Breathless in China

Click to see the report
Click to see the report

What do you look for in a holiday destination – sunshine and sand, fine food, ancient treasures? If none of these send you scuttling off to Tripadvisor, then how about this: fresh air. That’s what one Chinese province is promising in adverts running on national TV: “Take a deep breath, you’re in Fujian.”

The campaign seems to be working: So far this year, the coastal province has seen a 38% rise in visitors, according to NPR’s Rob Schmitz. “The air is so fresh here!” one tourist told him. “Whenever I go to work in Beijing, I have to wear a mask or else I’ll start coughing uncontrollably. It’s just been terrible lately.”

Indeed. Even by Beijing’s standards, air pollution this past winter has been awful, with the city repeatedly blanketed in throat-choking fog. On one weekend in January, the level of airborne fine particles classed as PM2.5, which are especially harmful to health, briefly rose to almost 40 times above the acceptable limits set by the World Health Organisation (WHO). Beijing is not alone: Less than 1% of China’s 500 biggest cities meet WHO air-quality guidelines, according to the Asian Development Bank, and seven of them rank among the world’s ten most polluted cities. According to the in the world from urban air pollution.

None of this is particularly new – China’s problem with pollution has been apparent for years, but the depth of the murk that descended this past winter does seem to have sparked a real bout of soul-searching. China’s media, for example, has been reporting the problem with unusual frankness –“Beijing’s 225 shades of grey,” says a headline in the China Daily, over a set of photos of the smoggy capital. The leadership, too, has responded, promising increased air monitoring and extra efforts.

The air problems in China’s urban areas bring together two major challenges facing the country, both of which get special attention in the OECD’s latest Economic Survey of China, released ahead of the annual China Development Forum in Beijing at the weekend.

The first is the challenge of making China’s rapidly growing cities more liveable. At one level, this means ensuring that citizens have access to breathable air, rapid transport and so on. But there are other, less visible, issues. Setting environmental problems aside for a moment, one of the most pressing concerns the status of internal migrants, who account for around 70% of the growth of China’s cities over the past few decades. Faced with an ageing population and stagnating workforce, China needs that movement to continue but, if that’s to happen, its cities will need to set out a proper welcome mat for migrants. As we’ve noted before, the hukou registration system means people leaving their home area can lose access to services like health and education. That’s bad not just for migrants but also their children. Many of them – perhaps 36 million – get left behind, and are raised by grandparents; those who do move with their parents to the cities – an estimated 23 million – don’t always have access to great education. Chinese cities and provinces have pursued piecemeal reform of the hukou system, but there are growing calls – including from the OECD – for cities to grant residential permits to migrants; recent reports suggest substantial reform may not be far off.

The second great challenge is, of course, the environment. Smog-filled cities are just one face of the country’s environmental degradation, which also encompasses desertification, flooding, soil contamination and water pollution. China has made some progress in tackling these: For example, sulphur dioxide emissions have declined somewhat, although the country remains the world’s biggest emitter, and there has been a slight improvement in water quality – Shanghai’s floating pigs notwithstanding.

Nevertheless, grave problems remain and, as the OECD report notes, a wider range of weapons needs to be used to tackle them, including market-driven pricing of fuels like natural gas and coal and greater use of pollution taxes and levies. The potential impact of China on the global environmental is so great that, unless the country rises to the challenge, it won’t just be the citizens of its own cities who are gasping for air.

Useful links

OECD work on China

网站 (中文) (The OECD’s Chinese-language site)

China Development Forum

Smoke kills

Click to go to the 2010 World Energy Outlook

Cooking will soon kill more people in developing countries than malaria, tuberculosis or HIV/AIDS. That’s the shocking message from a chapter on energy poverty in the 2010 World Energy Outlook, released today.

Our colleagues at the International Energy Agency combined their projections of traditional biomass use with WHO figures on mortality. They estimate that if nothing is done, household air pollution from the use of biomass in inefficient stoves would lead to over 1.5 million premature deaths per year, over 4000 a day. Many of them are young children who are at home all day, breathing in the pollution from the stove.

Access to modern energy services, and better stoves, would change this. The IEA point out that 1.4 billion people in the world today don’t have access to electricity (other than costly batteries). That number will drop by 2030 thanks to general economic expansion, but only to 1.2 billion.

The Millennium Development Goal of eradicating extreme poverty by 2015 is unlikely to be met unless an additional 395 million people are provided with electricity, and a further 1 billion with clean cooking facilities. That would require an annual investment of $41 billion a year over 2010-2015, or 0.06% of global GDP. To achieve universal access to modern energy services by 2030 would cost $36 billion a year.

Another way of looking at it is that adding under 2% to electricity tariffs in OECD member countries would raise enough money to bring electricity to the entire global population within 20 years, while in the past year, the prospective cost of the additional global energy investment to 2035 to curb greenhouse-gas emissions has risen by $1 trillion because of the caution of the commitments made at the December 2009 Copenhagen climate change conference.

More generally, the world energy outlook to 2035 hinges critically on government policy action, and how that action affects technology, the price of energy services and consumer behaviour. For instance, consumption subsidies to fossil fuels in 2009 cost $312 billion, compared with  $57 billion in support given to renewable energy.

Removing fossil-fuel consumption subsidies could make a big contribution to meeting energy-security and environmental goals, including mitigating carbon-dioxide and other emissions. However, as  Nobuo Tanaka, Executive Director of the IEA said this morning at the launch of the Outlook,  “The Copenhagen Accord and the agreement among G20 countries to phase out subsidies are important steps forward. But, these moves still fall a very long way short of what is required to set us on the path to a truly sustainable energy system”.

Useful links

International Energy Agency

OECD work on green growth

OECD work on development

Who knows where the cold wind blows?

A volcano erupts in Iceland and thousands of Kenyan farm workers lose their jobs. An oil rig sinks in the Gulf of Mexico, and retirees in Britain could see their pensions cut. Globalisation and interdependence aren’t just slogans.

The Kenyans were working for companies that export flowers to Europe using airfreight. The 500 tonnes of flowers exported daily brought in 71 billion shillings last year (around $900 million) making horticulture the country’s main foreign exchange earner, ahead of tourism at just over 50 billion shillings.

Kenya is only one of many countries pushing non-traditional agricultural exports. The idea is to integrate the global economy by exploiting improved communications and marketing networks and the large numbers of customers for out of season and exotic products in developed countries.

One way of looking at this is that everybody wins – one partner gets income and development opportunities, the other gets cheap luxuries. When things go wrong though, the risks are very unevenly shared. It’s one thing to go without fresh flowers or pineapples, another to have no job.

Exporters rely on cheap transport, and that in turn needs oil. The IEA chief economist has repeatedly warned that “we need to leave oil before it leaves us”. In the meantime though, the search is intensifying for new sources and ways to squeeze the last drop from existing ones. That’s why US President Obama lifted the ban on drilling in certain parts of the Gulf and elsewhere, and why companies like BP that exploit the resource are among the world’s richest firms.

Oil prices and the profits of oil companies fluctuate, but in the long run, they’re seen as a sound investment, making them attractive to pensions funds. Funds based in the UK invest heavily in BP (and earlier this month backed BP management against a campaign by NGOs concerning oil sands developments in Canada ).

Around $24 billion has been wiped off BP’s market capitalisation (over $170 billion before the accident), and the estimates of $2 to $3 billion for cleanup are huge, but not crippling for a company that size. BP will probably recover long before the Gulf coastline does if history is anything to go by. Exxon shares outperformed the market as a whole and the oil industry following the Exxon Valdez disaster in 1989.

We’ll look in more detail about a number of the issues raised here in forthcoming Insights books. Global agriculture is discussed in “Feeding 9 Billion People”, while From Crisis to Recovery will have a chapter on pensions and financial markets.

While Stocks Last has a chapter on fishing and the environment, describing the impact of oil pollution and other hazards on marine habitats. The Gulf provides examples of many of the issues raised. It already has a dead zone where run-off from agricultural chemicals washed down the Mississippi has caused an algal bloom that starves everything else of oxygen. Atlantic bluefin tuna are due to start spawning in the Gulf around now. And commercial and recreational fisheries could be devastated by the pollution.