Asia Centre

Great news in the struggle for the environment: on September 7 2006 the SEPA (State Environmental Protection Administration) and the BNS (Bureau of National Statistics) published a "Research report on the calculation of Green GDP in 2004"[1] which, as its title indicates, contains an assessment of Green GDP for 2004[2]. This scotched rumours that the project had been abandoned a few months ago[3].

Green GDP (绿色, GDP) is the same as traditional GDP, minus the environmental impact. The principle is to calculate the cost of pollution on growth.

The report concludes that the damage caused by pollution has reached 511.8 billion yuans, or 3.05% of GDP, while fictitious costs (虚拟成本, the necessary expenses of "cleanup" for renewable energy) amount to 1.8% of GDP.

Beyond this success it must be kept in mind that this project is the result of almost ten years of struggle, and that it remains, in many respects, unsatisfactory, despite the praises of foreign experts.

It all began in 1996 when the BNS set up a department to assess production and natural resources. In 2002, the means available to the BNS were increased for the first time, while it launched assessemnts of water and forest resources in the provinces of Heilongjiang and Hainan, as well as in Chongqing.

However, as the Chinese environmental situation continued to get worse, pressure on the authorities grew. The SEPA continued to suffer from a lack of authority, and it became increasignly urgent to reinforce it. The turning point was on October 3 2004 when Hu Jintao mentioned Green GDP for the first time. He emphasised "the necessity for finding a means of calculating the Green people's economy" The project was taken up by the BNS and the SEPA, who fixed a deadline of three to five years to carry it out. The calculation of this indicator was to be based on UN reports published in the 1970s, on the Integrated Environmental and Economic Account system (IEEA). It must be noted that the project was completed at least a year ahead of time.

At present, other research in this direction is also being carried out, with the SEPA and the BNS in the course of preparing a report in collaboration with the National Forest Administration and the Water Bureau. This report, which Caijing hopes will be made public, concerns forests, ore, water, etc.

China appears to be a pioneer in this field. Research of a similar nature has indeed been carried out in countries such as Japan, China, Indonesia, Mexico and the Northern European countries. However, experst consider that these studies have not passed the experimental stage.

According to Caijing, the news of this Green GDP was therefore received with enthusiasm by international environmental specialists. The magazine quotes praise from various prestigious international figures such as Herman Daly, a former senior economist at the World Bank, and now a professor at the University of Maryland, Thomas Lyon, co-di­rector of the Erb Institute of Global Sustainable Enterprise, Gernot Wagner of  Harvard University, and Bindu Lohani of the Asian Development Bank. Globally, they all congratulate China on this success and hope that the Western countries will follow this example.

And yet, as usual, Caijing casts a highly critical eye on Green GDP, which it accuses of being "pale green" (浅绿色, GDP).

The first problem stems from the fact that there is still no unanimously accepted definition of Green GDP. For example, some contend that all traces left by human activity should be included in its calculation.

However, more generally, there is a consensus on about twenty costs which are recognised as polluting. The Chinese Green GDP incorporates only ten of these. Among those left out are damage to underground water reserves and pollution of the soil. Wang Jinan, leader of the group responsible for the calculation of the Green GDP recognises the limitations of his work. Some environmental dmamge cannot translate into costs, he admits. On a health level, it is extremely difficult to assess the links between enivronmental damage and death rates. How can it be ascertained whether or not certain illnesses are linked to the environment? And, even if a link is demonstrated, how can it be translated into GDP? For example, how can the fact that pollution can reduce life expectancy by ten years be expressed in GDP?

Another problem concerning the calculation of this Green GDP, is the assessement of fictitious costs. Hu Tao, in charge of the SEPA's Centre for political research into the environment and the economy, considers that they are impossible to determine precisely. How can costs be calculated when they are not the result of trade?

Moreover, the breaking down of costs by year, in the same way as GDP growth, can seem arbitrary: environmental damage has to be considered as cumulative.

The article also seems to infer that the establishment of the Green GDP is hampered by purely institutional factors. Firstly, the SEPA lacks power. Next the ministries and departments concerned by Green GDP are numerous. As well as the SEPA, these include the BNS, the Ministry of Agriculture, the Ministry of Hydraulic Resources, the Bureau of Forests, the Bureau of Seas and Oceans, etc.

Caijing calls for the reinforcement of the tools available to these structures. There also seem to be problems of coordination between them.

Beyond these administrative questions, Lei Ming, of the Guanghua Institute of  Management of the University of Beijing emphasises that Chinese are generally all the more difficult to assess for being difficult to access.

Lastly the question arises of the concrete repercussions of these advances. Green GDP remains an "abstract" standard. The "Green GDP spirit" ("绿色GDP" 这个概念) is unlikely to spread among the population for years to come. Nor will this index be sufficient to make Chinese growth more ecologically responsible, as Pan Yue, director of the SEPA deplores. At the same time, Qiu Xiaohua, the new director of the BNS, considers that it is necessary to change the structures of governance, otherwise China will not succeed in improving its environmental situation. The relative pessimism of these senior leaders is enough to leave one confused.