A carrot for China's
polluters By Antoaneta Bezlova
BEIJING - After a series of failed
administrative campaigns to enforce pollution
controls, China is hoping to use financial means
to restrain its big polluters.
Forming a
rare alliance, the country's environmental
watchdog has joined forces with the China Banking
Regulatory Commission (CBRC) in preparing a new
green credit policy that would evaluate the
eligibility of companies for loans based on their
environmental
performance.
"For
many years China's conventional way of fighting
pollution was to issue bans and orders for closure
of polluters," said Pan Yue, deputy head of the
State Environmental Protection Administration
(SEPA). "We have come to realize we need economic
leverage to go forward. We need to make companies
feel it would be costlier to break the law than to
abide by it."
China has reached a point of
critical reckoning for the damage that a blind
pursuit of rapid economic growth for more than
three decades has caused to its environment. The
country has some of the most polluted cities in
the world. All of its major rivers are dangerously
contaminated, with millions of people lacking
access to clean drinking water.
The human
cost of widespread pollution is growing by the
day. About 460,000 people die prematurely each
year from breathing polluted air and drinking
dirty water, says a preliminary version of a new
World Bank study. Chinese authorities have become
so alarmed, said a report in The Financial Times
this week, that they have asked the World Bank not
to publish the estimates of the physical and
economic cost of pollution for fear they could
trigger social unrest.
So far Beijing has
tried to mitigate public complaints by slapping
sporadic bans on serious polluters, singling out
particular cities and economic zones for
environmental cleanups. The latest cleanup
campaign, unveiled on Tuesday, targets
contamination of China's four major waterways -
the Yangtze, Yellow, Huai and Hai rivers.
But even as he announced the bans on new
industrial projects along the river systems, Pan
Yue sounded cautiously optimistic about the
success of the new campaign. Previous crackdowns
on industrial pollution have been short-lived
because of pressure from China's powerful business
interest groups.
In 2005, the country's
environmental plight drew a lot of international
attention when an industrial spill contaminated
the Songhua River in northeastern China, affecting
the lives of thousands in the country and in
neighboring Russia. Since then, SEPA estimates
that pollution accidents have happened on an
average every two days.
"Crackdowns will
not solve real problems without the backing of our
political and legal systems," Pan Yue told the
media on Tuesday. "We need to find a way of
converting the environment and the natural
resources into part of the companies' internal
cost."
The contemplated green credit
scheme would subject companies to vigorous checks
about their compliance with environmental
regulations. Enterprises that fail to complete
environmental assessments before embarking on a
project or fall short of the benchmarks during its
implementation would be denied credits. The
planned policy goes even further - vowing to
revoke granted loans to companies if they
backtrack on pollution controls.
However,
observers warn that implementing such strict
financial controls would require a long time and a
lot of fine-tuning by those involved.
"The
government's position on protecting the
environment by keeping the credit reins tight is
commendable, but its actual implementation would
need new legal mechanisms," said a business
commentator pen-named Shui Pi.
One obvious
obstacle: Chinese banks do not have independent
environmental policies. Only two of China's three
policy banks, which come under the direct
jurisdiction of the State Council, have adopted
environmental financing standards. The China
Development Bank is responsible for raising
funding for large infrastructure projects, while
the China Exim Bank is China's official export
credit agency.
China has long been
criticized for financing projects in developing
countries without complying with any
internationally acknowledged standards regarding
the environment. China is not a member of the
Organization for Economic Cooperation and
Development, and thus China Exim Bank has not
signed on to the Common Approaches, which
establish common guidelines on the environment for
the export-credit agencies of the OECD countries.
Although China Exim Bank adopted an
environmental policy in 2004, it only chose to
make it public this April after a spate of
international criticism about its role in funding
controversial projects in Africa and other
regions. Yet when the document was made public,
experts criticized it for being short on
specifics.
"The policy espouses strict
principles, but does not elaborate them in much
detail," Peter Bosshard, policy director of the
US-based non-governmental organization
International Rivers Network, commented after the
publication of the policy.
Even if Chinese
banks were to adopt environmental financing
standards, difficulty remains in enforcing the
restrictions, say industry insiders.
China's environmental watchdog SEPA
carries too little weight to shut down polluting
ventures completely. Yet temporary bans would not
bite enough to make funding institutions
reconsider lending money to polluters.
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