a long time before China can provide adequate resources for environmental protection. China therefore hopes to receive support for its efforts from the international community.

55. China's environmental problems stem in part from the difficulty of replacing coal as the main energy source, the backwardness of science and technology in China, and the unreasonable price structure, which leads to waste of natural resources. The prices of raw materials such as coal, natural gas and water are extremely low in China, resulting in considerable waste and a low efficiency of utilization of resources and energy. Experts from academia and from government realize that the pricing system is not rational: they are working towards a move reasonable accounting system, suited to national conditions in China.

Goals and plans for environmental protection.

56. China's goals and plans for environmental protection by the year 2000 are: to bring environmental pollution under control; to improve environmental quality in key cities; and to check the deterioration of natural resource systems to some extent. These goals are not very ambitious, and fall far short of people's expectations. Yet more ambitious goals would cost 200-300 billion yuan or more in the next 8 years.

57. More ambitious goals would be very difficult for the economy to sustain. Major measures would include:

— implementing national industrial policies and industrial structures that prohibit enterprises from consuming excessive amounts of resources and generating serious pollution;

— strengthening afforestation efforts;

— promoting ecological/agricultural projects and protecting land resources;

— rationally protecting and using water resources and giving correct guidance to township enterprises;

— continuing to strictly control growth of population;

— raising the cultural level and enhancing the sense of environmental protection among the people;

— reforming urban and rural construction and improving urban infrastructure;

— carrying out programmes for the comprehensive improvement of the urban environmental;

— continuing to strengthen the management of energy resources by giving equal importance to energy development and energy saving;

— adopting rational prices for resources;

— pushing forward technical upgrading for energy saving;

— improving the energy consumption structure and energy distribution.

58.In the field of natural resources, China will promote efforts: to strengthen energy management and environmental protection; to reform the current pricing system for natural resources; to give resources their due place in national economic accounting; to strengthen the protection and management of rare species; to maintain biological diversity and to build up the system of nature reserves.

59.China will support the development and practical application of scientific and technological research findings, establish technical systems for environmental protection efforts, maintain rational and proper financial inputs to environmental protection, and increase financial resources to guarantee funding for efforts in this field.

60. The goal of the Eighth Five-Year Plan is the environmental protection funding should reach 0.85% of GNP. The goal for the Ninth Five-Year Plan is an increase to 1% of GNP.

Discussion.

61.In the comments which followed, the following main points were made:

62.China should explore policies which promote growth while, at the same time, providing better environmental protection - for example, water-saving irrigation technologies. This Council can help in examining and advising on technologies t hat have been successful in other countries, then China can decide which ones are appropriate for China.

63.The Council can also help by making available the latest studies and state-of -the -art methodologies in the field of resource pricing. The expert working Groups can bring together and coordinate studies being performed by different groups, without duplicating research.

64.Many other countries are spending 1%-2% of GNP on environ-mental protection, which is a higher percentage than that spent in China. The Council should consider whether the experience of other countries in the regard is relevant to China, and whether China should de-vote more resources to environmental protection.

(b) General Discussion on the Role, Objectives and Activities of the Council.

65.Following this overview of problems and policies in China, and under the chairmanship of State Councillor Song Jian, a general discussion took place about the role, objectives and activities of the Council. The following points wer3e made:

66.Industrial countries throughout the world pace many of the same problems as China and have not found many solutions. But only China has created a Council such as this one.

67.Governments must view environment as an essential ingredient in policy development at every stage, and place proper prices on resources to instill a sense of the value of resources which were previously considered without value. The Bureau of Pricing, which is not represented on the Council, accepts the need to raise pr ices, but is concerned about public reaction and adverse impacts on living standards.

68.Technology transfer cannot be left to the market alone. The government must be committed to creating a framework to encourage the development of technological cooperation. The first step would be to create an institution which will collect, disseminate and make widely available information on environmental, health and technical issues. This institutional framework (to be proposed at UNCED), could be greatly improved if discussed on the Council.

69.Investments in environmental protection are not extra costs, but reductions in loss. Each unit of investment brings benefits in terms of economic losses eliminated. The Council should assist by developing a clearer substantive view of this relationship.

70.The Council should develop an overall, total analysis of environ-mental matters, bringing different sectoral analyses together. It should demonstrate how basic environmental aspects affect each sector, and how each sector affects others, both centrally and provincially, drawing on different national experiences.

71.Grain consumption in China is 400 kilograms per capita at pre-sent. China must increase food grain production to 500 million tons by the year 2000,in order to fulfill the basic needs of a rapidly growing population. Yet available land per capita is shrinking and water re-sources arc dwindling and unevenly distributed. The Council should analyse the requirements for food and agricultural production in terms of land, water and biological diversity. It should then identify the technologies which are available today to achieve minimum requirements without further degradation.

72.The international community is struggling to move beyond the failures of the environmental policies of 20 years ago. China has the opportunity to leap-frog beyond these policies in addressing both its domestic problems and global environmental issues. It could focus on three areas:

73.First, China could achieve the proper integration of the environment with other sectors, such as the agricultural, energy and transport sectors, rather than treating it as a sector by itself. This is a main aim of the Council.

74.Second, China could consider technology as part of the solution to environmental problems, rather than the problem itself. It may be possible to avoid technological solutions that are a source of environmental problems in China and in other countries, seeking technological transformation to move to environmentally advanced technologies.

75.Third, China could use economic incentives and market-based approaches such as penalties and fees to address environmental issues. And market prices must reflect both environmental and economic costs.

ITEM2: MANDATE.ORGANIZATION AND PROCEDURD

(a)Adoption of the Terms of Reference of the Council.

76.Under the chairmanship of Dr.Marcel Massé, the Council discussed its proposed Terms of Reference: the following comments were made:

77.It is of importance that the Council place emphasis on issues of development as well as environment: in particular, on how to reconcile competing sectoral demands on land and other resources into a reasonable, coherent plan at every level of government.

78.The Council must also consider how China" s development efforts and resource allocations are being affected by the international economy, and by issues such as international trade, investment and technology transfer.

A Strategy for the Working Groups.

79.The Council must consider how to accommodate cross-cutting issues. The Terms of Reference of the Expert Working Groups must take cross-cutting issues into account, particularly in the energy sector. The draft Terms of Reference of the Expert working Groups must take cross-cutting issues into account, particularly in the energy sector. The draft terms or Reference must be circulated and given thorough analysis to ensure that such issues are included.

80.One possibility that the Bureau will consider is the creation of a Steering Group to coordinate and oversee the results of the Working Groups, in order to achieve consistency and avoid repetition. Another possibility is to create a separate Working Group to examine cross-cut-ting issues or to consider the nature of a mechanism for achieving synthesis or overall coordination.

81.Paragraph 31 of the draft Termas of Reference implies that the main work of t he Council is to provide an overall perspective based upon the specific work of the Working Groups. The Council has a comparative advantage in developing such a perspective and in studying cross-cutting issues because of the diverse backgrounds of its Members. On some issues, the Council can assign work to create a sound basis for discussion at the next meeting.

82. In paragraph 30 of the draft Terms of Reference, the topic of the second Working Group-monitoring, data collection and the control of pollution-needs further clarification, for example, whether it is intended to include the setting of targets for industrial and municipal discharge, and the development of an environmental planning system for China.

83. It is the Council's understanding that this topic is intended to be interpreted broadly and to encompass a wide range of issues, including the implementation of measures to reduce the effects of all types of pollution. If necessary, these topics can be covered in the future by more than one Working Group, or by distinct sub-groups.

84. The issues listed in paragraph 30 of the draft Terms of Reference are in no sense exclusive. It must be open to the Council, as work proceeds, to study other subjects in depth through further Working Groups. The work plan of the Council is flexible and will be developed over time.

85. The Council should consider including as a Member, an appropriate representative from the education sector in order to ensure proper consideration of educational issues. Educational awareness programmes should be discussed further.

86. The Council should also consider adding a Working Group on the issue of forest production, development and management. This possibility should be examined, as part of the work plan for Working Groups to be established in the future.

87. With respect to paragraph 12.2 of the draft Terms of Reference - the stimulation of international cooperation and financial support - the Chinese members expect that the Council will provide recommendations and suggestions to the Chinese government on the coordinated development of the environment and the economy. It is hoped that the international Members will also help to encourage the allocation of financial and other resources through international cooperation in this field.

88. Following this discussion, the Council adopted the Terms of Reference as pro posed without amendment.

(b) Adoption of the Rules of Procedure of the Council

89. Under the chairmanship of Dr. Marcel Massé, the Council adopted its Rules of Procedure as proposed without amendment.

ITEM 3: THE FINANCIAL FRAMEWORK OF THE COUNCIL AND THE BUDGET FOR 1992-1993

90. Under the chairmanship of Dr. Marcel Massé, a financial report was presented to the Council by Mr. Xie Zhenhua, Secretary General of the Council, for its consideration.

91. The Ford an Rockefeller Foundations each provided $ 170,000 of initial funding for the period 1st April 1991 to 30th June 1992, for the purposes of establishing the Council.

92.Operational funds to support five year of Council activity and three years of Working Group activity have been provided as follows (U. S. dollars): Government of China - $ 4,199,000. These funds are to be used to cover the costs of the following major items: the annual Council meetings in China; the meetings of the Bureau; The Council Secretariat in NEPA; the Vancouver Support Office; the Expert Working Groups; and additional consultancy services.

93. Within the limits of this budget, the total number of Working Groups may not exceed five, each one with five Chinese members and five international members. And the Groups will only be able to undertake their activities for an initial three year period.

94. The budget provides for the international Co-Chairman of each Group to visit China four times each years, and the other members twice each year. The Chinese members will arrange for preparatory work to be carried out with the support of the Council Secretariat. This preparatory work will then be discussed and analysed at meetings of the full Working Group, including the international members.

95. To extend the five Working Groups for a further two year at the present modest levels would require an additional $861,000. And, a further increase in funds will be required if the Working Groups are to assume a more substantial role or if additional Working Groups are to be established. In view of the scale an d importance of the issues under consideration, it is hoped that the Council an d the Working Groups will attract the support of a large number of multilateral and bilateral agencies and foundations to strengthen their work, and to continue their activities after the initial three year period.

96. The Council approved its budget for 1992-1993 as presented

ITEM 4: DISCUSSION OF SELECTED ISSUES

(a) Investment and the development of environmental protection in China.

(b) A preliminary analysis of the losses caused by environmental pollution in China.

97. Under the chairmanship of Dr. Marcal Massé, a presentation was made by Mr. Wang Chunzheng, Vice Chairman, State Planning Commission, on Item IV (a): "Investment and the development of environmental protection in China." (The issues under Item IV (b), were covered in the earlier statement by professor Qu Geping. See paragraphs 38 to 60 above.)

98. Vice Chairman Wang made the following main points:

99. Investment in natural resources protection and pollution treatment has been increasing annually: from 17 billion yuan in the 6th Five-Year Plan, to 30 billion yuan in the 7th Five-Year Plan, and to 80 billion yuan in the 8th Five-Year Plan.

100. In 1991, a total of 14 billion yuan was invested in environmental protection, broken down as follows:

- 550 million yuan in water resources protection, agricultural/ecological construction and control, afforestation, flood control, soil conservation, and control of soil erosion;

- 5 billion yuan in controlling the creation of new pollution and pollution load s;

- 2 billion yuan in reducing the pollution of old enterprises;

- 2.5 billion yuan in urban drainage systems, gasification, central heating, afforestation and urban sanitation;

- 2 billion yuan in pollution fees returned and used for treatment;

- 1 billion yuan in reinvestment of benefits gained by multi-purpose pollution prevention projects;

- 150 million yuan in subsidies to provinces and municipalities for treatment of urban water pollution;

- US $ 100 million in loans from both foreign governments and international organizations.

101. China has established a national environmental monitoring network wit 4243 monitoring stations. There are 73 universities and colleges offering special study courses in environmental protection. In the 7th Five-Year Plan, 350 million yuan was allocated for this environmental training.

102. In 1991, 100 million yuan was allocated for environmental monitoring, training and scientific research. China needs to increase financial resources for environmental activities, both from internal sources and through international financing.

103. The following points were made in the discussion of Agenda Items, IV (a) and IV (b).

104. As the cost of pollution in China is equal to around 6.7 % of GNP - as mentioned by Administrator Qu Geping-it would probably be cost-effective to invest a greater percentage of GNP in environmental protection. China - with the assistance of the Council - should perform detailed calculations to determine the potential benefits from different levels of expenditure on pollution control. For example, increased spending to control air pollution could be justified not only by the benefits of clean air, but also by a reduction in health costs and in the 26 % of deaths in Beijing caused by respiratory or pulmonary disease.

105. China has presented as major targets for the year 2000, the control of environmental pollution and the halting of further deterioration in the natural environment. China should consider whether its investment of 3 billion yuan per year in pollution control is adequate to meet these targets, and if not, what its investment should be.

106. NEPA sets priorities for investment in environmental protection. Its first priority is to control industrial pollution; the second priority is to control urban pollution. Investment must be increased, and it is indeed increasing in each of these areas. Environmental standards must also be established and improved, although the necessary consultation takes a long time.

107. China's monitoring stations mainly provide local and nationwide information for domestic use. These include more than 600 climate change stations, 1900 climate monitoring stations, 120 outer space monitoring stations an 70 acid rain monitoring stations. Only 5 cities have monitoring stations with links to world net works, which is insufficient. China is now setting up a continent-wide monitoring system, with multilateral and bilateral assistance.

108. China should make the best use of experience and financial assistance from other countries in the environmental field. Donor countries and multilateral organizations should provide additional assistance to support progress on environment al issues in China, in spite of the worldwide shortage of capital. This is because appropriate solutions to these problems in China may benefit the rest of the world.

109. China should use step-by-step measures in the energy field, such as inexpensive energy-saving technologies and desulphurisation and denitrification device s, and a nationwide energy saving campaign. These measures can save much more in the long run than their initial investment. And, China should internalise the costs of pollution reduction devices and energy saving devices into product costs and prices.

110. China-and the Council-should pay particular attention to education, especially of women and children, so that they can be sensitised to their role in the local ecnomic process and in protecting their own health and the local environment.

111. China - and the Council - should examine traditional assumptions of what constitutes desirable development, for example, the increased use of the automobile. The wrong kind of development could be retrograde: China should invest in environmentally appropriate technology from the start.

(c) Strategic alternatives for coordinated development of energy and environment in China.

112. Under the chairmanship of Dr. Marcel Massé, Mr. Lu Youmei, Vice Minister, Ministry of Energy, made a presentation on "Strategic alternatives for coordinate d development of energy and environment in China." The following main points were made:

113. China's energy sector has been developing rapidly, but both national and per capita energy consumption levels will have to increase in order to achieve economic development and to improve the standard of living. China hopes to increase national production of primary energy from 1.44 billion tons of coal equivalent in 1991 to 1.4 billion tons of coal equivalent by the year 2000. The average per capita energy consumption level in China is less than 50 % of the world's level.

114. At present, 74 % of China's energy is derived from coal but only 23 % of this is converted into electric power. The fact that such a small percentage of the coal is converted to energy in large scale and relatively efficient centres aha s severe environmental consequences. Coal combustion causes 70 % of smoke and dust emissions and 90 % of sulfur dioxide emissions in China.

115. China is promoting three major policies to improve its energy situation:

1) The first policy is to improve the energy structure through the accelerated development of hydroelectric and nuclear power and the increased conversion of coal into electricity. China hopes to increase its installed capacity of hydropower from 27.36 million kw to 80 million kw by the year 2000. It also plans to increase the installed capacity of nuclear power to 6 million kw by the end of the century, and to increase the percentage of coal converted into electricity from 23 % to 33%.

2) China's second energy policy is to promote energy conservation and energy efficiency. The average efficiency in China's use of energy is substantially less than the world's advanced level. National energy conservation can potentially save 300 million tons of coal equivalent and provide major environmental benefits

China plans to take such measures as:

- improving the efficiency of energy production through the addition of new high -efficiency plans and the renovation of existing coal-fired plants;

- replacing inefficient industrial boilers with central heating and co-generation systems;

- further promoting the use of coal briquettes through incentive policies and other means.

3) China's third energy policy is to improve the quality and variety of coal. An increase of the ratio of washed coal from 17.2% to 19% is planned during the period of the 8th Five-Year Plan, with-steady increases thereafter. It is also planned to increase the average heat value of the coal used in cities by 25 %, and to restrict the use of high-sulphur coal in order to reduce acid rain.

116. To reach the strategic targets set by China for reducing emissions of smoke, dust, sulphur dioxide and carbon dioxide will require substantial funds and advanced technologies. The present main approach to carbon dioxide reduction is afforestation. China welcomes further international exchanges and the introduction of foreign investment and technologies in order to meet these targets which will also make contributions to the global environment.

117. The following points were made in the discussion:

Energy Efficiency and Pricing.

118. It is likely that, by the middle of the next century, China will be using several times the current amount of primary energy, even with increased energy efficiency. Yet investment in the area of energy efficiency would still bring a huge economic and environmental payoff, and should be given first priority.

119. China could virtually double its per capita energy consumption level without any increase in installed energy production capacity, by reaching the same level of energy efficiency as South Korea. This cannot be done without an increased c ommitment from the international community and particularly the multilateral banks, which are now spending only about 1 % of their energy portfolio on energy efficiency.

120. Per capita consumption of energy in China is probably understated; it would probably be higher if calculated using a universally recognised method.

121. According to statistics, India is twice as efficient in its use of energy a s China. Taiwan and South Korea are twice as efficient as India, and Japan twice as efficient as Taiwan and South Korea. There is thus, a potential eight-fold increase in energy efficiency for China. This should be viewed as a tremendous resource and given much greater emphasis, especially since the total amount of energy used in China today is 50 % more than that used in Japan.

122. In is doubtful that China can achieve its energy strategies without price reform. In China and elsewhere, subsidies for coal use should be reduced and phased out as quickly as politically possible.

123. China must take a new look at social cost pricing, and at incentives and disincentives to ensure that the price of coal reflects its true social and environmental costs.

124. There is substantial scope for both energy and financial savings through energy conservation: there is good evidence that in temperate climates, half of energy production is wasted in heating buildings. In Western Europe, better insulation and other controls pay back investment in less than two years, and they have the potential to reduce demand by up to 40 %. Measures to improve efficiency should be considered at every stage of production and use, including transmission systems.

125. Many available energy efficiency measures are inexpensive, they require only low technology, are decentralised and easy to produce and install. These include such simple items as time switches for lighting and heating and cheap photovoltaic units to power village pumps. Providing information and incentives, including pricing, for these measures would generate real gains quickly and cheaply: and the investment would be rapidly repaid.

Sources of Energy.

126. China must develop new processes for energy supply, such as cogeneration facilities using fluidlised-bed boilers and other technologies that dramatically reduce sulphur emissions. The price of solar energy has come down tremendously in recent years: the price of new wind energy and solar-thermal technology is now comparable with nuclear energy in the U. S. today.

127. In the future, alternative technologies will probably be cheaper than new nuclear power facilities and they may one day be cheaper than coal. Before China adopts the nuclear option, in should look at energy efficiency and renewable energy, since the investment payoffs may be higher than in large central nuclear stations.

128. China is the world leader in developing bio-gas as an important source of renewable energy. More than 4.7 billion households use small-scale bio-gas for home beating, and 2000 enterprises and 60,000 households use large or medium scale central bio-gas production. In addition, more than 140 million rural households now use energy efficient stoves, particularly in South China. China is also studying the conversion of high density organic waste-water, and perhaps municipal wastewater, into bio-gas.

129. China should consider the scope for the use of natural gas in its energy strategy. Many economies throughout the world that have relied significantly on co al are moving to natural gas. China should also look as developing other hydrocarbon sources.

130. China's consumption of natural gas is very small - only one third of its consumption of oil. Yet China has located some natural gas reserves and intends to exploit offshore oil and gas resources. It plans to develop new technology in t his field, particularly prospecting technology, with the support of the international community.

131. The Working Group to be established on energy issue should conduct in-depth analyses of alternative energy sectors, to determine the real potential of renew able energy sources, coal gasification, natural gas, small scale hydropower, and nuclear energy etc. The key issues for nuclear energy are the disposal of nuclear waste and operating safety. Solar energy should also be considered, given the amount of available uninhabitable space and sunshine in regions of China.

Energy Strategy.

132. China should consider designing an energy strategy that will meet both its economic and environmental needs and take account of wider, global consideration s. Then it should challenge the world community to help it to succeed in implementing the strategy, through financial and research assistance and access to technology.

133. China could become a leader, and a major exporter of energy-efficient technologies, such as emissionless vehicles and hydrogen-based technologies. Coal gasification is too expensive at present, especially in relation to prevailing oil prices. But China can harness its innovativeness to become a leader in the development and utilization of other coal technologies.

134. The energy sector is, by its nature, a polluter to some degree. It will continue to emit a significant amount of carbon dioxide despite the above measures. Therefore, in addition to short term measures, China should also undertake research to understand better the effects of carbon dioxide emissions on the atmosphere.

135. Three-quarters of the carbon dioxide now in the atmosphere has been produced by the industrialised countries. And one of the most important aspects of UNCED is to determine how these countries intend to stabilise or reduce their carbon dioxide emissions. But China also must consider the effects of its current energy patterns on its own environment, since it consumes more than 1 billion tons of coal per year.

136. The long-term effects on China of a substantial increase in global warming could be severe. They could include melting of the permafrost in Northern China, releasing the methane under the permafrost, reducing China's rainfall from 5 % to 3 % of the world total, and unknown effects on sea levels and weather pattern s.

137. Although there is strong pressure in the short term to continue to rely on coal, in the long term this risks increased losses due to environmental damage, which already stand at 6.7 % of GNP. The strategic challenge is progressively to phase out the direct burning of coal, which implies a change in the energy mix a s development proceeds.

138. China should consider breaking down its energy strategy into short-term and long-term measures, and into rural and urban measures, since different strategies are required for each. Transportation should also be an integral part of energy policy, including for example, the transport of coal, electricity and people.

139. China should develop models which can analyse alternative patterns of energy mixes at various future points over the next decades. It should determine the sensitivity of these models to different assumptions and disaggregate them by different sectors and regions or provinces.

140. China should involve foreign enterprises as major long-term investors in new technology and also to assist in evolving technology to meet the specific need s of China. China could become a world leader in the application of energy efficient technology, the clean use of coal, and the safe use of nuclear power, which should be a major element of China's energy supply.

141. China should pay particular attention to personnel training - for example in techniques to increase the efficiency of blast furnaces and to improving the education of engineers and scientists.

ITEM 5: PRIORITIES FOR THE FUTURE ACTIVITIES OF THE COU NCIL

(a) Establishment of Expert Working Groups on priority issues.

Substantive Aspects.

142. Under the chairmanship of State Councillor Song Jian, draft Terms of Reference, prepared by Chinese experts, were presented for the five proposed Working Groups as follows:

(i) Energy Strategy and Technology.

143. Mr. Yang Jike, Deputy Head of the Scientific Advisory Group of the Environmental Protection Commission of the State Council and member of the Chinese Academy of Sciences presented a paper on: "The working outline of the expert working group on energy strategy and technology."

144. The Expert Working Group on Energy Strategy and Technology proposes to research the exploitation, the development strategy and the science and technology o f China's various forms of energy, including coal, hydropower, petroleum and natural gas, nuclear, rural, solar, wind, geothermal and tidal energy. Following this research, the group would make some strategic and technological proposals to facilitate China's energy exploitation while also protecting China's environment.

145. It was proposed that the Working Group should conduct research on the following seven topics for the first phase:

1) The exploitation, development strategy and technology of China's coal reserves.

China's total energy production ranks third in the world. Coal constitutes 72% of the non-renewable energy sector, with 1 billion of the 850 billion tons of proven coal reserves recovered annually. Much of this coal is burned directly, resulting in great pressures on transportation and the environment. The efficiency of coal utilization is only 25 %, far below that of developed countries. Research is needed to develop strategies and technologies for addressing these issues of energy conservation and efficiency, coal transportation, and environment-particularly carbon dioxide emissions, acid rain and ecological degradation.

2) The exploitation, development strategy and technology of China's hydropower resources.

China has 680 GW of theoretical hydropower reserves, 370 GW of which can be exploited, ranking first in the world. To date, however, only 33 GW, or 4.4% of the total reserves, have been exploited, far below the 20 % world average utilization rate or the 8 % rate for developing countries. China has attached strategic importance to the development of various small- to large-scale hydropower projects, including the Three Gorges project. More than 150 hydropower stations with 200 GW of total installed capacity are also available to be exploited in Western China. This exploitation must be combined with conservation of water and soil in drainage areas.

3) The exploitation, development strategy and technology of China's petroleum and natural gas resources.

Petroleum and natural gas constitute no more than 25 % of the non-renewable energy sector, ranking second to coal. Petroleum reserves are among the largest in the world: the output is substantial and will continue to grow in the future. Potential natural gas reserves are also great, and although current production is not large enough, it is expected to keep pace with petroleum development in the future. Development of offshore petroleum and natural gas reserves offers the greatest prospects for future growth, particularly in the long-term. China must strive to reduce petroleum consumption as fuel for transportation, seeking other kinds of clean transportation energy, including the continued use of the bicycle.

4) The exploitation, development strategy and technology for the use of nuclear energy in China.

China's installed nuclear capacity of 300 MW is less than 02 % of the world's total. Increased use of nuclear power can relieve China's intense energy shortage and transportation problems and speed up economic development. Given China's estimated uranium reserves and nuclear technological capabilities, it can probably catch up with advanced countries in the next century.

5) The exploitation, development strategy and technology of China's rural biomass energy.

China faces an acute shortage of rural fuel, with 500 million farmers in 100 million households - over half the total - short of firewood to provide energy for a few months each year. These farmers resort to felling trees, digging up bushes and grasses, and burning agricultural residues, which in turn leads to grave ecological problems and shortages in fertilizer and fodder. China is working hard to develop energy-efficient stoves and rural fuel sources such as bio-gas and solar cookers, and hopes to exploit 120 cubic GM of bio-gas resources annually by the next century.

6) The exploitation, development strategy and technology for solar, wind, geothemal and tidal energy in China.

China has a large potential capacity to develop solar, wind and tidal energy. The use of solar cookers and small-scale wind-powered generators is expanding rapidly, and experiments are underway using large-scale wind and tidal, and small-scale geothemal power generation facilities.

7) The distribution and management and a strategy for coordinated exploitation and development of China's energy resources.

Because of the uneven geographic distribution of various types of energy and problems in transportation, China needs to develop a strategy for using locally available energy resources. The Working Group proposes to study the macroeconomic questions of energy exploitation and development, and stategies for organization and distribution.

(ii) Monitoring, Data Collection and Pollution Control.

146. Mr. Jin Jianming, Deputy Administrator, National Environmental Protection Agency, presented a paper on: "The terms of reference for the expert working group on monitoring, data collection and pollution control."

147. The Expert Working Group proposes to focus on the control of industrial pollution as its major goal. Its research would be divided into four areas:

1) Defining the optimal design for China's environmental monitoring network.

Under this topic, the Working Group would determine how to standardise, coordinate and improve the more than ten different environmental monitoring networks, systems and categories now being operated by different industries or departments in China.

2) Establishing a system of targets for the coordinated development of China's economy and environment.

This study would focus on the establishment of a complete target system to evaluate the quality of the environment; to assess the costs and efficiency of measures to prevent environmental pollution and ecological damage and also, to assess their impacts on the economy and society; and to promote coordinated development of the economy, society and environment.

3) Strengthening the information system for industrial pollution control in China.

This study would seek to increase the quantity and quality of available information so as to better serve industrial strategy for environmental management. It would collect policy models, gather information about new environmental problems associated with economic reform, such as Special Economic Zones, and develop an information system for information sharing among departments and various levels of government.

4) Analysing the strategic problems of China's industrial development and pollution control.

This study would analyse a number of new industrial pollution problems, including the control of pollution from township enterprises and the recovery and re-use of sulphur resources.

148. Since these proposed subjects, especially the target system, cover a wide field and go beyond the specific expertise of this Working Group, it may be useful to establish a separate Group or other mechanism to focus on the linkages between Working Groups on some of these issues. Since the subject of pollution control is so large and is linked to the issue of global climate change, it also might be useful to separate the issue of pollution control from that of data collection and monitoring.

(iii) Scientific Research, Technological Development and Training.

149. Mr. Sun Honglie, Vice President of the Chinese Academy of Sciences presented a paper On" "Scientific research, technological development and training -- an outline of the work for the working group."

150. The Expert Working Group will develop recommendations concerning the integration of scientific research and technological development, and methods for increasing the effectiveness of environmental training and education at all levels in order to increase public awareness. It will emphasise three key areas:

1) Research, training and technological development.

This must focus on the crucial issue of ecological damage caused by the irrational use of scarce natural resources such as land, water and forests. Unless China can determine how to develop these scarce resources in a sustainable manner, China' s environment will continue to deteriorate.

2) Applying the results of environmental research.

China must develop policies and increase public awareness to ensure that the results of environmental research are broadly applied. The Working Group should also study the marketability of environmental research to determine the demand for such research.

3) Training and public awareness.

There must be more emphasis on the training of policy-makers to resolve China's environmental problems. It is also essential to begin environmental training in primary and high schools, to train professional personnel, and to enhance public awareness.

(iv) Resource Accounting, Environmental Economics and Pricing Policies.

151. Mr. Li Ying, Professor of Economics at Beijing University, presented a paper on: "The work programme for the expert working group on resources accounting an d price policy."

152. The Working Group would research the current condition of natural resources in China and the rationality or resource prices, in order to formulate a realistic resource pricing system for the Chinese government as a reference.

153. Following extensive investigations and study of mineral, forestry, fish, water, land and prairie resources, the group proposes to concentrate its analysis on the following five issues:

1) The development of domestic and foreign theories of resources accounting;

2) Methods of resources accounting;

3) An international comparison of resource prices in developed and developing countries;

4) A comparison of resource prices with other prices in China;

5) The incorporation of resources accounting into the accounting system of the national economy.

(v) The Protection of Biodiversity.

154. Mr. Wang Song, Research Fellow, the Institute of Zoology, Chinese Academy of Sciences and Executive Deputy Director of the Scientific Committee for Endangered Species, presented a paper on: "The Biodiversity conservation working group of the CCICED - strategy and policy study for conservation and sustainable use."

155. Preliminary draft Terms of Reference have already been prepared, containing ten proposed projects designed to evaluate the status of current biodiversity conservation efforts, and to develop strategies for strengthening and improving the system. Some members of the Council have already provided comments on this preliminary draft, such as the need to include a statement regarding the significance and value of biodiversity conservation.

156. It was suggested that perhaps the setting of priorities and specific tasks should be left to the Co-Chairmen of the Working Group after the group has been fully established.

Discussion.

157. The following points were made in the discussion:

158. The Terms of Reference for each Working Group should take full account of the international aspects of each topic, including the results of UNCED and its follow-up. And the Groups should maintain contact with the international scholarly community.

Pollution Control.

159. The Working Group on control of pollution should consider the "critical loads" approach in setting targets and developing a rational policy on pollution control. The critical loads approach seeks to define the tolerance of ecological systems to stresses, including pollution, and to quantify the relation ship between the imposition of stress and the deterioration of vital resources. Such an approach would consider the costs of different levels of pollution reduction in terms of t he impacts on the environment.

160. Very few studies have been conducted on the effects of pollution upon human health in China. The Working Group on monitoring and data collection should take the following steps:

- Identify the major diseases caused by environmental pollution, including cancer, arterial and respiratory diseases, and poisoning by hazardous materials, in order to determine monitoring targets among major pollutants;

- Establish a data bank for pollutants that have major impacts upon health; and

- Establish regular and unified monitoring stations to collect data on these pollutants.

Scientific Research.

161. The Working Group on scientific research and technological development should examine ways and means through which China can develop global leadership in technological areas, particularly in developing and exporting environmentally advantageous technologies.

Resource accounting and Prices.

162. The Working Group on pricing policy and resources accounting should examine the critical question of how to raise resource prices without unacceptable social and inflationary impacts. The Working Group should undertake a comparative study of how different countries, including those in Eastern Europe and the former Soviet Union, are seeking to minimise the social impacts of price increases.

Biodiversity.

163. With respect to biodiversity, there must be an emphasis on saving endangered species through the establishment of gene banks. These gene pools may contain genetic material that can enable species to adapt to climate changes.

164. The Working Group on biodiversity conservation should not only focus on end angered species, but also consider the total stock of genetic material, species and ecosystems, as well as soil fertility and soil stability in agricultural are as. The Working Group should look widely at the value of all living natural resources, both for their current economic value, such as in medicines, and for their future value, for example, in providing genetic adaptability to future condition s

165. The Working Group on biodiversity conservation should take the following steps:

- Propose a plan for the nationwide protection of biodiversity, taking into account the broad diversity of species in China, the need to restore and redevelop the biodiversity damaged by centuries of civilization, and the long history of agricultural cultivation and development of artificial bio-systems such as grasslands and forests;

- Establish an information network for protection of biodiversity, including an inventory and database, an integration model, an on-site protection system, and a center for reproduction;

- Emphasise education and training to enhance public awareness of the value and the richness of China's biodiversity and the need to protect it.

Soil Erosion and desertification

166. A Working Group should also be established as soon as feasible, to consider the critical issues of soil erosion, which affects 15 % of all land in China, and desertification, which affects 10 % of all land.

These issues are particularly serious since deteriorating areas subject to soil erosion and desertification are also backward in economic development, which in turn contributes to further environmental deterioration.

167. China has had rich experience in the past half century in controlling soil erosion and desertification, but these issues must be studied further, and all countries could benefit from an international exchange. This working group is necessary to focus on the overarching challenge of ensuring the security of rural livelihood by protecting the rural environment on which this livelihood depends.

Education.

168. The Terms of Reference for each Working Group should refer to the need for education at all levels to promote environmental awareness and to spread their results. Environmental issues should be included in the core curriculum from the earliest grades onward and in university training, which provides the teachers of the future. China has 64 universities with environmental departments, graduating more than 8000 students each year. Environmental education begins in primary and secondary schools.

169. Developing countries should also establish media resources centers to avoid credibility problems created by exaggerated reporting.

Organizational Aspects.

170. Under the chairmanship of Mr. Qu Geping, the Council decided to establish the following five Expert Working Groups in an initial phase. It also approved by acclamation the following Chinese experts as Co-Chairmen of the Groups.

1) Working Group on Energy Strategy and Technology:

Mr. Yang Jike, Deputy head of the Scientific Advisory Group of the Environmental Protection Commission of the State Council;

2) Working Group on Monitoring, Data Collection and Pollution Control: Mr. Jin Jianming, Deputy Administrator, National Environmental Protection Agency;

(3) Working Group on Scientific Research, Technological Development and Training:

Mr. Sun Honglie, Vice President, Chinese Academy of Sciences;

4) Working Group on Resources Accounting and Price Policy:

Mr. Li Yining, Professor, Beijing University;

5) Working Group on Biodiversity Conservation:

Mr. Wang Song, Research Fellow, Institute of Zoology, Chinese Academy of Sciences and executive Deputy Director, Scientific Committee on Endangered Species.

171. The Council will take the following steps to activate the Working Group and to advance the work of the Council:

1) The international members will review the draft Terms of Reference for the working groups and submit comments, suggestions, and proposals for International Co -Chairmen to the Bureau through the Secretariat;

2) The Bureau, in consultation with the Chinese Co-Chairmen, will prepare a list of possible International Co-Chairmen for the Secretariat to review and contact.

3) Once the International Co-Chairmen are appointed, they will review and give t heir approval to the Terms of Reference for their Working Groups.

4) The Chinese and International Co-Chairmen will then develop and submit detailed work plans and budgets for Bureau approval. The work plans will reveal where gaps in existing data and analysis require further research, analysis and funding.

5) The Co-Chairmen of the Working Groups will develop and submit to the Bureau for final approval, lists of possible international members. There lists should be developed using the widest possible selection process, including suggestions by the Co-Chairmen, by Council members, and possibly by panels of experts.

6) The Secretariat will recommend procedures to enable the Council to work on wider, more integrated and/or cross-cutting policy issues; to elaborate its work plan; to consider adding more Working Groups or expanding existing ones; and to co ordinate the conclusions of the Working Groups, perhaps through a Steering Committee or a group consisting of the Working Group Co-Chairmen.

7) There is no difficulty in principle to considering the creation of other Working Groups as the need arises and as it becomes possible to finance them. It is the Bureau's understanding that the Council will create a number of additional Working Groups over time, depending on its work plan and changing priorities.

With respect to a Working Group on soil deterioration, the proponents should meet to define draft Terms of Reference, and submit these to the Secretariat. Once the TOR have been approved by the Bureau and communicated to the Council, and additional sources of finance have been found, the Working Group can come into effect.

(b) Substantive priority issues for the overall work programme of the Council.

172. Under the chairmanship of Dr. Marcel Massé, a general discussion was held regarding substantive priority issues for the overall work programme of the Council. The following points were made:

173. The Council can learn from the experiences of the "International Advisory Council on the Economic Development of Hainan in Harmony with the Natural Environment" (IAC), which could serve as a model, especially for developing strategies for other provinces and Special Economic Zones. The aim of the LAC, established in September 1990, has been to promote development in harmony with the environment. The IAC has already taken the following steps:

- It first undertook a review of all sectors of Hainan and their potential for sustainable use.

- It then prepared a master plan, with the support of the Asian Development Bank, based on a comparative analysis of existing and potential uses, and of how sectors interact in using resources.

- The master plan included specific sectors such as river basin and watershed management, agriculture, biodiversity and forestry conservation, management of coastal zones, fisheries, and tourism etc.

- It took a holistic view of the relationship of economic development, urban and industrial strategy, and environmental opportunities.

174. The China Council, although on a much larger scale, can apply the same principles, and consider general themes and approaches to guide China's national strategies. The Terms of Reference indeed emphasise the value of the Council in "developing an integrated, coherent approach across the broad areas of environmental protection, economic and social development, science and technology, etc. "Themes which should be included are:

- How to value environmental resources as part of the nation's capital, and to include these resources in the economic equation;

- How to define environmental goals more precisely in order to reduce the costs of environmental pollution while developing the economy;

- How to define the tolerances of the environment, and understand the resilience and dynamics of environmental systems affected by human activities, the "carrying capacity" of China;

- How to define and create an appropriate, cost-effective balance of instruments, such as policies, legislation, principles, price mechanisms, education and information;

- How to mobilise people towards goals as individuals and groups, with the future of individuals and children a central concern;

- How to bring a cross-sectoral approach into national, regional and provincial plans. Both sector analysis and in-depth analyses are needed.

175. The Council should provide information on systems and approaches that have worked elsewhere, and in accordance with the Terms of Reference, assist in identifying practical experiences, innovative approaches, methodology and activities in other countries which can be of special relevance to China's development. It should also assist in disseminating Chinese experience, ideas and solutions to other countries.

176. One example is the experience of the International Union for the Conservation of Nature in helping over 40 countries prepare National Conservation Strategies, which were then discussed widely throughout those countries. There strategies can be formulated if all sectors and levels of the community are engaged in the dialogue.

177. The Chinese ecosystem is faced with pressures greater than that of any other country. There is a sharp contradiction between population increase and an annual decrease in arable land as a result of desertification, flood, drought and soil erosion. The Council must give serious thought on how to link the ecological security of rural areas with security of the livelihood of human populations, paying greater attention to technologies which include both new and traditional elements.

178. The purposes and objectives of the Council as set out in the Terms of Reference have been considered carefully at a high level in China. Certain of these a re extraordinarily important:

- To help China to move toward an integrated, coherent approach to issues, getting departments and personalities to collaborate, Even in Hainan, the practical difficulties of integrating and getting different local departments to collaborate a re already apparent. Success is more a matter of policies than of dollars;

- To emphasise the long-term perspective and reconsider basic assumptions involving economic development and the environment, not just deal with immediate problems;

- To facilitate international cooperation in both directions between China and the rest of the world;

- To enhance the participation of China in international programmes and negotiations aimed at reducing the present threats to the world environment.

179. The Council should consider the following general points:

- Most of the existing ways of measuring a country's wealth are being questioned and require modification, such as the traditional methods of measuring GNP.

- Countries must distinguish between development, which means realization of its economic potential, and growth, which means multiplication of its economic activity. Development is generally good, while growth is not necessarily good and ca n actually be harmful.

- Countries should measure their use of non-renewable resources to determine how they are using up their capital, and should avoid turning renewable resources into non-renewable noes: they should aim to live on their income, not their capital.

180. Only technological cooperation and innovation can relax the trade-off between growth and the environment, and allow and increase in present welfare without compromising the welfare of future generations. Necessary measures include the following:

- New and additional resources should be allocated to assist developing countries in dealing with national and global environmental problems, provided that they join the Convention on Climate Change, and commit themselves to sustainable development.

- Donor countries should assist in overcoming information, institutional and educational barriers to technology transfers; encourage their industries to develop, export and disseminate environmentally sound technologies; and provide assistance incapacity building.

- The Global Environment Facility (GEF), IF appropriately managed, could play an important role in allocating financial resources, such as through a multilateral funding mechanism. Ways must be found within GEF to improve the allocation of funds, to increase participation and to improve programme effectiveness.

- Existing and new centers and institutions should be developed to strengthen cooperation between donor countries and developing countries, and among developing countries themselves.

- There must also be an emphasis on the blending of frontier and traditional technologies in order to capture the strengths of both and also to provide increased employment opportunities.

181. It is important to move beyond the concept of the Council as a means of carrying out studies: the Council should also move towards the mobilisation of inter national support to address China's environmental problems. The Council should develop overarching concepts and presentations to make its recommendations attractive to the world and to funding agencies, as was done in Hainan.

182. As one example: if the Working Groups and the Council can develop and propose an energy strategy for and with China that meets its development need as well as global environmental needs, China could present this strategy to the world community as part of a global compact for sustainable development and atmospheric protection. China would agree to achieve and promote this energy strategy with appropriate technological and financial support from the international community.

183. Within such a strategy, short-term energy issues must be included, such as energy conservation, energy efficiency, improvement of coal burning and heating systems, reduction of pollution from township and village enterprises and local environmental development etc.. And long-term energy issues must also be included, such as nuclear power, renewable energy sources and large hydropower stations. The Council' s recommendations should take a step-by-step approach, urging the u se of existing technology first.

184. One member questioned whether the subject of the Three Gorges Dam would be considered, since there die not appear to be any particular Working Group to address the subject. Issues include flood control, irrigation and the environmental impacts, as well as whether the enormous financial resources allocated to this project might not be better used for other purposes. Nearly one-third of the 200 0 delegates to the National People's Congress expressed objections or reservations to the project. The Council members should be provided with further data.

185. Population growth is a fundamental variable which must be considered in parallel with all other issues. The Council will keep open the possibility of including a Working Group on this issue, which appears to be priority.

186. It was also proposed in this connection, that the Council should concentrate its discussions on the following three priority points:

- China's large population is 22% of the world total. It faces the crucial tasks of family planning and enhancement of the quality of the labor force.

- China faces a critical shortage of arable land for agricultural development. Its arable land, both developed and underdeveloped, constitutes only 14% of total land, as opposed to 50% in India, Water and forests are also in critically short supply. The Council can assist China in facing the major challenge of reaching sustainable development given the scarcity of resources.

- Given the difficulty of changing China's coal consumption patterns in the fore seeable future, the Council should provide insight on methods of reducing carbon dioxide emissions, facilitating coal gasification and developing clean coal technologies.

187. Another priority issue was raised which could become the focus of a Working-Group: the need for China to develop a basic system and infrastructure for transportation which can respond to the specific requirements of China as it develop s. A sound concept for the future of transportation is a necessity for the future prosperity of China. The Council should support the development of an efficient transport infrastructure and system as soon as possible.

188. In this field, as in others, economic growth-which is essential for the future of China-can be made compatible with a new way of thinking, in which the quantity of growth is less important than the quality of growth. Industry and business can play a key role in contributing to this type of growth while caring for t he environment: this trend is now evident in the industrialized countries. And a policy to promote the widespread dissemination of environmental information is essential.

ITEM 6: OTHER MATTERS FOR CONSIDERATION BY THE COUNCIL

(a) The Second Session of the Council.

189. The next session of the Council will be held in Hangzhou City for three day s, from Monday 3rd to Wednesday 5th May, 1993.

190. Following the Council session, all members are invited to return to Beijing for a further two days, 4th and 5th May for high level discussions with the Chinese government. The members will be notified of specific arrangements as soon as these are made.

191. Now that the procedural matters have been dealt with, the Council will be able to concentrate on policy issues, including those which emerge from the Working Groups. Each member of the Council has resources at his or her disposal. It is suggested that each member should propose in writing, appropriate topics and themes to be considered by the Council at its Second Session together with lines of action to achieve the Council's objectives.

192. During the next session, the Council may be organized into panel discussion s, in addition to the plenary sessions.

Follow-up Action.

193. The international members of the Council should consider the following actions to share their expertise and to focus on specific issues:

- Indicate to the Secretariat their personal interest in specific Working Groups, and agree to act as corresponding members, "shadow" members or contacts for those Working Groups;

- Indicate to the Secretariat their interest in other broad areas or issues not covered by the Working Groups, such as a national conservation strategy;

- If possible, accept responsibility to forward data or prepare short review papers in their areas of interest;

- Form informal groups with other members sharing the same interests, and meet informally 1-2 days before the beginning of the next Council meeting.

194. The following international members were suggested to head the "shadow" groups interested in assisting the Working Groups:

1) Working Group on Energy Strategy and Technology: Dr. Gus Speth.

2) Working Group on Monitoring, Data Collection and Pollution Control: Mr. B.C.G. Zoeteman.

3) Working Group on Scientific Research, Technological Development and Training: Ms. Julia Marton-Lefèvre.

4) Working Group on Resources Accounting and Pricing Policy: Sir Crispin Tickell.

5) Working Group on Biodiversity Conservation: Dr. Martin W. Holdgate, Mr. Charles de Haes and Dr. Gus Speth.

Action by the Secretariat.

195. The Secretariat should, on a regular basis, take the following actions:

- copy and distribute to the Council Members or the Working Groups, all materials and documents forwarded to it by Council Members;

- copy and distribute to all Council Members, relevant materials concerning major developments or policies of the Chinese government. Although Council Members cannot directly intervene in decisions of the Chinese government, they should be informed of and able to follow developments on important issues;

- distribute to all Council Members, the work plans and papers of the Working Groups, which should be kept short.

- provide adequate data and material to Members of the Council in advance of each session, to enable them to reach informed conclusions and make constructive suggestions.

196. In general, more opportunities should be provided for direct interactions in small groups between the Chinese and international Members.

197. Also, although the Council itself will only meet in China, the Working Group meetings could take place in other countries, perhaps near organised centers of excellence in order to involve experts in several days of meetings.

Presentation of Conclusions to the Media.

198. With respect to media relations, it is the Council's position that the members are free to indicate to the media their own positions and views, but that they should leave any discussion of positions of the Council as a whole to the Chairman or an agreed communiqué.

199. Differences over particular projects or measures should not prevent the Council from seeking common ground while respecting those differences. An agreement y by the membership to preserve any common positions they have reached will help to ensure the prestige and effectiveness of the Council meetings, will be taken into consideration and reflected without attribution in the minutes.

200. In order to increase the value and impact of the Council's recommendations to the Chinese leadership, they should be translated into a practical, focussed context. For example, they could be grouped under headings such as rural development, urban development, transportation development and energy supply and usage. Another possible grouping would be energy, agriculture, industry, transportation and consumers.

201. The thrust should be the continued development of the economy with proper consideration of the environmental impact of various development options, and proper incorporation of environmental costs into the economic analyses.

(b) Statements by Special Guests and Observers.

202. Under the chairmanship of Dr. Marcel Massé, the following specially invited guests and international observers presented their views:

1) Mr. Bao Keming. Executive Vice Governor of Hainan Province.

2) Mr. Ali M. Azimi, Environmental Specialist, office of the Environment, Asian Development Bank. Manila.

3) Mr. Attila I. Sönmez. Chief of Mission, the World Bank Resident Mission in China, Beijing.

4) Mr. Jordan Ryan . Assistant Resident Representative, UNDP, Beijing.

5) Mr. Luc Vandebon, Counsellor for Science and Technology, Delegation of the European Commission. Beijing.

203. The following points were made:

204. The International Advisory Council on "The Economic Development of Hainan in Harmony with the Natural Environment" which was established over two years ago, has already made several important recommendations now being implemented by the Hainan Government with the support of the Asian Development Bank and others. These include:

-Improving environmental legislation and education, and incorporating environmental considerations in the education process;

-Replacing coal as a primary energy source with gas and hydropower;

-Protecting one of the only two remaining tropical rain forests in China by transferring lumber industry workers to other fields;

-Assisting the one million people of Li nationality to develop agriculture and other methods of production instead of slashing and burning the forests;

-Taking strong steps to protect rare species;

-Developing marine resources and food processing industries in environmentally acceptable ways.

205. The Asian Development Bank hopes to play its part in ensuring the success o f the China Council. The work of the Council in guiding future progress and projects in specific areas, such as energy efficiency and pollution control management, will be of great value to donor agencies.

206. The Council should use its comparative advantage in worldwide knowledge and experience to:

- assist Chinese policy makers in defining environmental goals in more specific and operational ways, beyond the general ones of sustainable growth and avoidance of pollution;

- assist Chinese policy makers in their choice of instruments to achieve these goals;

- provide practical advice rather than theoretical or general points.

207. The World Bank can offer assistance to the Working Groups and the Council in may areas. The Bank has been working extensively with various Chinese governmental agencies in areas such as environmental economics, the impacts of coal use, greenhouse gases, biodiversity, implementation of the Montreal Protocol, and overall environmental strategy, etc.

208. China must strengthen inter-disciplinary training and research in the fields of environmental economics, environmental law, environmental engineering and natural resources management. Assistance is needed for large-scale training in environmental management, and donor efforts should be coordinated.

209. Assistance from the United Nations Development Programme (UNDP) to China is channelled through the China International Center on Economic and Technological Exchanges. This government agency would be responsible for identifying ways in which UNDP could assist the Council.

210. UNDP has been deeply involved in a number of environmental projects in China, including such issues as coal utilization, fertilizers and pesticides, energy efficiency, and greenhouse gases. It is assisting in administering over $ 40 million in funding to China through the Global Environment Facility.

211. The European Community has dedicated one-half of its budget for science and technology in China to environmental science activities, such as joint research projects on water pollution and global climate change. It is very interested in the practical outcome of the Council's discussions and in concrete support for Working Group projects in areas of worldwide importance to environmental protect ion. The European Community is willing to look for ways to cooperate in financing and executing the work of the Council.

ITEM 7: CONCLUSIONS AND DECISIONS

212. Under the Chairmanship of State Councillor Song Jian, concluding remarks we re made during The Closing Ceremony by:

1) Vice-Chairman Qu Geping.

2) Vice-Chairman Marcel Massé.

3) Dr. Volkmar Köhler, Vice Chairman. CDU Committee on Development Cooperation, Germany.

4) Ms. Julia Marton-Lefevre, Executive Director, The International Council of Scientific Unions (ICSU), France

5)Mr. Wang Chunzheng, Vice Chairman, State Planning Commission.

6) Mr. B. C. G. Zoeteman, Deputy Director for Environmental Protection, and Adviser to the minister, Ministry of Housing, Physical Planning and Environment, Netherlands.

7) Ms. Qian Yi, Professor of Environmental Engineering. Environmental Engineering Department, Qinghua University.

8) Chairman Song Jian.

213. The following diverse points were made:

214. The Council will assist China in achieving the coordination of environmental protection and economic development. It is also of great importance for global environmental protection, especially as it has been established just before the convening of UNCED. Yet the Council cannot survive for long or continue to hold the attention of the world community if it does not produces concrete results.

215. This meeting has already produced a number of tangible results, including the establishment of the Council itself and the Working Groups. It has also produced many intangible results, including: a sense of international cooperation; man y discoveries and new information regarding the operation of the Chinese system and the challenges it faces; several unique opportunities for collaboration between China and the outside world; and the establishment of a new model for international dialogue.

216. Real change in China's environmental situation can only be achieved by developing long-range environmental master plans and policies, and by setting clear targets for education in sulphur dioxide and other pollutants. The interrelationship between the environment and economics is central to any discussion of environmental matters. In Germany today one can see the results of both a free market economy and a central planning system.

217. The Eastern part of Germany is now experiencing the results of an industrial strategy emphasising heavy industry, and an inappropriate state pricing policy. And very substantial costs must be incurred over many years to correct the severe environmental and other problems which have arisen.

218. Chinese and international members can work together to study environmental problems and learn from each other, since no one has all the answers. We share a fragile planet and must work together to find the right path. China is not the author of one-fourth of the world's problems

219.It is difficult to adopt and follow through with an integrated or interdisciplinary approach to issues. The issues of environment and development provide a unique platform to begin a long-term partnership between the natural and social sciences.

220.Behind many environmental problems lie pressures from population growth and unsustainable use of natural resources. The solution lies in improved living standards and education, particularly of women. Every aspect of the Council's work must contain an element of training, communication, and consideration of the children who will inherit the planet.

221.The Working Groups should concentrate and make recommendations on specific issues that need urgent solutions, such as an energy strategy. This would be of real value to the State Planning Commission.

222.The Council should develop emission targets for the most important sectors, broken down into short-term and long-term proposals. It should also consider recommending activities suitable for international financing: for example, an energy strategy for carbon dioxide control.

223.Industry in China must pay attention to chemical waste. If China acts now to control improper chemical waste disposal, it can avoid having to clean up a great deal of contaminated soil later at much additional expense. Agriculture should be kept on a small scale, as in India, replacing capital and chemicals with intelligence.

224.The Council should also make concrete recommendations regarding the exploration for and the exploitation of natural gas reserves, maybe in collaboration with industry expert groups.

225.The Council should focus on recommending exemplary research methods in areas such as clean energy technologies. China can also contribute to global technological development——one example is an upcoming conference on new technologies for the new century hosted by talented and dynamic students are being trained in environmental engineering throughout China.

Conclusions by the Chairman.

226.Finally, Chairman Song Jian provided an overall summary of the major points raised at the conference:

1) The establishment of the Council provides a good forum for international cooperation and for the sharing of experiences, and can facilitate the solution of the problems of integrating environmental protection and economic development.

2) Economic development and environmental protection are two parts of one integral whole. Economic development need not lead to environmental deterioration. Environmental protection does not have to become secondary to economic development as long as we take proper measures and utilize science and technology.

3) China's present energy structure is incorrect. Per capita energy consumption is not high, and energy efficiency is rather low. By applying energy-efficient technologies and innovative policies, China can drastically cut energy consumption per -unit of output, while improving the environmental and increasing GNP.

4) It is essential to strengthen policy coordination and coordination among relevant departments in environmental protection.

5) China must set up resource/price accounting systems including for environmental resources, both renewable and non-renewable. Only then can rational tax, pricing and other systems be established to conserve limited resources.

6) Agriculture is the foundation of the national economy in China, which has over 80% rural population. It is essential to protect the rural environment from soil degradation and water pollution in order to ensure grain production. New and advanced technology cannot address these problems alone, but should be integrated with traditional agricultural farming techniques.

227.The Bureau will draft a memorandum containing the Council's report to the Chinese government, which will be distributed to Council Members for opinions and amendments. This report will then be sent to the Premier and to the leaders of the State, and may be made public to designated journalists and scientists at a time designated by the Bureau.

228.The Inaugural Session of the China Council has been a success.

—It has adopted its Terms of Reference and Rules of Procedure, and has approved its financial report and budget.

—It has held candid and extensive discussions on environmental standards, environmental investment and natural resource pricing, and reached agreement on a number of issues.

—It has deliberated on priority fields to be addressed by the five initia Working Groups, as well as issues to be covered in the future given additional funding.