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People's Daily Online>>Special Coverage >> China Studies >> Cooperation >> Resources and Enviroment

Reducing Environmental Costs for a New-Type Industrialization of China

(People's Daily Online)

12:21, August 03, 2011

New-type industrialization is one of the major issues in the 12th Five-Year Plan of China. What is new-type industrialization? The definition in the 16th CPC National Congress Report is "driving industrialization by informationization and promoting informationization by industrialization ", which is characterized by high technology, high economic efficiency, low resources consumption, low pollution, and maximization of the advantage on human resources. The paper argues that "new" means "new path" and "new mechanism". "New path" refers to breaking through the Kuznets curve to shorten the period before the pollution peak. "New mechanism" refers to lowering environmental costs with a scientific outlook on "cost".

Breaking through the Environmental Kuznets Curve by Innovation Path

The Kuznets curve is a theory explaining the relationship between average income and equality of wealth distribution, which takes on an inverted U-shaped curve, demonstrating that income disparity increase first and then decrease as economic growth continues. The Environmental Kuznets Curve is an inverted U-shaped relationship which demonstrates how environmental degradation increases as a country begins to develop and lowers as average income continues to grow to a critical point.

Innovation (Tunnel) Path (as shown below in Figure. 1)means through innovation, environmental pollution reaches the peak value earlier(A-B-E-F), and then drop dramatically when GDP per capita still remain comparatively low.

Figure 1. Comparison between two paths of industrialization

In Hu Jintao's speech on the United Nations Climate Change Summit, four points are highlighted. First, China will step up efforts to conserve energy and improve energy efficiency and strive to reduce carbon dioxide emissions per unit of gross domestic product (GDP) by a considerable margin by 2020 from the 2005 level; second, China will energetically develop the renewable energy and nuclear energy, trying to increase the share of non-fossil fuels in the primary energy consumption to around 15% by 2020; third, China will vigorously increase forest carbon sinks and work hard to increase forest area by 40 million hectares and forest reserves by 1.3 billion cubic meters by 2020 from the 2005 levels; fourth, China will spare no efforts to develop the green economy, low-carbon economy and circular economy and strengthen research, development and popularization of climate-friendly technologies. The speech not only points out the emission reduction roadmap and the way of green development for China, but also proposes an innovative pathway for new-type industrialization, and various tools including technology, governance, ecology, finance and human resource. Application and improvement of these tools will help environmental pollution peak in advance, so that China can step into an environment-friendly development period earlier.

Lower environmental costs and innovate in industrialization mechanism

In a broader sense, environmental cost means demand for environmental resources in human production and consumption activities. "Environmental resource", as a systematic concept, has dual connotations. First, it refers to individual elements of environment, including air, waters, seas, land, minerals, forests, grasslands, wild animals, natural remains, cultural remains, nature reserves, urban or rural areas or their combination (environmental status); second, it refers to the carrying capacity for pollution of the environment. In a narrow sense, it refers to a measurement of damages on the environment and resources by human production and consumption activities, e.g. liquid waste, solid waste, SO2 and smoke, industrial dust, CO2,disasters, diseases, damage to the marine environment , etc.

Environmental resources are public goods, thus in a sense environmental costs are public costs. Climate change is a byproduct tied directly to global, especially western industrialization during the past 150-250 years. As an emerging industrialized country, China has already incurred some "new debts", therefore is responsible to some degree and should pay its share. Now China is active on emission reduction. Since its emission reduction cost is relatively lower, China is promising in this area. The cost of emission reduction defined by the international framework convention is over $30 per ton, while according to calculations by Chinese scholars, the cost is only $15 in China. So this is a promising huge market.

China has an unbalanced energy consumption structure, with coal as the main fuel, which causes huge negative externalities and social costs. According to quantitative estimation by Unirule Institute of Economics based on coal price and output in 2007, direct external costs incurred by coal amounted to about RMB 1.7903 trillion, equivalent of 7.3% of GDP in the same year.

Innovation (Tunnel) Pathway provides a measure for the time requirement of the new-type industrialization, while lowering environmental costs calls for a policy portfolio within China's institutional framework. According to Tinbergen rule, for N policy targets there must be at least N independent and valid policy tools. New-type industrialization calls for different kinds of policy tools, among which environmental policies and environmental economic policies are essential. Quantified data on costs is one of test tools for the economic system, and policies with a scientific outlook on cost are necessary for scientific development.


1.Hu Jintao: Work Together to Address Climate Change—Speech at the Opening Ceremony of UN Summit on Climate Change, Xinhua News Agency, September 22, 2009, New York

2.Hu Angang: What Way Should China Take to Address Global Warming, China Study, the 29th issue in 2007, August 3, 2007


Leave your comment3 comments

  1. Name

CLsCDuSfkVs at 2011-10-0485.112.95.*
Holy shinizt, this is so cool thank you.
LeBtrJYngkKICxLIefu at 2011-09-04213.33.67.*
Great site, great reporting. Keep on going
ErakhkgekEQQVhCnBEk at 2011-09-02210.107.100.*
I"m rellay into it, thanks for this great stuff!

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