Economic Department
 
Liu Xiao-Bing

Student ID :S06060
Minzu University of China
Paper superviser and Course leader : Dr. Sekou Conde

2007-6-28
 
 
 
 
BEIJING, March 21, 2007 – Today the World Bank’s Board of Executive Directors approved a loan of $96 million to the People’s Republic of China to help finance the Second Guangdong Pearl River Delta Urban Environment Project. The project will help reduce water pollution in the Pearl River system in Guangdong province through a package of key initiatives, including wastewater treatment and sludge disposal, industrial pollution control and water quality monitoring, sediment removal from waterways, and flood protection and river embankment improvements.[1]
 
1. Introduction
The World Bank was established in 1944, as the International Bank for Reconstruction and Development. It is one of the world's largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers, provide water and electricity, fight disease and protect the environment. Since the first loan in 1981 supporting development of Chinese universities, the World Bank's cumulative lending to ChinabyJune 30, 2006was US$40.534 billionfor a total of 274 development projects.  Seventy-five of these projects are under implementation, making China's portfolio one of the largest in the Bank.
The magnitude and costs of pollution in China are still large, although Chinese government had done sustained efforts during these years. Biodiversity was reduced, less than 30percent of the sections of seven major river basins meet minimum water quality standards, air quality in about two-third of Chinese cities failed to meet the standard of State Environmental Protection Agency (SEPA). China’s recent rates of economic growth have now widened environmental impacts and accelerated many adverse trends. The urbanization and industrialization in China have produced rising material standards of living but have ever more costly environmental consequences. Plausible estimates of environmental costs vary from 3 percent to 15 percent of China’s GDP (2). Accuracy is constrained both by methodology and limited accurate data. This is not simply a matter of lack of transparency. Come out environmental laws in particular provinces is extremely urgent.
 The Bank takes notice of environmental production in the year 1992 and then, culminates in 2001 with the Bank Environmental Strategy. For the evaluation period there were four policies adapted to judge environmental performance and defend the negative affections in China:
(1) Mainstreaming the environment modifying and adding to the design of projects and conventional sector activities to mitigate environmental “bads” and generate “goods.”
(2) Enforcing Environmental Safeguards. Safeguards define the operational directives to implement environmental policy and manage the Bank’s reputation risk.
(3) Implementing a Global Agenda. International cooperation on issues such as biodiversity, climate friendly renewable energy international waterways, coastal environment and ozone depleting substances.
(4) Environmental Stewardship. This includes “policy dialogue”, “advocacy and policy analysis through ESW/AAA” and “technical support”.
2. China’s Environmental Problems and the Bank’s Efforts
Considering China’s strong economic growth over the last 20–25 years, there is no doubt that it has had positive impacts on the environment. At the same time, new environmental challenges have been created. Following a period of stagnation in energy use during the late 1990s, total energy consumption in China has increased 70 percent between 2000 and 2005, with coal consumption increasing by 75 percent, indicating an increasingly energy-intensive economy over the last few years.[2] Moreover, between 2000 and 2005, air pollution emissions have remained constant or, in some instances, have increased. China is now the largest source of SO2 emissions in the world. Recent trends in energy consumption, particularly increased coal use, provide a possible explanation for the increase in SO2 emissions.
2.1 Air Pollution and the Bank’s Efforts
Atmospheric conditions in China are amongst the worst in the world, in terms both of scale and concentrations. According to the World Health Organization, seven of the ten most polluted cities in the world were in China, one of the world’s three main acid rain regions. Researchers in the United States believe China’s progress in decreasing CO2 emission rates, While somewhat overstated by official statistics approximates 6 to 14 percent below 1996 levels. For instance 1989-1999 output growth was much higher than that of emissions of chemical oxygen demand, sulphur dioxide and soot, which all declined. Air pollution in China affects the rich and poor alike in the rapidly expanding urban population. Unhealthy levels of sulphates and dust from industrial chemical processes, construction and natural sources are normal in most urban and some rural areas.
China is the world’s second largest energy consumer after the United States (see table 1). Almost 68 percent of its energy comes from coal, much of which is burned in thermal power plants or in industrial boilers. This has led to continuously high level of SO2 and particulate air pollution.
 
TABLE 1 Trends in Air Quality in China’s Cities (%)

Air Quality Standards

1999

2000

2001

2002

2003

2004

2005

Grade I (Up to the standard)

33

37

34

36

42

39

52

Grade III

26

30

33

34

31

41

38

Worse than grade III

41

33

33

28

27

20

10

Source: Status of China Environment reports 1999–2005
 
 The major air quality impacts of Bank-supported investments can be attributed to CO2 and sulphur reductions in the energy sector (table 2). The Bank lends more to China for energy than any other country. Total costs of these projects were two to three times higher. GEF granted $90 million in co-financing for efficiency and renewable energy projects. The efficiency and environmental impact of coal was the subject of early Bank-funded research collaboration between the Ministry of Energy and SEPA, although China did not subsequently borrow for coal extraction. Half the CO2 emissions in China are from industrial boilers, furnaces and kilns and early industrial boiler and municipal heating.
TABLE 2 Distribution of SO2 Levels among Cities in the Two Air Pollution Control Zones, 1998–2005 (in %)

SO2 Concentrations

1998

2000

2002

2003

2004

2005

In the SO2 control zone

Reaching Class II standards
(SO2≤ 0.6 mg/m3)

33

48

41

39

41

45

Reaching Class III standards
(0.06 mg/m3 < SO2 ≤ 0.10 mg/m3)

30

25

31

25

30

34

Below Class III standards
(SO2 > 0.10 mg/m3)

37

27

28

36

29

21

In the acid rain control zone

Reaching Class II standards
(SO2 ≤ 0.6 mg/m3)

70

81

79

75

73

74

Reaching Class III standards
(0.06 mg/m3 < SO2 ≤ 0.10 mg/m3)

14

6

14

15

20

22

Below Class III standards
(SO2 > 0.10 mg/m3)

16

13

7

10

7

4

Source: Status of China Environment reports 2000–2005
 
  The Bank was largely responsible for China’s adoption of high-efficiency electrostatic precipitators (ESP) in new power plants and strongly influenced adoption of low-NOx burner technology. New combustion technologies and international best practices contributed to reductions in particulate emissions of Bank-funded coal-fired power plants. The technology is the standard for Bank projects and widespread throughout China for all new power plants. Controlling sulfur dioxide emissions, China has also employed flue-gas desulphurization (FGD) on Bank projects. Large hydro and multi-purpose dams co-financed by the Bank created the possibility of substituting clean hydropower for thermal coal-powered plants. This was not automatic and in some cases coal-fired plants were not closed after hydropower came on line.
China is the biggest producer of Ozone Depleting Substances (ODS) but its ODS program fulfilled international obligation by reducing ODS output and consumption by over 50,000 tons between 1990 and 1999. This has been accomplished by international agreements and provision of grant funds under the Multilateral Fund for the Montreal Protocol (MFMP) the GEF. The biggest single source of supplementary funding for World Bank supported projects was the GEF which covered 10 percent of total project cost on average. EASES acts as a conduit for GEF funds which can be added to projects to enhance their attractiveness by addressing environmental factors—GEF is itself relatively passive and the initiative has to be taken by the client, EASES or another SMU. Bank-supported ESW in energy-related scrotal studies, has increased Chinese interest in, and commitment to, new environmentally preferable strategies, and strengthened the
 
2.2 Land and Natural Resource Problems and the Bank’s Efforts in China[3]
 Land degradation accounts for the highest proportion of GDP losses attributed to environmental causes. A 1999 Ministry of Agriculture study estimated that one-third of grassland (which cover 40 percent of China’s land area), is degraded. Desertification, erosion, Stalinization, and loss of high-quality cultivated land to urban development have reduced the quality of land resources. About 25 percent of land area is affected, especially the agro-pastoral zone of Inner-Mongolia and surrounding oases in the internally draining river systems in the NW provinces of Xinjiang and Gansu.
 On the one hand, the Bank has doing more efforts on the China’s land and natural resource protection. An Agricultural Development Project (ADP) was first put forward in 1999. Till now, the Bank had supported many ADPs that included extensive multi-sector investments in agro-industries, crop production, soil conservation and afforestation. Past ADPs were strictly provincial and even projects covering 3 provinces were managed as three discrete accounting entities. Current “Green Agenda” projects include forestry, biodiversity integrated agricultural development, coastal zone management irrigation and drainage, and for the first time pastoral development. The Bank-supported Loess Plateau Project has been one of the most successful erosion control programs in the world, using indigenous ecological engineering to allow efficient use of watershed resources and reverse soil deterioration. This Project in particular appears to be one of the few up-scale working examples of the Bank’s much promoted win-win poverty-environment model. It broke a cycle of poverty and environmental degradation by introducing economically viable and environmentally sustainable farming practices on a large scale.
 On the other hand, [...]