China’s Silver Lining

Why smoggy skies over Beijing represent the world’s greatest environmental opportunity
China coal
INDUSTRIAL AREAS of Shandong province are dotted with huge mounds of low-grade coal, now worth picking over because of soaring world demand. China burns more than 2 billion tons of coal each year, about one-third of the world's total.

How do we measure the good against the bad, the signs of progress against the devastated landscape and opaque skies? Here are three propositions to suggest, followed by one big challenge China poses to the world.

The first is simply that we acknowledge that the authors of the 11th Five-Year Plan were right. There are positive developments in China. And the situation is grave.

Renewable energy? More of it is coming online every day. Indeed, one of the world’s leading producers of photo­voltaic cells, Suntech Power, is based in Wuxi, near Shanghai. It is listed on the New York Stock Exchange, and its owner, Shi Zhengrong, is a billionaire. I have seen large windmill farms in Xinjiang province, where GE and Siemens compete to sell turbines. But because demand for power is increasing much faster than renewable supply, China burns about 10 percent more coal each year than it did the year before.

Automobiles? A similar picture. China recently adopted fuel-efficiency standards higher than those in the United States. But China now has only about one-twentieth as many cars per person as the United States does—about 35 million cars for 1.3 billion Chinese, versus 185 million cars for 300 million Americans. It will close that gap, and even though China’s cars will become more efficient, there will be a lot, lot more of them. According to a recent analysis by the McKinsey Global Institute, China will have about 120 million vehicles by 2020. Outsiders, then, should give the Chinese credit for what they are achieving, without forgetting how much there is to do.

Second, the major problem with government policy in China is essentially the same one as in the United States: despite the differences in political systems and overall wealth, both governments are afraid to make the public pay the true cost of cleaning up the country. And that could slow the process, by many years.

What the United States has done for decades with oil and gasoline—namely, keep prices as low as possible, so its citizens can live the good life—the Chinese government has done with even more necessities. Gasoline is cheaper than in the United States, because the government subsidizes the refineries. Water, electricity, agricultural fertilizer, and above all coal—they all cost Chinese consumers less than their “real” cost to the country, in both environmental and economic terms.

“Just because a country is poor is not a reason to subsidize scarce goods,” David Dollar, an American who directs the World Bank’s China and Mongolia operations, told me in his office in Beijing. He explained the point this way: some places in northern China and Mongolia use more water per capita than much of Europe, even though they’re mostly desert and have nearly exhausted their aquifers. That’s because they are allowed to pay so little for water. If people had to pay more, they would use less: “Chinese people,” Dollar said, “tend to be very practical, if I may put it that way.” The same is true of fertilizers. China’s rivers and lakes are so foul in part because chemical fertilizers are subsidized. Farmers overuse them, and the runoff kills streams. If fertilizer cost more, farmers would use less, and less runoff would end up in streams. The Chinese government is planning a continental-scale system of canals to bring water from the south to the arid north. But over the next decades, Dollar argues, tens of millions of people are going to leave the northern farms for urban jobs in any case. It would be far saner—economically and environmentally—to scale back the canal-building and steer farms, factories, and people to the south, where the water is.

The urban version of this pattern involves electricity, gasoline, and public water supplies, all of them cheaper for consumers than their real cost to the country and the environment. Here, too, changes in price and policy can make large differences. For example: the Shanghai city government makes owning a car very expensive, and has relatively manageable traffic and excellent subways. The Beijing city government makes it cheap, and is being strangled and choked by cars.

“Underpriced energy is the world’s largest subsidy for environmental destruction,” William Chandler, of the Carnegie Endowment for International Peace, wrote in a report this spring. “The Chinese government continues to intervene heavily in energy pricing, recently even freezing—in a profoundly wrongheaded move—key energy prices.”

David Dollar is not Ebenezer Scrooge. The World Bank’s recommendations for realistic prices include many schemes to offset the burden they would place on the country’s impoverished majority. But he recognizes the trap the government is in. If China keeps these prices down, it will have even more trouble producing positive developments of any sort. If it lets them rise, it will face the anger of people for whom inflation is already the No. 1 domestic concern. Americans who reflect on their own experience with proposed hikes in gasoline taxes will recognize the difficulty of the choice.

The third proposition, which is more hopeful: the business of improving China’s environment can be a very attractive business indeed. For corporations, it can mean profits, as with the newly efficient cement factories. For the world as a whole, it opens the possibility of a longer-term profit, in dealing with shared climate-change problems. Over the past 20 years, the world got used to a “China price” for manufactured goods—the rock-bottom price for anything coming out of a factory. In the coming 20 years, the world could make use of a “China price” for pollution control, especially greenhouse gases—the rock-bottom requirement of money and resources needed to reduce emissions by a given amount. Precisely because many Chinese systems are now so wasteful, it can be cheaper and easier to eliminate the next thousand tons of carbon-dioxide output or the demand for the next million watts of electricity-generating capacity here than anywhere else.

Late last year I went to Tsinghua University in Beijing, China’s counterpart to MIT, to hear an American businessman address a group of young Chinese engineers. The visiting speaker was George David, the CEO of United Technologies Corporation, and he had come to give a lecture that at first struck me as implausibly upbeat.

China consumes less energy per person than America, David said, because its people live so simply, and so many are on farms. But China’s economy consumes much more energy per unit of economic output than America’s—about four times as much, in fact—and that, he said, is good news. So is the fact that China’s homes, schools, and office buildings are so wasteful in the ways they use energy for heating and cooling. China’s traffic system suffers extreme congestion, which wastes more fuel. More good news! “The U.S. is tremendously inefficient, and China is worse,” David said. “That is what gives us the opportunity”—both commercial opportunity for companies like his and strategic opportunity for groups fighting climate change worldwide.

He went on to make a point that became obvious once explained: precisely because so much of the Chinese system is profligate and sloppy, the opportunity to improve efficiency, and cut back on pollution and energy use, is greater here than nearly anywhere else—and the savings can be achieved more cheaply. The energy wastefulness of China’s economy affects the entire world because of the greenhouse gases it generates. And so as the world looks for ways to cut those emissions, China offers fast, easy, and inexpensive opportunities for improvement. For businesses, this means a market for efficient engines, sewage-treatment plants, solar cells and similar “clean” energy sources, and other technologies that help control pollution. For those working to control greenhouse-gas emissions, it means a fast, cheap way to make a difference.

David gave this illustration: commercial and residential buildings are a deceptively important source of pollution and greenhouse-gas emissions. Worldwide, the energy needed to heat, cool, and illuminate buildings, together with the energy costs of putting them up and maintaining them, accounts for nearly 40 percent of total energy demand—even more than the energy used by all forms of transportation. Chinese office buildings and apartments are leakier than those in developed countries. They require about twice as much fuel to heat and cool as those in similar climates in Europe or North America, because many were built in the days when insulation was one of many unaffordable luxuries. Therefore, in principle it’s cheap and easy to cut their power use: more insulation in existing buildings, higher standards for new ones.

Heating water by itself accounts for about 15 percent of the energy used in buildings. Switching to a different, technically proven means of heating water—“heat transfer” instead of “heat insertion”—would so dramatically improve efficiency that, according to David, it could lower total world energy demand by several percentage points.

Thus a corporate opportunity and an environmental opportunity coincide. Selling equipment and many other “green building” features to and within China will save money by cutting waste, plus modernize factories to reduce their energy use too. For George David’s arch-competitor, General Electric, that might mean selling windmill turbines to China; for his own UTC, it means selling elevators that, like hybrid cars, generate power whenever they brake and thus substantially cut total energy use. This in turn would have obvious benefits to the world. David and 10 other CEOs from industrial companies in North America, Europe, and Japan have formed the World Business Council for Sustainable Development, which is pushing for similar innovations in urban design and building construction.

I saw one demonstration in a manufacturing zone an hour’s drive west of Shanghai. A factory there will, when it becomes operational in a few months, produce a radically different sort of window glass for use in office buildings. The company, called Envision, is based in Alberta, Canada, and uses a technique designed in the 1980s in Switzerland. It replaces the double-glazed windows normally used in apartments and offices with a complex structure that looks like a normal pane but has internal membranes and other devices that almost totally block the transmission of heat. These are the windows used at the U.S. National Science Foundation’s research station at the South Pole, and they have been widely adopted in cold-climate buildings around the world—a government building in Minnesota, the airport in St. Louis, more than 500 installations in Canada and Europe. The company has a factory in Edmonton, Alberta, and another in Switzerland, where the equipment being installed near Shanghai was previously used.

At the factory, Albert Wong showed me the difference the windows could make. Wong, who is in his 50s, grew up in Shanghai and then studied chemistry at Louisiana State University, in Baton Rouge. (Time for a reminder: America’s universities are the crucial connection between the U.S. and China.) He worked for Shell Oil and DuPont; he became a Canadian citizen; and five years ago he returned to China to sell his windows. His company has taken infrared photos of Chinese buildings at night. The typical ones blaze red with radiating heat: much of what comes into the building, from the furnaces, goes right out through the panes. (As I write this, I am sitting in a two-star Chinese hotel in the hinterland. It is cold and windy outside, and the breeze through the half-inch gap between the window glass and its frame ruffles the papers on the desk.) Then he showed me comparable photos of buildings with his windows. They are deep blue, the heat trapped inside.

These windows cost 10 percent more than standard glass. But if specified from the start, they can reduce construction costs for an entire building by 15 percent or more, since the heating and air-conditioning systems can be reduced by half. Plus, they save money each year on fuel.

The bad news is that not one of the windows is used in China yet. After five years of effort, Wong has yet to make a single sale here. The factory near Shanghai will supply customers in Korea, Japan, North America—but not the surrounding provinces. The barriers are the conservatism of the construction industry (not the most adventurous group in any country), and the fact that even if his windows save coal for China, they will cut out an existing glass manufacturer.

Many green businesses are already enjoying better luck, and Wong says that Envision is in China for the long haul. But his start-up difficulties illustrate the importance of helping Chinese factory owners, builders, and citizens realize the many opportunities for saving energy—and money—and reducing emissions that are open to them. “China has a golden opportunity to leapfrog old, inefficient technologies and introduce cutting-edge technologies at a relatively early stage of development,” the McKinsey analysis said.

In one way or another, all the proposals for helping China make this new great leap forward do the same thing: apply money or other rewards or penalties to steer China in a greener direction, for instance, stricter requirements for the windows in office buildings. Many of the proposals involve a concept that the Bush administration has rejected but that Senators John McCain, Hillary Clinton, and Barack Obama all support: a world market in “carbon credits.” When a million dollars spent on better building standards in China—or better smelters, or smokestack scrubbers, or any of a hundred other possibilities—could make a bigger difference in controlling world pollution than that same million dollars spent in the United States or France, there should be a way to make sure that million dollars gets spent in China.

"When I was a child, it was incredible for my father to have even one cold beer,” a man named Sean Wang, who works for Envision, told me recently. He grew up in Beijing in the 1970s. “Now people want 24-hour heating, hot water, refrigerators. It is not sustainable unless we make a change.” We met in a shiny and spectacular new office tower in central Beijing. In every direction around us in the city were construction and bustle. In every direction around us in the country were people moving from the villages, where they had a few flickering lightbulbs and a bicycle, to the city, where they expected elevators, cars, and espresso machines.

The conclusions I’ve suggested so far all bear on the ways that China’s environment might be improving, however slowly, and whether and how that improvement might be speeded up. All of these improvements lead to one further and now unanswerable question, which is raised by Sean Wang’s comments. Promising as some trends might be, bright as is the potential for efficient, money-making green investments, does China’s scale and ambition, plus its reliance on coal, simply doom the world’s effort to control greenhouse-gas emissions?

China is no idle bystander to this discussion. Its major rivers originate in glaciers on the Tibetan plateau, which have begun to melt. Even if every building in China is better insulated and built with Albert Wong’s windows, and every factory is equipped with Tang Jinquan’s co-generation pipes, is China’s newfound commitment coming too late? One data point among hundreds: a recent study by Maximilian Auffhammer and Richard Carson, of the University of California, concluded that without some startling change in technology, China cannot avoid increasing its greenhouse-gas emissions faster than other countries can possibly cut theirs back.

Startling changes in technology have appeared over the past century. Antibiotics, to name the one that has made the biggest difference in human welfare. Telecommunications, from the radio to the Internet. Air travel and knowing our world from space. Startling changes in energy technology are now necessary—in producing, conserving, and containing the by-products of fossil-fuel combustion. This is the next big technological challenge for the world as a whole.

The world will have more time to work toward a solution if it nurtures promising developments in China—and if it recognizes that its most populous nation is doing some things right.

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James Fallows is an Atlantic national correspondent; his blog is at More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

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