Blue skies over Beijing
Economic growth and the environment in China
By Matthew E. Kahn, Professor of Economics, Spatial Sciences, and Environmental Studies at the University of Southern California; and Siqi Zheng, Samuel Tak Lee Associate Professor of Real Estate Development and Entrepreneurship, MIT Center for Real Estate/Department of Urban Studies and Planning, and Faculty Director, Samuel Tak Lee MIT Real Estate Entrepreneurship Lab
Mr. Wu is thirty-eight years old and has a Ph.D. in civil engineering from Tsinghua University. Originally from the Hunan province, he moved to Beijing, and now manages a department in a large, state-owned building design company. He earns a good salary. He and his wife, who works in a state-owned hospital, have a five-year-old daughter. Like many young city couples in China, they bought their apartment and car before their daughter was born so she could grow up comfortably.
Mr. Wu enjoys a much better quality of life than his parents did. Thirty years ago, the Communist Party of China would allocate jobs and dormitory housing to college graduates like Mr. Wu’s parents. For most basic necessities — from grain, meat, and cooking oil, to clothes, soap, and bicycles — the Party distributed ration coupons.
But Mr. Wu faces challenges that his parents did not. If he doesn’t reach his profit target at work, then he faces income deductions. If he suffers from health problems, such as a serious cough from the terrible pollution in Beijing, the fierce competition with his colleagues forces him to stay on the job. When he goes out for dinner, he is careful about what he eats because he has recently read about the excessive levels of drugs and hormones injected into chicken. At home, he must manage his parents’ retirement and plan his daughter’s schooling. The nation’s one-child policy creates extra anxiety for urban parents as they focus their energy on investing in their one child’s success. There is a scarce supply of elite slots in high-quality schools and colleges, and this puts heavy pressure on every child. Worried about his daughter’s future, Mr. Wu might move to Canada or the United States.
Young Chinese urbanites also face very high home prices in the major cities. Ms. Feng has a graduate degree from Tsinghua University and works at a major real-estate company, and she recognizes that the booming market has brought her company enormous business opportunities. But she laments the soaring house prices in Beijing. Her family rents a small, old apartment in the Xicheng District. To buy a 100-square-meter condo unit, they would have to save for ten or fifteen years. Ms. Feng describes her workweek as “five plus two, and white plus black,” that is, all five weekdays, both weekend days, and always late into the night. The extra hours are considered voluntary, so she does not receive overtime pay. Those who do not follow this routine lag behind in their performance evaluations and are pressured to leave.
Ms. Feng works a much longer week than the typical worker in Western Europe. Indeed, a comparison between daily life in urban China and Western Europe yields striking contrasts. Urban China’s material standard of living is rising, but urban pollution and stress are extreme. Western Europe’s cities offer high quality of life, and their inhabitants have ample leisure time to enjoy life.[1]
Over the last thirty years, China’s economy grew at an amazing rate of 10 percent per year, and the share of people living below the poverty line fell from 84% to 13%. There are still hundreds of millions of poor households in rural China, but hundreds of millions have escaped poverty. The horrible famine of 1959 to 1961 is now a distant memory. Improvements in medical care and diet have lengthened life expectancy. Over the last thirty years, life expectancy at birth has increased from 66 to 73 years.
Despite this progress, Chinese urbanites must reckon with the reality that the nation’s standard of living is not improving as quickly as its economy is growing. Their cities suffer from limited access to health care and education, and disastrous environmental quality.
In recent years, the Chinese and Western media have published high-profile and lengthy exposes on environmental problems such as lead pollution in Deqing, toxics created by the mining of rare earths in Inner Mongolia, coal burning in Northern China proven to decrease life expectancy, fox and rat meat sold as mutton, even thousands of dead pigs floating down the river in UShanghai — all salient examples of the costs of China’s economic growth.
In early 2013, the incredible smog in northern China caught the world’s attention.[2] In January 2013, the particulate matter concentration in Beijing reached levels between two, three, and even four times the public-health-emergency threshold of 250 µg/m3 — and up to 40 times what the World Health Organization labels as the healthy level.[3] Based on one key indicator of outdoor air pollution, twelve of the twenty most polluted cities in the world are in China.[4] In 2003, 53 percent of the 341 monitored Chinese cities — accounting for 58 percent of the country’s urban population — reported annual average pollution levels that exceeded the WHO’s standard. One percent of China’s urban population lives in cities that satisfy the European Union’s air-quality standard.[5] One study estimated that such extreme pollution may cause 1,200 premature deaths a year in Hong Kong alone.[6]
Another cause for concern is water pollution. According to a report by the Chinese Ministry of Environmental Protection, 57% of the groundwater in 198 cities in 2012 was officially rated as “bad” or “extremely bad,” while more than 30% of the country’s major rivers were found to be “polluted” or “seriously polluted.”[7][8]
China is the world’s largest greenhouse-gas emitter, and these emissions exacerbate the risk of climate change. While per-capita energy consumption in China is still less than 30% of that in the US, China’s total energy consumption already surpassed total U.S. energy consumption in 2009. Data from the World Bank shows that China’s per-capita greenhouse-gas emissions grew by 186 percent (to 5.2 tons) between 1990 and 2010, while the world’s emissions grew by 16 percent (to 4.9 tons per person).[9]
We’ve Been There
Today, China faces many local environmental challenges and an unintended consequence of its industrial production and motorization and coal reliance is growing greenhouse gas emissions. In contrast, many cities in the United States have clean air and water. Based on local environmental criteria, cities in the United States have enjoyed great progress over the last 40 years.
Not long ago, the cities of the West were much more polluted. Coal burning in major cities such as London and New York City created ambient soot that killed thousands. London’s Great Smog of 1952 alone killed thousands as coal emissions from residential burning greatly elevated local particulate levels. Meanwhile, rising motorization relying on leaded gasoline caused high levels of urban lead emissions. In the 1960s and 1970s, Los Angeles smog got worse and worse due to vehicle mileage growth. Also in the mid-twentieth century, heavy manufacturing in major cities like Pittsburgh, New York City, and Los Angeles led to severe air and water pollution. Pittsburgh’s booming steel industry offered high-paying but dirty jobs.
But the combination of new regulations — perhaps spurred by the horrible consequences of the Great Smog — and energy efficiency gains, and rising household incomes that encouraged the substitution away from dirty fuels such as coal towards cleaner fuels such as natural gas fostered air-quality improvements for dense cities during times of growth. The birth of the environmental movement, often associated with the publication of Rachel Carson’s Silent Spring, helped mobilize the growing number of educated people in U.S cities in the 1960s to pursue environmental progress and to preserve natural capital.
In the case of vehicle emissions, effective environmental regulations in the United States have offset the growth in total annual miles driven. Vehicles built in 2015 emit 99 percent less local air pollution per mile than those built before 1975. So despite continuous vehicle growth and increased mileage, over the last several decades Los Angeles smog has plummeted.[10]
Starting in the early 1960s, Pittsburgh and other Rust Belt cities lost thousands of manufacturing jobs. The silver lining was blue skies: as industrial activity declined, air and water quality sharply improved. Pittsburgh reinvented itself as a pretty city built along the Allegheny and Monongahela rivers, with new firms that relied on an educated workforce benefiting from access to leading research universities such as Carnegie Mellon and the University of Pittsburgh. Boston and Chicago enjoyed similar transitions to blue skies, as did London.
The U.S experience offers some lessons for predicting China’s future environmental quality dynamics. While the two nations differ on many dimensions, the experience of cities in the United States highlights the role that fossil fuel consumption, the scale of industrial activity, and the role of private motorization play in contributing to urban pollution. For a city of given population size, it will experience pollution progress if its power plants and industrial boilers substitute away from coal, experiences an industrial transition away from heavy industries, or if the city’s firms introduce new technologies that reduce emissions per unit of economic activity. The transportation sector will create fewer emissions if people drive less or if private vehicles emit less pollution per mile of driving. Note the two key variables here are the scale of economic activity (i.e industrial production or total miles driven) and the pollution intensity per unit of economic activity. For a growing economy to enjoy environmental progress, it must be the case that pollution per unit of economic activity declines faster than economic activity grows. For example, if the people of Beijing drive 50% more miles in the year 2015 than they did in the year 1990 then aggregate vehicle emissions can only decline if emissions per mile of driving decline by more than 50% over this same time period. This accounting framework of tracing the scale and the pollution intensity of economic activity in a growing city provides a framework for tracking pollution dynamics in a Chinese city over time and to compare Chinese cities’ environmental performance over time.
Reasons for Hope
Will the 2013 Beijing haze be China’s equivalent of Rachel Carson’s Silent Spring, or the Great Smog of 1952 — a catalyst for genuine environmental change? There are several nascent trends now unfolding in China that suggest that many of China’s cities will experience environmental progress over the next decades. As we discuss below, of 83 major Chinese cities for which we can access urban air pollution data (as measured by PM10) we predict that 49 have already experienced sufficient economic growth such that we predict that their air pollution will improve in the near future.
Between the years 2001 and 2013, Beijing’s ambient annual particulate levels have declined by 39%. This pollution progress has taken place during a time when Beijing’s population, vehicle stock and per-capita income continued to grow. An examination of PM10 pollution levels across 83 of China’s major cities over the years 2005 to 2010 indicates that controlling for a city’s population size and its share of employment from manufacturing that PM10 pollution levels are declining by 2.8% per year. Assuming that this past statistical relationship continues to hold, we predict that a city whose population and manufacturing share does not change over time would enjoy a 28% decline in PM10 levels over a ten year period. While China’s cities are growing in size, and city size is positively correlated with PM10 levels, the impact of city growth on urban pollution levels is small. A 10% increase in a city’s population (so Beijing growing by 2 million people) is associated with only a 1.3% increase in ambient PM10 levels.
Many Chinese urbanites are becoming increasingly aware of the threats and impositions on their quality of life, and as more and more people obtain higher education and better wages, their standards and demands are rising. Indeed, the pollution in Chinese cities has sparked widespread complaints and calls for a clean-up.[11] Using modern Internet technology, the Chinese people are discussing and debating the causes and consequences of urban pollution. Under the Dome is a 2015 self-financed, Chinese documentary film produced by Chai Jing, a former China Central Television journalist. This documentary focused on the challenge of air pollution struck a nerve in China. It was viewed over 150 million times on Tencent within three days of its release. The film openly criticizes state-owned energy companies, steel producers and coal factories for being responsible for the pollution. Mr. Chen Jining, the recently appointed Minister of China’s Ministry of Environmental Protection (before this he was the President of Tsinghua University), praised the film, comparing its significance with Silent Spring.[12] Over 18% of the world’s population lives in China. A majority of China’s population now lives in cities. The quality of life of this growing urban middle class is a key determinant of political stability both for the nation, the region, and the world.[13]
Notes
2. “Air quality suffers due to smog”, China Daily, January 14, 2013, http://www.chinadaily.com.cn/china/2013-01/14/content_16115953.htm.
3. Alex Wang, Orville Schell, Elizabeth Economy, Michael Zhao, James Fallows and Dorinda Elliott, “Airpocalypse Now: China’s Tipping Point?”, China File, February 06, 2013, http://www.chinafile.com/airpocalypse-now-chinas-tipping-point. Particles 2.5 microns or less in diameter (PM2.5) are referred to as “fine” particles and are believed to pose greater health risks than larger particles because they can become embedded deep in people’s lungs.
4. World Bank. “World Development Indicators 2007”. Washington, DC: World Bank, 2007b.
5. World Bank. “Cost of Pollution in China”. Washington, DC: World Bank, 2007a
6. Edgilis, Outdoor Air Pollution in Asian Cities: Challenges and Strategies — Hong Kong Case Study, Singapore, June 2009.
7. “Environment may be issue at two sessions”, China Daily, February 26, 2013, http://usa.chinadaily.com.cn/china/2013-02/26/content_16255385.htm.
8. Jennifer Duggan, “China’s environmental problems are grim, admits ministry report”, The Guardian, June 07, 2013, http://www.theguardian.com/environment/chinas-choice/2013/jun/07/chinas-environmental-problems-grim-ministry-report.
9. “CO2 emissions (metric tons per capita)”, accessed October 13, 2014, http://data.worldbank.org/indicator/EN.ATM.CO2E.PC/countries
10. Kahn, Matthew E., and Joel Schwartz. “Urban air pollution progress despite sprawl: the “greening” of the vehicle fleet.” Journal of Urban Economics 63, no. 3 (2008): 775–787.
11. “ China readies itself for CO2 emissions cap”, China Daily, August 29, 2014, http://europe.chinadaily.com.cn/epaper/2014-08/29/content_18510113.htm.
12. Despite demonstrating the failure of China’s regulations on pollution, the Chinese government at first did not censor the film. However, within a week, the Communist Party’s publicity department confidentially ordered the film to be removed. See: https://en.wikipedia.org/wiki/Under_the_Dome_(film)
13. Our definition of the “middle class” and “upper middle class” is based on the McKinsey report “Mapping China’s Middle Class” published in 2013 (see http://www.mckinsey.com/Insights/Consumer_And_Retail/Mapping_Chinas_middle_class?cid=china-eml-alt-mip-mck-oth-1306).
This text is an extract from Matthew E. Kahn and Siqi Zheng, Blue Skies over Beijing: Economic Growth and the Environment in China (Princeton, NJ: Princeton University Press, 2016).
