cementfactory.jpg[UPDATED] An Organisation for Economic Co-operation and Development report says China's breakneck economic growth is wreaking severe environmental damage, with air pollution in Chinese cities amongst the worst in the world.

Hardly a revelation, of course, but nevertheless, its good to see that the OECD is not afraid to say China's pollution problem is bad — and getting worse.

The report, which makes 51 specific recommendations, builds on more than a decade of OECD-China cooperation and is based on the same review methodology used for environmental reviews of all OECD countries — a rider which is presumably designed to prevent China from disputing the findings.

The OECD lays much of the blame on China's central government which can not implement its environmental policies. In particular, it has not been able to meet ten of its 13 critical targets set in the most recent Five Year Plan for air and pollution control.

According to a recent World Bank report on China's pollution, the most pressing off-target performance is the drastic increase in SO2 emissions due to industrial activity, which was 50% higher than the target set for the end of 2005, thus reversing the previous downward trend in SO2 levels.

Acid rain is caused mainly by SO2 emissions and over half the estimated damages done to buildings by acid rain happens in just three provinces — Guangdong, Zheijang and Jiangsu.

The OECD report, somewhat predictably, calls on China's central and territorial governments to strengthen the enforcement of environmental policies and increase and diversify public and private sources of environmental finance.

It was this financing angle that most caught EngagingChina's attention, as it is an area where western business could make a big contribution in providing the funding — how about a western-listed “China clean energy fund?

In addition, a lot of the money is likely to flow back to the west, as environmental technologies and services represent an area where Chinese companies are still playing catch-up to western suppliers which are generally larger and better experienced.

For example, France's Suez, which specialises in water, sanitation and waste services, sees big potential in China. The company plans to invest around €100m each year in new projects in China during the next five years and it expects its sales in China to grow an an annual 15% growth rate.

Like it or not, the west is partially responsible for China's polluted skies and rivers — Made in China goods would cost significantly more if the west insisted on Chinese suppliers using western environmental and labour standards — so its only fitting that the west should be part of the solution. More on this “symbiotic” relationship between China and the west in this post on Richard Spencer's excellent China blog for the Daily Telegraph.


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