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Is China underfunding its ‘war on pollution’?

Luna Lin

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China’s environmental spending fell by almost 10% in 2013 despite a publicised commitment to tackling pollution

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Economic pressure could undermine China’s environmental efforts, said Zeng Kanghua of the Central University of Finance and Economics (Image by Argonne National Laboratory

 

China’s environmental spending showed a year-on-year drop of almost 10% in 2013, according to the budget report delivered at China’s annual parliamentary gathering.

Despite premier Li Keqiang’s vow to declare “war on pollution”, the 2013 report shows that China spent 30 billion yuan (US$4.9 billion) less than it had budgeted for conservation and environmental protection last year. Investment fell to 180.39 billion yuan (US$30 billion), down from 199.84 billion yuan (US$33 billion) in 2012.

The amount budgeted for this year, 210.9 billion yuan (US$34 billion), is only slightly higher than the 210.1 billion yuan figure in 2013's budget.  

The finance ministry has said the primary cause for the drop in environmental spending was the expiration of a subsidy on energy-saving home appliances. But it is notable that environmental protection was the only major budget item to see an underspend, observers have said.

“In 2013, the central government’s spending on education, social security and employment, healthcare and technology all recorded growth,” Shi Lei, an environmental economics professor at China's Renmin University, told chinadialogue. “Environmental spending was the only one that suffered a drop in investment.”

According to Shi, total environmental investment in an economy with a high growth rate needs to reach 2%-3% of gross domestic product before improvements in the environment become visible.

Therefore, even if the environmental spending last year had met the budget, it would not have been enough to stem China’s worsening environment, Shi said. “To tackle China’s pollution problem effectively, the central government’s environmental spending will at least need to be set at 390 billion yuan (US$65 billion),” he said.

Shi’s view is shared by Ma Jun, the director of Chinese NGO the Institute of Public and Environmental Affairs. Ma told the South China Morning Post that he felt the government’s environmental investment fell short of what was needed to address China’s pollution woes.

Economic pressure

Worsening pollution has pushed environmental issues up the public agenda in China recent years. An opinion poll conducted by state-run newspaper China Youth Daily shows that environmental governance is now the public's number one concern.

In response to growing frustration, the State Council launched an ambitious action plan to combat air pollution, worth 1.7-trillion-yuan (US$277 billion),  in September 2013. Earlier this year, the environment ministry said similar action plans were forthcoming for water and soil pollution.

However, the drop in environmental spending shows a different picture, observers have said.

Zeng Kanghua, a professor at the Central University of Finance and Economics, blames last year’s decline in environmental spending on the central government’s fiscal difficulties in the first half of 2013.

“The growth of central government’s fiscal revenue slowed in 2013, compared to that of the year before, and hence there was a need for spending cuts. Environmental spending was among the cuts,” Zeng told chinadialogue.

Zeng said economic pressure could undermine China’s environmental efforts as, for policymakers, environmental spending is usually the easiest cut to make.

Zhang Junjie, an environmental economist at the University of California San Diego, said people should not place all their hopes for environmental protection investment on the government. “Investment in environmental protection should come from both public fiscal input and the private sector,” he said, adding that the most efficient way to tackle pollution is to internalise environmental costs and make polluters pay.

However, Shi Lei, a longtime advocate for increasing public environmental spending, said sufficient governmental spending was a precondition for private investment, particularly for environmental protection, which directly impacts public welfare and people’s livelihoods.

“We have been through many empty promises, but environmental woes will wait for no one,” he added.

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