Is there hope for China’s polluted megacities? According to new data, after years of smog-smothered skylines, there might be. As a report by Greenpeace shows, the government’s crackdown on coal-fired plants and industrial activity has contributed to major improvements in air quality in Beijing and other northern cities since it was announced in 2013.
There are of course caveats. As outlined by the environmental advocacy group, the country reduced air pollution by a mere 4.5 percent last year – the smallest annual decline since Beijing began its national anti-pollution campaign. This lower-than-usual decrease reflected a slight increase in the production of coal, cement, and steel. So while air pollution in the north fell, smaller gains in other parts of China meant that overall improvements were minimal.
To some, the less-than-impressive results corroborate concerns that while government policymakers might be getting serious on pollution, in the medium term they face hard choices between prioritizing public health or economic growth. Look at long-term trends, however, and it becomes clear that despite some short-lived disruption in certain industrial sectors, China will soon be able to have it all: clean air and healthy economic growth.
One thing is for sure: Beijing is determined to cut pollution. Five years ago, the government introduced a $277 billion campaign to reduce air pollution as smog levels hit their worst levels in 52 years. As part of the scheme, Beijing aimed to reduce levels of fine particulate matter (PM2.5) by 25 percent by 2017, a plan that has borne fruit: Since 2012, the city’s PM2.5 levels have fallen by 35.6 percent.
Central to the government’s fight for clean air is a crackdown on coal-fired plants and some of the most highly polluting heavy industries. As in previous years, the crackdown intensified this fall ahead of the winter heating season. President Xi Jinping signaled the move during a speech at the Communist Party Congress in October, when he identified fighting pollution as one of the country’s key goals through 2020. Soon after the Congress ended, China activated production cuts at 30 percent of its highly polluting aluminum smelters, causing November output to drop by 7.8 percent from October. New restrictions also affected 25 percent of the country’s steel-making capacity and 10 percent of cement production. These cuts formed part of the government’s aggressive campaign to cut wintertime pollution by 15 percent year-on-year. The government also intensified crackdowns on non-compliant aluminum smelters, steel mills, and coal mines.
Although some companies compensated for these restrictions by shifting their facilities elsewhere, this campaign has nevertheless had a major impact on commodities prices and the entire national economy. Prices for aluminum, steel, and other industrial metals have surged as Chinese producers cut capacity, with aluminum rising by almost one-third to a four-year high of $2,284.75 by the end of 2017. Shanghai steel rebar futures rose by 46 percent as non-compliant Chinese steelmaking plants were shut down and production cuts kicked in. Metals and minerals in high demand by the clean-tech industry, such as palladium, also saw their prices rise.
Environmental restrictions have significantly impacted certain industries. Yet while some may be feeling the short-term pinch, the most remarkable aspect of Beijing’s blue skies campaign has been the fact that its environmental impact has been surprisingly minimal in other ways. For one thing, the industries directly affected by the restrictions add up to only 7 percent of the country’s national investment, and this percentage will only decrease as the nation’s service industries expand. For another, although industrial production has been curtailed, it is still growing by more than 6 percent year-on-year. And while commodity prices have increased, there is little indication that these prices will continue increasing at comparable rates over the long-term. In addition, contrary to expectations, this trend has not caused overly high inflation levels.
There is also the fact that over the coming years, even China’s most polluting industries are likely to adapt to the changing times. For one thing, it is widely acknowledged that Chinese aluminum and steel industries have operated at overcapacity and that cuts in output were long overdue. For another, as anti-pollution restrictions continue to weigh on industry heavyweights like Hongquiao, these companies will likely begin to shift their operations accordingly. After all, numerous foreign industry players already power their operations using not coal-fired plants, as in China, but hydropower, and have benefited from doing so. For instance, the world’s second-largest aluminum producer, Rusal, exploits Siberia’s vast hydropower resources to power its aluminum smelters and aims to produce 100 percent of its aluminum using hydropower by 2020. The firm is also among those that offer a “green” brand of aluminum produced with a carbon footprint that is less than a third of the industry’s average. The same goes for other players like Alcoa, Rio Tinto, and Norsk Hydro, which also increasingly rely on hydropower to run their smelters and offer low-carbon aluminum at a higher price point.
For those who say that the Middle Kingdom’s economy will buckle under environmental restrictions, there is also the simple fact there is significant economic gain – not to mention well-being – to be had from lower pollution levels. In fact, Beijing largely started its anti-smog campaign due to economic considerations. According to China’s Ministry of Environmental Protection, pollution in 2010 cost the economy a whopping 3.5 percent of GDP. This is not surprising when one considers the health costs, lost productivity, and detrimental effects of pollution on sectors ranging from tourism to agriculture.
As it turns out, then, there is some good news both for Beijing and the world. Though some economic sectors may feel some initial and relatively muted impact from the environmental restrictions, over the long term, China may well be able to both have its cake and eat it too.
James Borton is an independent journalist and a nonresident fellow at the Stimson Center focusing on environmental security issues. His email is asiareview@yahoo.com. The views expressed here are the author's own.
