China takes aim at smoggy skies

First in an occasional series

GUANGZHOU, China—The Pearl River Delta was the incubator of China's economic transformation, where special economic zones gave free markets a fighting chance against central government control.

With the rise of industrial development came some of the world's worst air pollution. Now, for the first time, the smog stretching from the city of Guangzhou south to Hong Kong threatens the vigor of China's fastest-growing economic region. Merrill Lynch's Hong Kong investment advisers are so worried that smoggy air is chasing jobs from downtown Hong Kong that they recently advised clients to snap up real estate in Singapore, where the air is clean.

Alarmed at the perception and the reality of a growing environmental nightmare they acknowledge is tied to global warming, government officials from Beijing to this port city formerly known as Canton are trying something altogether new: the beginnings of an organized attempt by China to confront the problem while it still might be controlled.

The mayor of Shenzhen, a high-tech mecca of 9 million people that was a fishing village just 20 years ago, this summer asked citizens to stop buying cars.

In an unprecedented crackdown, Guangdong province has begun sending out human "sniffers" to track down noxious emissions. "The police use dogs to sniff drugs -- we use our people to sniff pollution," said Chen Jian, director of the Guangdong Energy Conservation & Monitoring Center, a government agency. "It's like for wine or perfume. You use your nose."

In Beijing, the capital some 1,200 miles to the north, the central government is moving ahead with an unprecedented, aggressive plan to target specific companies all across China for mandatory curbs on energy use and emissions.

For years, Chinese leaders argued that they did not have the luxury of tackling climate change. As a developing economy, China needed to focus on growth. Besides, leaders said, Western nations did nothing to protect the environment during their industrial revolutions.

But this year China is expected to surpass the U.S. as the world's largest emitter of greenhouse gases: carbon dioxide, methane and others that contribute to global warming. The concerns about climate change are jeopardizing China's economic growth, and a surge of environmental protests has put China's security apparatus on high alert. And with the Summer Olympics a year away in Beijing, the government is scrambling to scour a persistent cloud of smog out of the skies.

China's response is emblematic of a massive, worldwide shift in the climate-change debate. There is little argument anymore that human activity is contributing to rising global temperatures. The questions now focus on how much damage it is causing, what to do about it, how fast the work must be done, what it will cost and how much time is left to attack the greenhouse gas emissions that scientists say contribute to the warming.

From China to Africa, South America to the United States, governments and private agencies are working to find practical solutions to what they say is the overheating of our planet. On Monday, the United Nations will convene a one-day international meeting of top officials for what the UN says will be the largest gathering of world leaders on climate change, in advance of a UN Climate Change Conference in Bali in December.

The challenge of fighting climate change is perhaps best seen in China, where the need to keep the economy humming supersedes all other political and social considerations, even the need for clean air. And like other countries, China is finding that it is far easier to set ambitious national goals than it is to achieve them.

Still, China hopes to cut emissions of carbon dioxide and other greenhouse gases 10 percent by 2010, a mammoth undertaking that, if successful, would have a real impact on the global environment.

To reach that goal, Chinese leaders are targeting their country's voracious appetite for electric power. The economy is growing so quickly that a cut in overall consumption has been deemed impossible. That would short-circuit the economy and potentially put the government at risk. But a still-consequential half measure aims at the "intensity" of energy consumption: a 20 percent cut in energy use per unit of national economic output by 2010.

There is no guarantee China will succeed, or even remain committed to its green rhetoric. Indeed, despite the push from the central government, the targets are proving tough to hit. Emissions are down, but not as much as the government wanted. Energy consumption per unit of gross domestic product dropped 1.23 percent in 2006 -- less than a third of the goal.

Meanwhile the economy grew by 11 percent, a surge that continues so far this year.

An emerging domestic concern

China's noxious emissions also are an issue for other countries and trading partners. And they are an emerging domestic problem: Citizens have demonstrated recently about toxic water and soil, and Chinese officials do not want air quality to become the next flash point. When a joint research project conducted by the Chinese government and the World Bank found that air pollution contributes to as many as 400,000 deaths a year in Chinese cities, the government resisted releasing the data for fear of arousing political turmoil.

Yet China is pushing ahead. The cornerstone of its effort is an aggressive new program focused on the 1,000 largest consumers of power. The central government has required those companies, which consume one-third of the nation's energy supply, to sign agreements to slash energy use and emissions.

Countries as diverse as Canada, Japan and Denmark have experimented with voluntary agreements. China is making them mandatory.

With little consultation, the central government dictates emissions and energy goals for the so-called Top 1,000 companies. Then it provides free consulting on ways to cut back. The catch: harsh financial penalties against enterprises that don't succeed. The government uses its controlling interest in many utilities to push for the closure of smaller, dirtier and less efficient plants. In their place, the utilities are building hundreds of cleaner, more efficient big plants at the rate of two per week. Sometimes violent protests have broken out over the land seizures that make way for the big power plants, but the government is pushing ahead.

Before, 'growth at any cost'

The focus on efficiency and cleanliness is an abrupt turnabout. In recent years, almost every available yuan in China went toward increasing capacity and boosting the economy, with little regard for the environmental impact.

"Until now, the Chinese have promoted growth at any cost. It is a very perverse incentive that destroys any social or environmental limitations," said Krzysztof Michalak, a researcher at the Organization for Economic Cooperation and Development who has done extensive work in China.

"Now, at the state level, there is an appreciation that the environment can be a limitation on economic growth," Michalak added.

Chinese leaders in several instances this year have spoken out on the need to respond to climate change by reducing industrial emissions and taking other measures, with Premier Wen Jiabao calling on China to show more determination and move ahead in an "urgent manner."

In fact, even strong central governments like China's can be surprisingly powerless to impose quick change. Corruption and bureaucratic indifference are problems. From 2001 to 2005, China earmarked 1.3 percent of its national economic output for environmental projects, but a subagency of China's powerful State Environmental Protection Administration reported this year that less than half of the money went toward legitimate purposes. Chinese academics who monitor environmental enforcement believe the country's vast bureaucracy enforces only about 10 percent of environmental codes.

Problems at provincial level

This time, the central government is attacking the weak link where past efforts have broken down: the provinces. Provincial administrators have often obstructed environmental efforts because the officials were evaluated and promoted solely on the basis of economic growth in their territory. Now environmental measures are getting equal treatment in the way the central government rewards and sanctions local officials.

The central government is focusing on Guangdong province. As the region that has attracted the most foreign investment and one with a relatively modest contingent of heavy-industry giants, Guangdong is at once most susceptible to outside pressures and most easily affected by government-led cleanup efforts.

Twenty-six of the country's top 1,000 companies are based in Guangdong. They consume 180,000 tons of coal a year. But at the urging of the central government, Guangdong has added another 128 local companies to the program, consumers of an additional 70,000 tons. In the first year of the program, Guangdong had the biggest improvement of any province, consuming 16 percent less energy per unit of economic output than in 2005.

"The enterprises are obliged to follow the policies," said Chen, of the local energy monitoring agency. "It's a national policy, and they have responsibilities. This year is a crucial year."

Similar tactics have been employed in Beijing. In an effort to clear the capital's skies before the Olympics, the government pressured a huge steel enterprise, Beijing Shougang, to close an 85-year-old plant a few miles from Tiananmen Square.

In Guangzhou, Chen said, provincial authorities prompted Guangzhou Iron & Steel Group Co. to move a mill out of the city, while central government officials pushed it to build a more technologically advanced plant that would consume less energy and reduce emissions.

Forces from outside the government are pushing for change too. Foreign companies that use Guangdong businesses as part of their supply chains are asking for more attention to the environment. And independent-minded Hong Kong, neighbor to the south, is agitated about the clouds of acid rain and other pollutants wafting down the Pearl River Delta.

Citizens, companies resist

Some of the steepest resistance to cleanup efforts can come from Chinese citizens and from Chinese companies that simply want to turn a profit. For them, concerns about the environment are secondary to their need for electrical power. Indeed, Guangdong province has fallen short of power this summer, which prompted dozens of warnings about brownouts.

Chinee Inflatables is a case in point. When the company's second-story workshop is humming, its 100 employees mold, press and paint some of the bounciest attractions on Earth: everything from back-yard "moonwalks" to the 15-foot-tall King Kongs that used-car dealers can't resist. But dozens of times this summer, officials running the Guangdong power grid have called to warn about impending brownouts.

Tian Ji, general manager of the company, refuses to let his factory be stopped. He recently bought a 20-kilowatt diesel generator to keep the workshop running when the city juice doesn't.

"For families and people, power is guaranteed," said a frustrated Tian. "It's always the industrial enterprises where the electricity runs out."

Such makeshift solutions are major contributors to China's polluted air. Hundreds of larger companies -- steel mills, cement plants, car factories and the like -- have their own generators. Elsewhere in Guangdong, entrepreneurs have converted mothballed sugar mills into rogue power plants that burn diesel, coal and other fuels. Their emissions all gather in the blanket of carbon-saturated smog that hangs over Guangdong's cities.

To outsiders monitoring China's efforts to reduce its emissions, the give-and-take in Guangdong makes the province worth watching.

"Guangdong matters a lot," said Jennifer Turner, a scholar at the Woodrow Wilson Center in Washington who has studied the impact of climate change in China's Pearl River Delta. "If Guangdong shifts to become greener, it will have a big impact on the rest of the country."

Some efforts help bottom line

Ultimately, the efforts best take root when companies find ways in which emissions reductions can serve their economic interests.

On the outskirts of Guangzhou, the province's capital, the Guangzhou Zhujiang Brewery Group's Pearl River brewery this summer began operating two power generators that take methane from the brewing process and convert it into electricity. The 1.4 megawatts of generated electricity exceed the brewery's needs, so Zhujiang sells the excess into the power grid.

Elsewhere in Guangdong, windmills dot the province's southern coastline. Big investments in liquefied natural gas and nuclear and solar power facilities are in the works.

Still, the biggest challenge lies in finding new ways to use coal, which still accounts for at least 70 percent of China's power but is a dirty-burning fuel.

Guangdong province is finding that the effort to modernize China's power infrastructure is fraught with political obstacles too.

As the country's utilities seek land for new power plants, they often face fierce protests from villagers who claim the utilities pay below-market prices for the property.

In the southern city of Dongzhou, a demonstration in December 2005 turned violent after police shot and killed three protesters. The activist group Human Rights Watch called the shootings the worst Chinese government attack on protesters since the Tiananmen Square massacre in 1989.

Unbowed, government officials are pushing ahead, weeding out smaller, inefficient power plants. The government-controlled power grid pressures small plants by paying below-market prices for their power, while regulators impose strict fees for wastewater discharges and other pollution.

"It's up to them," said Xie Zhuoqun, director of energy matters in Guangdong's Development and Reform Commission, the agency responsible for complying with environmental goals. "If the cost is too high and the return is too low, they will just go out of business."

China still likely to fall short

No matter how hard China works the levers of economic pressure, it almost certainly will fall short of its goal of a 20percent reduction in the amount of energy consumed per unit of economic output by 2010.

Were China to meet its target, it would reduce emissions by the equivalent of 240 million tons of carbon dioxide through 2010. That's more than half of the 422 million-ton reduction pledged by all the signatories to the Kyoto Protocol on environmental emissions.

Climate scientists cheer any improvement, especially because there has been rampant skepticism about China's commitment to cut emissions.

"Maybe they only reach half their goal," said Lynn Price, an expert on China's emissions policies at the Lawrence Berkeley National Laboratory in California. "That's still big."