RECOMMENDATIONS TO THE GOVERNMENT OF CHINA

from the 5th meeting of China Council for International Cooperation on Environment and Development Phase II (2001)

The fifth and last meeting of the Second Phase of the China Council (CCICED) took place in Beijing from l3 to l5 October 2001. This was the tenth time that the Council had met. At this meeting the Council undertook a review of the results achieved over the past decade, in particular those of its joint Working Groups. It also considered possible adjustments to its future priorities and procedures to ensure its continuing effectiveness as a high level advisory body to the government of China.

Since the Council convened in 1992, there have been radical changes in China in attitudes and policies towards sustainable development. As before in the long history of China, the good health of the relationship between humans and their natural environment is once again recognized as an overriding priority, and protection of the environment has become an essential element in policy and planning. It cuts across all areas of economic activity, and requires an integrated approach, involving all parts of government (local and regional as well as national), and full use of legal, economic, technical, and administrative instruments. It also brings market mechanisms within the framework of the socialist market economy. Thus sustainable development with Chinese characteristics is becoming a defining feature of modem China and its prospects for the future.

The Council is a unique institution which brings together people from China and other parts of the world to cooperate in furthering sustainable development in China. All members have valued and profited from the experience, which could be a model for use elsewhere. The practical work of its Working Groups and Task Forces has covered the whole spectrum of sustainable development, including economics, sustainable agriculture, protection of bio-diversity, particularly in restoring forests and grasslands, control of pollution, cleaner production methods, promotion of the environmental dimension in business enterprise, energy strategy, transport issues, and the relationship between trade and the environment, with the implications for China of future membership of the World Trade Organization.

Attached are the reports of each Working Group and Task Force. It will be seen that a common thread is the importance of policies which reconcile protection of the environment with social and economic development (to the advantage and profitability of both), and the vital need for their coordination at all levels of society. In summary the Council's Recommendations now follow.

1. Environmental Economics

As the Council has emphasized on previous occasions, the role of environmental economics in a socialist market economy is critical. Although it is easier said than done, governments have the responsibility of determining true costs, and ensuring that prices take due account of them. In doing so they have to take account of the social impacts of price reform. The Council recommends that the government should aim

○ to ensure that in exploiting natural resources the users should recover total costs of production and consumption, including those of environmental damage and pollution;

○ to accelerate improvements to the current system of pollution levies and use of other instruments for environmental control: in particular levels of fees and charges should increasingly reflect total costs of environmental damage, and monitoring and enforcement capacity should be improved;

○ to develop capacity in all government agencies to understand the implications of environmental damage in policy making, and to develop incentives for public officials. Particu1arly important will be training in the development of skills in economic evaluation of the costs of environmental degradation and remedial actions, methods of pricing policies for exploitation of natural resources, environmental incentives and disincentives, and linkages between environment, poverty and public health. The cost of undoing previous damage should never be forgotten;

○ to undertake environmental impact assessments applying not only to individual projects, but also, Where feasib1e, to economic policies in general;

○ To use models and scenarios as appropriate to assess possible future developments and their environmental impacts.

2. Sustainable Agriculture

Agriculture is at the base of the Chinese economy, and now faces a series of problems. There are shortages of water, declining water quality, and excessive use of fertilizers and pesticides, particularly in coastal regions. Like cities and industry, agriculture contributes to water pollution. The consequences are many: higher production costs and lower incomes for farmers as well as land, air and water pollution of all kinds, involving threats to food safety.

Many of these problems will become more important after China joins the World Trade Organization. The safety and security of food supplies depend ultimately on the manner in which the supply chain is managed from soil and water to the consumer. It will also be necessary to work out and assess critically the effects of increasing use of biotechnology, including development of genetically modified organisms. The Council recommends that the government should aim

○ to reconcile the sometimes conflicting roles of government departments over regulation, production and sale of fertilizers and pesticides;

○ to raise agricu1tural efficiency;

○ to increase public awareness, particularly among farmers, of environmental costs of poor agricultural management;

○ to promote production of food in certain areas, free of pesticides, chemical fertilizers and genetically modified organisms, for which a market is rapidly developing;

○ to establish long-term monitoring and evaluation system for the agricu1tural environment, and to pay attention to the agricultural bio-diversity conservation, particularly the species sources of wild crops.

3. Forests and Grasslands

Chinese government has devoted great efforts to protecting and recovering the forests and grass1ands. However, at present Chinese forests and grasslands are in trouble. In particular there is a lack of coordinated policies regarding land conversion, forest protection and replanting, property rights of individuals and communities, logging (and compensation for the current logging ban), and policies to rehabilitate damaged soils.

The Council recommends that the government should aim

○ to conduct a full cost benefit analysis of land conversion and natural forest protection programs, taking into account ecological and socio-economic benefits and costs at every level；

○ to put in place long term arrangements for monitoring and evaluation, and supply the necessary funds；

○ to integrate watershed management with particular regard to property rights and use of appropriate technologies (including natural regeneration and the use of appropriate tree species to maximize ecological and economic benefits);

○ to reconsider and in some cases relax the current logging ban according to particular circumstances.

4. Bio-diversity

China has unique biological resources which, as the Council has said on previous occasions, sti1l seem to be underva1ued and insufficiently protected. While destruction of top soils and forests, and soil erosion are visible to the naked eye, the impoverishment of bio-diversity and the natural resource base fail to attract much attention. Diversity of species and the micro-organisms which support them are of fundamental importance. The Council recommends that the government should aim

○ to improve coordination whereby the various sectors involved in bio-diversity management and conservation are brought together, with particular regard to the maintenance, functioning, and in some cases restoration of whole ecosystems；

○ to establish guidelines for ensuring conservation of species and ecosystems, and restoration of bio-diversity in the different eco1ogical and geographical circumstances of China；

○ to review current regulations for protected areas and their enforcement, and to undertake a nationa1 assessment of the status and functioning of ecosystems in China (in cooperation with such international programmes as Diversitas and the Millennium assessment)；

○ to establish a nationa1 biosecurity programme to cover issues arising from the invasion of alien species, and those relating to uses of biotechno1ogy. In this respect early ratification of the Cartagena Protocol on Biosafety is highly desirable;

○ to develop new incentives for conservation and maintenance of ecosystem services, in full association with local communities；

○ it is more necessary to work out integrated policies for biodiversity and ecosystem functioning in the Western Development Strategy.

5. Cleaner Production and Control of Pollution

Increasing industrialization and urbanization under1ine the need for cleaner production and contro1 of pollutants of all kinds. These cover all aspects of the economy. Future Chinese membership of the World Trade Organization represents a further challenge. Cleaner production and pollution control go hand in hand with environmental benefits. They create many opportunities for more efficient and profitable production. Failure to adopt them can carry heavy penalties, with implications for human health and impacts on ecosystems generally. Yet special consideration needs to be given to the poor and disadvantaged who may suffer most from otherwise necessary reform.

A particular problem is the control of pollution of river basins. Comprehensive measures are necessary to reduce pollution from distant as well as nearer sources, including factories by the riverside and area sources.

The Council recommends that the government should aim

○ to establish special regulatory systems which require local government to integrate cleaner production into local development plans, to bring in the environmental dimension generally, and to assess and monitor performance in doing so on a regular basis；

○ to interest and encourage private investment；

○ to take maximum advantage of recycling materials whenever possible, and indisposing of waste without damage to the environment；

○ to pursue current demonstration projects by city and industrial sector, and draw on the experience already gained；

○ to conduct further studies on how best to promote cleaner production, and advance work on national legislation on the subject, possibly fo1lowing the precedent set in Taiyuan.

6. Energy

Demand for energy is constantly increasing. The point of departure for future strategy should be China's endowment in natural energy sources, the greatest being in coal and such renewable sources as hydro, wind, solar and biomass. At present Chinese dependence upon coal has diminished, but coal remains a vital resource. Coal gasification technology will be fundamental in allowing a high level of energy self sufficiency if all syngas options are properly used. But in this respect it is essential to develop means to ensure capture and disposal of the excess carbon dioxide inevitably produced by this technology. It is very much in China's interest to join with other countries in promoting what has been called the low carbon economy.

The development of other energy sources and technologies is essential. The Council recommends that the government should aim

○ to emphasize energy efficiency improvements in all sectors, especially at the point of end use;

○ to move away from smoke-generating direct combustion towards such cleaner energy carriers as electricity, gas and steam;

○ to evaluate and develop small scale hydro power；

○ to develop Chinese resources of wind, solar and biomass (at present very much underused);

○ to pursue research into other energy technologies, including nuclear, so that costs and benefits can be more accurately assessed;

○ to ensure that environmental costs are taken into account in pricing different forms of energy;

○ to encourage foreign direct investment, joint ventures, and private/public partnerships to gain access to capital and advanced technologies;

○ to set targets for application of renewable energy technologies, using subsidies as appropriate, to achieve economies of scale, and drawing upon experience in this respect elsewhere.

A strategy for sustainable energy supply should not be seen as a burden on the economy. On the contrary such a strategy offers opportunities for innovation, and economic and social development.

7. Transport

As the Council has said on previous occasions, China is no different from any other country in needing an integrated transport policy in which the advantages and disadvantages of different modes can be judged against each other. As the number of private cars increases and traffic congestion worsens, so does the need for better and more reliable public transport. Prices for all kinds of transport, whether of people or freight, should reflect the real social, economic and environmental costs. Throughout environmental standards need to be strictly applied.

Five Departments are at present involved in transport issues, and this can sometimes leading to conflicts of interest. The Council strongly urges that responsibility for different modes of transport should be brought into a single Department, which should be responsible for overall policy and planning taking environmental considerations into account throughout. Transport reaches into every aspect of modem society, including land use, pollution, urban and town planning, and development generally. Of particular importance is the need for an integrated strategy and procedures for assessment to take account of such issues as development of rail against road transport, especially of freight, the future use and costs of air transport, the rehabilitation of inland waterways, and the full association of the public, including local communities, in future planning. China should learn from the mistakes of other countries, which, for example, destroyed some of their railway networks for the sake of road transport, but are now having to restore rail facilities at great cost. Prices of fuel should reflect true environmental cost.

If, as seems inevitable, use of cars and road transport increases, at least in the short term, strict environmental standards need to be applied to motor vehicles, and best available clean technologies need to be used. Throughout the impact on city and town life should be carefully assessed. Smaller more compact cities, including home, work and recreation, should minimize the need for transport. These cities have their own sustainable transport arrangements, including the use of bicycles, and are being increasingly favoured elsewhere in the world.

8. Trade and Environment

Chinese accession to the World Trade Organization will have far reaching effects on the Chinese economy and society generally. The impacts have yet to be fully worked out, and an integrated assessment of the environmental consequences is urgently necessary. The World Trade Organization itself has yet to come to terms with the environmental dimension, and China may in the future play a creative role in establishing a better balance between commercial and environmental considerations in and out of that organization.

An important opening for China is Chinese participation in the Clean Deve1opment Mechanism for promoting sustainable development once the Kyoto Protocol comes into force. Early participation in the Clean Development Mechanism should help secure substantial foreign investment and transfer of advanced technology to China. In projects within this framework, the government may wish to give priority to the Western Deve1opment Strategy where the opportunities for reducing carbon emissions and application of modem technology are particularly large.

The Council commends the papers and recommendations made by the individual Working Groups and Task Forces. More particularly it recalls its previous advice to the government

○ to play a full part in international negotiations on such issues as climate change and sustainable deve1opment;

○ to review some of its environmental legislation and do more to enforce it;

○ to retain the responsibilities of government even when advancing privatization in some sectors and the use of market forces;

○ to bring sustainable development to the attention of ordinary citizens, and bring information about it into the educational process;

○ to learn from the mistakes of other countries, protect its unique environment and culture, and make its own distinctive contribution to sustainable development.

A delegation of the Council made a trip to Gansu Province and visited the sites of two projects aimed at environmental rehabilitation through afforestation, water catchment and prevention of desertification. These complex projects, which have the sponsorship of the local branch of the Chinese Academy of Sciences, merit full support.

RECOMMENDATIONS TO THE GOVERNMENT OF CHINA

from the 4th meeting of China Council for International Cooperation on Environment and Development Phase II (2000)

The Fourth Meeting of the Second Phase of the China Council for International Co operation on Environment and Development took place in Beijing from 31 October t o 2 November. This was the eighth time that Council had met,and as on previous oc casions,it ventures to make recommendations to the Chinese goverment. Over the years, the Council has expanded the scope of its activities,with eight Working Groups and two Task Forces,and has increasingly shifted its work from th e general to the specific.This is partly because the linkage between environment a nd development has been widely accepted in China as elsewhere. A healthy environment is a fundamental resource for all human society,and the principles of sustainable development enter into all fields,from social and economic policy to the educational system and regional planning. On this occasion, the Council was invited to give particular focus to plans for t he development of western China.In doing so it did not attempt to work out a spe cific regional policy for western China,but rather to adopt a regional approach within the framework of environment and development policy as a whole.It took a ccount of the fragility of the western Chinese environment,and relative lack of knowledge about it. The Council stands by the previous recommendations it has made,particularly on the central importance of policies which reconcile protection of the environment with social and economic development,and confirms the need for effective coordi nation of such policies at all levels,whether national,regional or local. Attached to these recommendations is a detailed annex by the Secretariat on the problems of western China,and a strategy for dealing with them.Also attached are the reports of the various Working Groups.The Council's broad recommendations n ow follow.

1.Environmental economics should be applied in all parts of t he planning process.

The place of environmental economics in a socialist market economy is critical.A lthough it is easier said than done,governments must determine true costs,coveri ng such issues as environmental damage and depletion of natural resources,and en sure that prices take due account of them.Market forces are indispensable but th ey must be brought within the framework of the public interest.Within this fram e work there are many possibilities for partnerships between the public and privat e sectors,including small and medium sized enterprises.For their part governments should use economic instruments,including tax incentives and disincentives,acro ss the field,and so far as possible,avoid perverse subsidies. In the case of western China,the Council recommends that such policies should ta ke account of local circumstances,in particular the fragile environment,climatic extremes,low population density and the relative poverty of the region.The poo r est members of society may need at least temporary protection from the impact of reforms.

2.Economic planning and environmental protection should be mo re closely integrated.

With a growing population and rising living standards,pressure on the environmen t is likely to increase.A high priority is the rehabilitation as well as the pro tection of the environment,and this needs better recognition in the planning pro cess.So does the growth of environmental industries,which are a major source of wealth and employment in other countries. The Council recommends fresh efforts to coordinate the work of institutions,in p articular Ministries in central and provincial governments,so that all aspects o f policy can be brought together and seen in terms of each other.Over the next te years,the Chinese economy may well double in size,and its success requires far reaching coordination of energy,transport,industrial and agricultural policy,wit h overriding respect for the environment and comprehensive legislation to give i t full effect.Nowhere is this more necessary than in western China.

3.Energy policy should have high priority.

Demand for energy is constantly increasing,and supply has difficulty in respondi ng.So far coal,which is abundant and easily available,has been the primary sourc e,and this will continue.But there are heavy environmental penalties.In both the short and long term the introduction of new and cleaner techniques for extracti ng energy from coal-in particular coal gasification-is essential.In the meantime measures are already in train to cope with air pollution and acid rain caused b y combustion of coal with high sulphur content.There are good prospects for pol y-generation whereby low cost chemicals,clean liquid,gaseous fluids,heat and ele ctricity are obtained from coal and natural gas.Of increasing concern is the pro blem of increasing atmospheric carbon,which must be seen in the context of clima te change.Here the possibilities of carbon sequestration are already opening up , and it is in China's interest to join with other countries in promoting what has been called the low carbon economy.

The development of other energy sources and technologies is an equal priority. Among them are natural gas, hydrogen and photovoltaics for industrial as well as transport purposes. Worldwide there is increasing interest in small scale electricity generation, and over a quarter of new annual investment in generation capacity comes from units of ten megawatts or less.Of particular importance in rural are as such as western China is biomass technology, where more research is needed to improve energy transformation. Local generating systems from photovoltaics would give greater local self-sufficiency, and reduce costs arising from dependence on extension of the grid.

For western China, wind energy resources (accounting for half the national total) should help to meet energy demand not only in the west but elsewhere in China. Ambitious Renewable Portfolio Standard (RPS) policies should be put forward at the national level to ensure that power supply departments include a percentage o f green electricity (i.e. generated from renewable resources) in their supplies, either self generated or purchased.



4.Sustainable agricultures is another priority.

There are four broad issues. The first is over of pesticides and the need for a national strategy for integrated pest management. There is clear evidence that farmers use more pesticides than they need, and that reduction in pesticide use can be lowered without damaging rice, cotton or other crop yields. It can also be of direct benefit to crops. In this area government departments seem to play conflicting roles in the regulation, production and sale of pesticides. Excessive pesticid e use can lead to health problems, waste farm resources, and damage water quality with effects on meeting drinking water standards and fish production.

The Council believes that existing national food security policy needs reconsideration. The effect of current regulations is to limit the internal grain trade to no good purpose, and to cause grain to be produced on land not suitable for the purpose. Now that food can be distributed without difficulty throughout China, the main constraint is not lack of grain but of low farmers' income in different parts of China.

Although there has been some progress in agricultural management, some unsustainable practices continue, for example soil erosion, burning of crop residues and waste in use of water, fertilizers and pesticides. The Council recommends a new look at the whole subject.

Last there is concern over the introduction of genetically modified organisms. Biotechnology has many positive aspects, and its applications have great potentialities. But although no ill effects have so far been detected on human health, they raise serious environmental issues, which have yet to be resolved. The Council re commends caution in the use of genetically modified materials until greater understanding of them is achieved. It is proposing to set up a Task Force to enquire further into how the rich resources of China be converted into economic wealth through the application of biotechnology.