OECD Environmental Performance Reviews CHINA ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. Also available in French under the title: Examens environnementaux de l’OCDE : CHINE and in Chinese under the title: © OECD 2007 No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to OECD Publishing [email protected] or by fax 33 1 45 24 99 30. Permission to photocopy a portion of this work should be addressed to the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, fax 33 1 46 34 67 19, [email protected] or (for US only) to Copyright Clearance Center (CCC), 222 Rosewood Drive Danvers, MA 01923, USA, fax 1 978 646 8600, [email protected]. OECD Environmental Performance Reviews: China 3 FOREWORD A healthy economy needs a healthy environment. In line with its mission to promote sustainable economic growth and rising living standards, the OECD promotes better integration of environmental concerns into economic and sectoral policies. In this context, the OECD’s Environmental Performance Reviews – conducted since 1992 – provide a systematic analysis of countries’ actions to reach their environmental goals and specific recommendations to improve their outcomes. We have learned much from past exercises of OECD member countries. But we have also continued to extend our reach and effectiveness with the work with non member countries. This co-operation has proven fruitful. In the case of China, the present review builds on over a decade of OECD-China environmental collaboration and is part of a wider strategy that relies on studies of several other areas such as: the Economic Surveys and the reviews of Agricultural Policies and Governance Reform. The OECD Environmental Performance Review of China was based on the same methodology used for environmental reviews of all OECD countries. This review evaluates China's performance in reducing pollution, improving the management of natural resources, implementing economically efficient and environmentally effective policies, and strengthening international co-operation. It includes Conclusions and 51 Recommendations which were presented to China and all OECD countries in a peer review process. The review confirms that rapid economic development, industrialisation and urbanisation have generated severe and growing pressures on the environment, resulting in significant damage to human health and depletion of natural resources. For example, air pollution levels in some cities are among the worst in the world, one- third of water courses are severely polluted, and illnesses and injuries are associated with poor environmental and occupational conditions. In terms of resource use, energy consumption per unit of GDP is about 20% higher than the OECD average, and large-scale transfers of water from southern to northern China are needed to keep up with growing demand. The review supports recent declarations by the Chinese authorities to encourage more balanced patterns of development by promoting concepts such as “harmonious society” and “scientific development”. It also found that China has embraced “polluter pays” and “user pays” principles, approaches promoted by OECD. This is © OECD 2007 4 OECD Environmental Performance Reviews: China reflected in China’s environmental legislation and the introduction of emission charges and water pricing. However, the implementation of these environmental policies lacks environmental effectiveness and economic efficiency. Energy, transport, industry and urban development policies need to integrate environmental concerns institutionally and through market-based mechanisms. Energy, water and other natural resources still remain under-priced. Further, international environmental co-operation needs to be strengthened in the mutual interest of China and the international community. Collective actions are necessary to protect the ozone layer, to combat climate change, and to tackle regional environmental issues such as acid rain, desertification and protection of the marine ecosystems. I urge China to strengthen its efforts, to move towards a more environmentally “harmonious society”, and to step up international environmental co-operation. It is in China’s own interest to address the negative impacts of environmental degradation and natural resources depletion on the health and well-being of its people and on its economic development. It is also in the interest of making globalisation and environment compatible and mutually supportive. As China enjoys a continued high rate of economic growth, further environmental progress will reward China with major economic and social benefits. Angel Gurría Secretary-General © OECD 2007 OECD Environmental Performance Reviews: China 5 TABLE OF CONTENTS 1. CONCLUSIONS AND RECOMMENDATIONS ....................................... 15 1. Environmental Management ........................................................................ 16 Implementing environmental policies more effectively and efficiently....... 16 Air................................................................................................................. 18 Water ............................................................................................................ 20 Waste................................................................................................................. 22 Nature........................................................................................................... 24 2. Towards “Harmonious Society” and Environmentally Sustainable Development ............................................................................ 26 Integration of environmental concerns in economic decisions .................... 26 Integration of environmental and social decisions ....................................... 27 3. International Co-operation ........................................................................... 29 Part I ENVIRONMENTAL MANAGEMENT 2. THE CONTEXT .............................................................................................. 33 1. Physical Context........................................................................................... 34 2. Economic Context ........................................................................................ 36 2.1 GDP and related indicators................................................................. 36 2.2 Structure of the Chinese economy...................................................... 38 2.3 Trade and FDI..................................................................................... 38 3. Social Context .............................................................................................. 40 4. Institutional Context..................................................................................... 45 4.1 National institutions............................................................................ 45 4.2 Territorial institutions ......................................................................... 47 4.3 Environmental framework .................................................................. 47 4.4 Environmental institutions.................................................................. 49 Selected Sources ................................................................................................ 52 3. AIR MANAGEMENT..................................................................................... 55 Recommendations.............................................................................................. 56 Conclusions ....................................................................................................... 56 © OECD 2007 6 OECD Environmental Performance Reviews: China 1. Policy Objectives.......................................................................................... 58 2. Ambient Air Quality and Emissions ...........................................................