How to fix China's pollution problem? It may not be able to afford it

Just outside a small village about 150 kilometres east of Beijing, a shepherd nudges a flock of sheep across a bright green field. Workers tie dried-out corn stalks into great sheaves. Men on mopeds lope down a gravel road. It would be a pastoral scene – if not for the giant steel mill looming in the background.

Inside the mill, Hongwei Iron & Steel, 1,200-degree-celsius heat is used to fashion I-beams, H-beams and other structural steel products, 900,000 tonnes a year in total. These metal bones form the skeletons of buildings across China – as well as elsewhere in Asia, North America and Europe. More than anything the villagers could pull from the ground, this is the region’s most valuable crop.

It also contributes an outsized portion of the foul air that has cast an ugly pall over the country – a problem that is literally impossible not to see.

Last month, the city of Harbin hit 1,000 on an air quality index that puts an upper limit on safe air at 25; the smog was so bad city buses got lost on their regular routes. A few weeks ago, LPGA athletes made international headlines for wearing masks to protect themselves while playing in Beijing. And new research suggests the toxic air has serious long-term consequences, cutting life expectancy in parts of China.

The country has responded to this noxious crisis in a fashion becoming its size, with promises of giant sums of money – more than a quarter-trillion dollars – and a breakneck build-up of a green energy sector that is already the world’s largest.

But even this may not be enough to clean up China’s air. That may require a much larger change, to the philosophy that has guided China for more than three decades: economic growth above all else.

That growth has been a salve for the frictions endemic to a one-party state single-mindedly devoted to maintaining its own power. But now, as pollution becomes a refrain in the hundreds of thousands of protests that erupt around China every year and on domestic social media, it poses a major threat to social and political stability – particularly among those who should have benefited most from the boom, the country’s middle class.

“The big challenge in the coming years for the party and the state is not so much economic. It’s not political. It’s quality-of-life issues,” says Jonathan Fenby, a prolific author and the head of research firm Trust Sources.

No less a voice than Li Keqiang, China’s Premier, put it this way earlier this year: “It is no good to be poor in a beautiful environment, nor is it any good to be well-off and to live with the consequences of environment degradation,” he said.

The question is how a country driven – both internally and externally – by expansion, by the idea that “to get rich is glorious,” can find a way to balance wealth and well-being.

It’s the day after Harbin hit 1,000. But in Beijing, where the sun is an orange Ping Pong ball trying valiantly to penetrate the massive haze over the city, the coal industry is just getting ready to party.

Once every two years, the city hosts a coal and mining expo. This time around, the expo’s 30th anniversary, golden script touting “green mining, stunning mines” greets a river of visitors pouring into the National Agriculture Exhibition Centre. Admission is free. And the exhibit, to this crowd, is scintillating: Caterpillar mining trucks, giant metal chain conveyor belts, chemical displays, sales booths boasting about soft-rock consolidation skills. A man whips out his cellphone to snap a picture of an oil cooler.

Hovering over all 850,000 square feet of the show, though, is soot-stained air. It’s not only fouled by coal. Cars are part of the problem: Last year, there were about 114 million of them in China, growing at a rate of 8 per cent a year. On Beijing’s sprawling ring roads, it can take 20 minutes to move a few kilometres. And the fuel vehicles burn here, higher in sulphur and less purified than elsewhere, is roughly the quality of what was pumped at gas stations in North America 25 years ago.

Location is another complication: Beijing lies in a basin surrounded by mountains, and is close enough to the Gobi Desert that windborne particulates have been a problem since long before the invention of the automobile or power plants.

There is little doubt, though, that coal is a central problem. Coal makes steel, it makes cement, it makes electricity, it makes heat, it makes food. And there is no bigger coal market than China, which burned 3.8 billion tonnes of it last year – almost as much as the rest of the world combined. Where demand is dropping in the world’s second-hungriest coal economy, the United States, it’s on a rocket-ride upward here, after a dozen years of consecutive increases. A dozen more years of increased demand is also likely as consumers buy the kitchen appliances jammed onto shelves at local grocery stores and turn up their air conditioners on hot, smoggy days.

Even if the country were to double its overall energy efficiency, analyst Wood Mackenzie has found, coal use stands to almost double by 2030.

That’s a conclusion that might warm the hearts of those inside the Beijing coal show – unless they look up at that orange sun. In this city, the air quality index – where higher numbers indicate worse smog – regularly tops 300, a level considered “hazardous.” Occasionally, it moves above 400, and higher. The World Health Organization measures air quality in other cities around the world, and they don’t make Beijing look much better. Famously noxious Mexico City averages 52 in a year. Los Angeles comes in at 25, Toronto at 21.

It’s far from just Beijing’s fault, nor its problem alone: Poor air wafts over from other polluted cities. Greenpeace has estimated that particles from a single coal-fired power plant can drift 1,000 kilometres, and the toxic cloud in this region has at times covered an area nearly as large as the Northwest Territories.

In the run-up to the 2008 Olympics, Beijing shut down or ordered to move numerous factories, including the goliath operations of Capital Iron and Steel Group. It moved to Tangshan. But Beijing’s air quality is no better than it was before.

People in Tangshan have taken to laughing at the futility of it all. Driving through the city on a day when the air quality nears 300, Zhang Hui, who works for a steel information portal based there, isn’t terribly concerned.

“If the wind comes up, tomorrow will be better,” he says. “Because the wind will blow the air to Beijing.”

Health versus wealth

Even on the worst of days in the capital, finding shelter from the air is possible – with enough will and a budget for space-age technology.

The International School of Beijing, for example, has built a giant dome over its outdoor athletic facilities to keep out bad air. Inside, a raft of air filters provides what the school calls “pharmaceutical grade” air – the kind typically reserved for laboratories. Entrances and stairwells have been pressurized to make sure toxins don’t seep in. It’s a moon base for kids.

But this kind of protection is the preserve of the narrowest upper crust of China. Tuition for students at the International School is $41,600 – equivalent to eight years of income for the average private-sector worker in Tangshan.

On a fall day in that city, the atmosphere was thick enough that nearby apartment buildings looked distant; even inside a local mall, the air was noticeably milky. At West Mountain Road Primary School, teachers had expected to deliver a special outdoors environmental education class to the entire school. But with pollution so bad, they moved it indoors. In the end, only a few classes were able to attend.

It’s not clear that many lungs were spared by coming inside. While kids here reassure their parents that each classroom is newly equipped with an air purifier, two school officials confirm that there are none. A mid-level air purifier can cost $1,000 and filters, which need to be replaced every six months, cost another few hundred dollars, sums well beyond the reach of a small school far from Beijing.

Sun Kewen, who picks up his eight-year-old granddaughter at West Mountain, can’t afford one, either. And at 66, the retired railway worker has seen the deterioration of the air first-hand.

“I was born here, and when I was little we could bathe in the river,” he says. “Now all of the food is laced with chemicals. The air is polluted. The water is polluted.”

Mr. Sun has also witnessed the country’s economic miracle first-hand. When he started railway work at 19 he earned 18 yuan a month. Now, his pension pays him 2,000 yuan a month. But like so many in China, his vastly improved circumstances still haven’t brought him the “good life.”

It’s hard to overstate China’s economic leap forward. In 1981, 84 per cent of the country was considered poor. Today, that same percentage – more than a billion people – lives above the poverty line.

Yet all that money has bought little, if any, happiness. According to a study at the University of Calfornia, Los Angeles, from 1990 to 2010 only the top third of Chinese earners reported any lift contentment – and only a slight lift. The other two-thirds of the country’s earners reported substantial decreases in “life satisfaction.”

If China has become a country with fatter wallets but heavier hearts, that’s at least in some measure because the spoils of wealth have spoiled so much of the country – and is putting citizens’ health at risk.

“What we are most scared of is that we will get some disease in the future and won’t be able to afford the medical treatment,” Mr. Sun says.

Even in Canada, 21,000 people die prematurely because of air pollution, according to research done at University of British Columbia. Bad air has been linked to impaired cognition, low birthweights, elevated risk of heart attacks and stroke. The worst element of air pollution, the tiny PM2.5 particles that defeat the lung’s natural filtration ability, can cause cancer.

A study published earlier this year looked at PM2.5, produced by burning coal among other things, and illness. For decades, China offered free heating coal north of the country’s Huai River – a huge expanse of the country – but not south of it. When researchers compared people on both sides, they found a rate of cardio-respiratory illnesses (pneumonias, among others) in the coal-burning area so much greater that they estimated a 5.5-year shorter life expectancy for people living there.

“It’s not just the young and the old who have elevated rates of mortality,” says Michael Greenstone, a Massachusetts Institute of Technology professor of environmental economics who co-wrote the study. “We found impacts on mortality across the life cycle.”

The impact of coal is obvious to anyone in Tangshan.

Zhang Jili, the foreign trade manager for Tangshan Ruitalong Trading Co., an important local steel trading company, notices it when he picks up his four-year-old from school. “I see that many, many other children have respiratory problems. They cough,” he says. “Certainly, I am worried.”

But for hundreds of millions of people – even those in the middle class – pollution is something they are powerless to avoid.

“If we were rich, we would buy an apartment by the sea,” says mother Ji Fang. “But for us to leave the city is not realistic.”

Great Smog, great change

In the first week of December, 1952, a dense smog fell over London. Unusual weather trapped air over a city of coal-burning homes, locomotives and power plants, the pollution growing so thick that ambulances had to be led to hospitals by people on foot. In some areas, people could not see their own feet. Press at the time reported cows asphyxiated just from breathing. In the course of four days, thousands of people died. Recent research suggests the toll may have reached 12,000.

The Great Smog was the spur for major change in Britain, including legislation to clear the air. Sixty years later, Chinese media are fond of pointing to it as an example of a Western power that struggled with ugly air but got past it – just like China, they say, will today.

“Most countries when developing economically follow a fairly predictable pattern,” says Michael Brauer, a professor at the UBC School of Population and Public Health. Air gets bad enough that people notice, and then the work of solving the problem begins. “The U.S. and Canada went through this in the seventies and this has continued in recent years. China is actually likely to follow this same pattern more rapidly than other places.”

Communist leaders do seem to be allowing pressure for change to build, turning a blind eye to raging, uncensored public discussion on bad air.

Earlier this year, the central government also put big money into fixes. It has pledged $290-billion for air improvement as well as further incentives for cities that make progress on pollution.

China has also started monitoring air levels in dozens of cities, is readying a system of alerts to warn the public when conditions deteriorate. In the smoggiest cities, rules are being put in place to shut down schools and cut traffic in half on bad air days – with plans to expand public transit to compensate.

By 2015, all of the coal-fired power plants inside Beijing’s fifth ring road – there are six – will be shut down. Approvals for new ones, in Beijing and surrounding provinces, have been halted.

This push for clean air almost perfectly aligns with China’s broader priorities, too: better corporate-sector efficiency, and a transition away from an economy driven by investment-heavy infrastructure toward one fuelled by Western-style consumer spending.

Among even the most ardent critics, there is hope that the skies will begin to clear. The changes under way have “historical significance,” says Wei Huang, climate and energy campaigner for Greenpeace in Beijing. “I think this is the turning point.”

Setting an ‘example’

On the western outskirts of Beijing, where new Nike and Adidas stores give way to dusty, industrialized land, are the remnants of yesterday’s power: massive cooling towers from coal-fired operations – two on the left side of the road, another four on the right side of the road.

A little ways farther, though, the highway curves to reveal a shiny building topped by scaffolding that rises around three more cooling towers, still under construction. In 2015, when they begin operation, what comes out of these towers will be what’s left behind as clean-burning natural gas is turned into electricity.

Owned by Jingxi Gas Thermoelectricity Co. Ltd., this plant is an $11-billion yuan ($1.9-billion) investment in what many consider the future of China. So much so that officials show off the facilities. Zhao Jianbo, Jingxi’s general manager, takes dozens of domestic and foreign journalists on tours of the new gas-fired power plants.

“As the capital, Beijing is setting an example, and doing the best we can,” he says. “Beijing is so determined that it will pay for the extraordinary effort it takes to deal with this environmental issue.”

But for all of those billions, this type of plant may or may not be an “example” – because the gains from moving away from coal are unlikely to be all that big.

Though painted as dirty villains, China’s coal plants are, on average, more efficient than those in the United States. And virtually every operation in the country filters out particulates. The coal plants that will be replaced (shut down, but not demolished, since they will be kept as backup facilities) have already installed technology to scrub out sulphur and nitrogen oxides commonly referred to as NOx and SOx.

Constantin Crachilov is the Beijing-based manager of corporate strategy for LP Amina, a company that sells equipment to abate nitrogen oxide emissions from power plants. He estimates that 90 per cent of those plants already remove SOx, and the country is rapidly moving toward a similar rollout of NOx systems.

“In a city where there is a good clean-burning coal plant, does it make difference to switch to gas? Good question. I would say no,” he says.

Even clean energy such as wind turbines and solar panels are unlikely to be a perfect solution. China is already the largest generator of wind and hydro power, and continues to build wind farms and dams at dizzying rates. It’s also part of a small group of global peers actively pursuing nuclear fusion, a form of electricity generation that promises huge environmental advantages.

But demand for energy is so strong that coal use is rising, too – coal plants under construction right now are roughly equivalent to Canada’s entire electrical generating capacity.

Greener approaches to cars can have only limited impact as well. Existing tailpipe and efficiency rules for new cars in Beijing are already stricter than those in the United States.

To fix the air, then, China needs to look at major surgery, not a simple nip and tuck. Earlier this year, Deutsche Bank sketched out what the country would need to do to clean up its skies by 2030, a reasonably distant goalpost. It concluded that it would have to cut total coal use by almost a quarter between 2017 and 2030, slash per-car emissions by 80 per cent, lengthen existing subway systems eight-fold and more than double the country’s rail network.

Car sales, too, would have to be substantially pared back. Where the auto industry aims to have 400 million cars on the road in China by 2030, Deutsche Bank reported that a cap of 250 million cars is necessary for better air quality.

If these changes don’t happen and China maintains its current course, air quality could be 70 per cent worse in just over 15 years, the bank forecasts.

Funding a blue sky

One problem is the price tag for all this – particularly given the current uncertainty facing China’s economy.

The country is now in its 13th quarter of muted growth, the longest slowdown since economic reforms in 1978. At the same time, academics estimate that local governments have run up between $2.5-trillion and $3.5-trillion in debt. The country’s bedrock industries, too, are feeling pain.

China needs to figure out how to “race while turning” – shift direction while maintaining momentum – says Cai Hongbin, dean of the Peking University Guanghua School of Management. “You don’t want to, for example, brake while turning – if you do that you will very likely lose control. You might flip. That might be disastrous.”

Take Tangshan’s steel makers: Overcapacity and an ensuing tumble in prices have exacted a terrific toll in recent years, with one estimate suggesting that half the industry has ceased operations since 2008. For mills that remain in business, installing emissions controls can cost tens of millions of dollars – money not readily accessible as operations struggle to get by.

Burning natural gas instead of coal carries a stiff financial penalty, too: it costs roughly twice as much, some energy executives say possible four times as much, and is in such short supply in winter that mills must schedule their work around heavy demand times. Plus, buyers don’t care how their steel is made.

“There is no consideration in the market for whether you provide a green product. It’s just down to price and quality,” says Gao Hui, the marketing manager at the Hongwei Iron & Steel plant outside the city of Shigezhuang.

Her operation is an exemplar. Built in 2006, it uses natural gas but compensates for increased costs with gains in efficiency. A corporate research arm also works to develop new, better technologies, which are then sold to other companies. “We have the most advanced technology in our industry,” Ms. Hui says.

But she warns the vast industry can’t manage much more change. She cites a statistic, disseminated by local officials, that attempts to curb steel production around Beijing could cost 400,000 jobs and many billions in government revenue. “The iron and steel industry in China has already reached a low or zero-profit state,” she says. “To improve environmental conditions will cause suffering.”

The risk is real. A huge government spending program on greening China could, “in the short run, stimulate the economy,” says Zhu Guozhong, an assistant professor of economics at Peking University. “But in the long run I think eventually this will reduce the competitiveness, reduce the profitability, of firms in China.”

Perhaps the biggest problems – bigger than economics, or debates about which energy solutions are most efficient and effective – are cultural.

Central control in China is often in appearance only. National authorities draft the country’s rules, but provincial and lower levels of government carry them out. And for decades mayors and provincial party cadres have been measured by a single number: GDP.

Beijing has recently started to limit the weight of GDP in evaluations. But it’s tough to overturn long-standing conventions and entrenched interests.

So power plants, those in industry say, have been prone to scrub exhaust only when inspectors come knocking. Last year, a team of Chinese and American researchers showed that trickery – not cleaner air – explained the unusual number of air quality readings just below the 100 threshold that indicates a “blue sky” day.

“They speak very pretty on TV, but they won’t do something real,” says retiree Mr. Sun. He may remember clean air and clean water. “All they want is the GDP.”

You can return to the main Market News page, or press the Back button on your browser.