As people known, China is the most populous nation and also one of the largest countries with the third biggest landmass, after Russia and Canada. The Chinese economy is the most rapidly growing economy on earth within 25 years. Yet China is also struggling to problem of the poverty. Even though China’s GDP was high but when divided by population (real per capita GDP), it’s less than Thailand and many countries in Asia. The World Bank however promoted China from the “lower income” to “lower middle income”. China’s remarkable growth over 25 years since 1978 came with the burden of environmental degradation and has come at a step cost to the environment. Environment degradation has imposed a serious cost on the Chinese economy and reduced the serenity in living in society. We can divide the environmental problem into two groups. The first group refers to pollution. It composes of air pollution, water pollution, shortage of fresh water, and hazardous waste. The latter is the sustainability of resource use. Economic activity results in an impairment of the natural system’s capacity to cure itself. There is soil erosion, loss of species, deforestation, flood, and also endanger in country’s rich biodiversity. Up to now, China is the largest emitter of greenhouse gas: carbon dioxide, Sulfur, Chlorofluorocarbons. They affect the global warming’s impacts including rise in sea level, drought, glacier retreat, endanger human health by the infectious disease such as cholera, and also the extreme weather. However, there are many attempts to concern about the environment since 1990 Montreal Protocol – the convention of international trade in endangered species and the Kyoto Protocol which will be terminated in 2055.
For recent convention in China, in March 2011, an aggressively address climate change. It’s 12th Five Year Plan (FYP) that concern much about the attention to energy and climate change and also establish a new set of target and policies for 2011- 2015. The target of FYP is three dimensions including with 16% reduction in energy intensity, 11.4% increase in non-fossil energy of total energy use and also 17% reduction in carbon diversity. The relationship between energy and economic growth matter greatly. At China’s 11th FYP (2006- 2010) has a target to decrease overall energy intensity of 20% in country. The target was responded to increase in energy intensity experienced in 2002- 2005. Moreover, the FYP imposes about the energy policy to support clean energy industry and technology. The strategic and emerging industry such as nuclear, solar, wind and biomass energy, hybrid, and electric vehicles replaces the old issues such as coal and telecom.
Market do many thing well but they do not do everything well. Sometimes market fails to allocate resources efficiently that it does not lead market itself to reach the socially optimal output - underproduced and overproduced. The market failure stems from an externality that means market equilibrium is inefficient when the externality exist because buyer and seller neglect about the external effects on the third parties. As a result, equilibrium fails to maximize the total benefit in society. There are two kinds of externalities – positive and negative. In this case in China, the pollution emission from heavy industry such as coal combustion emits the carbon dioxide caused the environmental degradation, health problem and so on. Everyone has to bear this cost together but there is no workable mechanism for resolving these issues efficiently. For instance, if a terrible storm destroys an America’ corn farm, the reaction of price and farmer will help equilibrate needs and availability. But if the problem rises as global public goods such as global warming like this, there is no market or government mechanism that contains both political means and appreciate incentives to solve to led market to an optimal level. There are two ways to internalize these externalities. The first is private solutions such as moral code, social sanction and also the method of coase theorem but there are not often work because the transactions cost is very high because they are too many interested party to negotiate and the expense of lawyer required to draft. For the public solution, there are two way. Firstly, the market-based solution includes the Pigouvian Tax that China is also used. It does not work because it affects many incentives for work and investment. The latter is direct regulation including the standard regulation, pollution right and control and command policy. China use the direct regulation through policy more than market-based solution because China has to care much about the domestic investment and worry about the effect of distortion in the way of incentives to work in labor market.
The good example of direct regulation is the 1963 Clean Air Act when it brings great benefit of reduced pollution. Also, the 1948 Water Pollution Control Act is the first environmental policy about water and lake. Well, the apparent convention about global public goods is 1990 Montreal Protocol in Canada that it’s the international convention about banning use of ozone- depleting chemicals- CFCs and 1992 the convention signed in Rio De ja Neiro about the global warming and the 1997 Kyoto Protocol that will be terminated in 2012. However, the result of environmental policy is noticeable. China becomes the top five cities with most effective pollution and control. World Bank said “ China was one of the few country in the world that have been rapidly increasing their forest cover”. It reduces air and water pollution. However, central government spent 40 billion yuan to protect of vegetation, farm subsidies and 345 billion yuan in 2009 to clean technology. In 2008, government use498 billion yuan to enhance sewage and rubbish treatment and also prevent water pollution. It aims to accelerate green belt and natural forest. In 2010, China eliminated the production (import) about pesticide. By 2015, China plans to establish POP (persistent organic pollutant) that is an organic compounds that are resistant to environmental degradation through chemical, biological, phytolytic process.
In China’ city today, trend in air quality is popular. Air quality has been improved by industrial emission policy and the shift in household fuel use away from coal. However, the growth of industry and automobile transport cause an increase in pollutant nowadays. Well, a major source of improvement in air quality has been the reduction in household use of coal. 80% of urban population now has access to gas for cooking more that using coal like in 1988 that the burning coal, wood which in turn contribute to increase in sulfur, nitrogen oxide, carbon dioxide. The biggest negative impact on air quality stem from the dramatic increase in truck and automobiles. The total number of vehicles in China increase from 5.5 to 43 millions in 2005. Motor vehicle emits sulfur, carbon monoxide and nitrogen oxide. Well, with the largest global concentration of nitrogen oxide in the north China plain. Now, 90% of industrial waste water from regulated factor receives treatment. The program “grain for green” make farmer convert the grain farm to forest that contribute to 1.24 million hectare of forest increase. China has been being more fresh water availability and surely air in China is more fresh and clean.
Precisely, there is an example of environmental response in China- The Sino – German environmental policy programme. It’s the cooperation between China and German for supporting China’ key government institutions in the development of economic policy for “energy saving, resources efficiency and environmental protection”. The organization within this program are The national development of reform commission (NDRC), the ministry of environment protection (MEW), and the China council for international cooperation on environment and development (CCICED) that they have ability to develop and impose and also enforce the effective environmental regulation and policy by cooperating with Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ). Sino-German also cooperates with the german expert and institutions UN, EU – delegation, and also Green Business Initiations.
I think the case of China is a good exemplar of the policy to cope with the environment because it shown that how effective the policies are. It’s interesting what will happen next year, decade or century. How best to improve the environment and how high to set the standard or regulation are likely to be questionable. The environment is critically important because it directly affects us. It’s no doubt that market alone won’t provide the socially optimal outcome because of the market failure due to the negative externalities. The method which government has tried to bring individuals and firms to act in efficient outcome is necessary to “adapt” followed the situation. Issuing the proper policy should be flexible. Finally, everyone should consider the impact not only on one who interact with but also the others for reducing the market failure in term of the external cost. Moreover, the voluntary contribution for provision of public good supplied by government is the good idea to help agencies finance for producing that goods that means we will lack the problem of free rider – the obstacle of development.
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