Chinese Pollution

China Pollution Problem
The Top 10 Causes of the Chinese Pollution Problem
by Jamie Ellis, Whiskey & Gunpowder

As the 2008 Beijing Olympics approach, the subject of China’s pollution problems has recently garnered a great deal of attention. Clearly, China has a problem with its air and water pollution. Something must be done, but before a real solution can be instituted, we must first understand the causes. Here is a list of the 10 most important causes of Chinese pollution.

China Pollution Cause #10: Price Fixing of Chinese Gasoline Costs
As China shifts from its traditional communist economic system to a more market-based approach, prices for almost all goods and services have been released by the government and allowed to float freely in the market. One of the few exceptions to this fundamental change has been the price of fuel. The Chinese government still puts ceilings on the price of gasoline, and the price recently rose for only the first time since May 2006. Not only does the government regulate the price, but it also penalizes anyone who sells gasoline above the ceiling. This artificially cheap gasoline is promoting its use at the very time when consumption should be curbed. World oil prices have reached record levels everywhere else, yet the one country that is just beginning to consume gasoline and oil at an incredible rate is still buying it for prices Americans haven’t seen since the turn of this century.

China Pollution Cause #9: The Shipping of Chinese Merchandise
As China continues producing and exporting more and more goods, more and more ships are needed to transport all that cargo. Currently, 90% of the world’s merchandise travels across oceans. The world’s — especially the U.S.’ — appetite for imported goods from China has shown no sign of weakening. There is still no universal standard for the fuel being used by these ships, which tends to typically be quite cheap and dirty. If a universal standard could somehow be adopted, the consistent rise in shipping demand would counterbalance any improvements made by tougher standards. While this pollution problem is not solely limited to China, the majority of the situation is certainly born there.

China Pollution Cause #8: Natural Aerosols
Natural and man-made aerosols reaching the atmosphere are never a good thing for the climate. Brought on by everything from volcano eruptions to desert winds, aerosol particles reaching the atmosphere can play havoc with the temperatures and weather patterns of surrounding areas. China, as well as other Asian countries, has this problem worse than other countries around the globe. Because of the vast deserts of Asia, strong winds carry silt and other particles into the atmosphere and the particles collect over the Pacific Ocean. For China specifically, recent deforestation that came about as the economy grew has also produced a more-than-ideal amount of aerosol particles.

China Pollution Cause #7: We Can’t Stop Buying Their Products
One of the biggest reasons for China’s recent economic surge has been the availability of labor and the willingness to produce all the products that we in the West use every day. China recently passed the United States as the largest emitter of carbon in the world, and that could be due to the fact that nearly everything we use these days is being made in China. If your cell phone, iPod, and children’s toys are all being produced in China, why would the United States have to pollute at all? We’ve passed our pollution to China, and China’s passed its products right back.

China Pollution Cause #6: White Pollution
Like those in many other industrialized nations, Chinese shoppers are used to carrying flimsy petroleum-based plastic bags from grocery stores and markets. Given the magnitude of China’s population, these bags have become an environmental nuisance. Not only has the sheer number of discarded plastic bags become a civic eyesore and a pollution product for many lakes and streams, but the bags are also using up precious resources. Their production uses the limited amount of petroleum the country has. Recently, the government banned the use of these bags in an effort to clean up cities in preparation for the Beijing Olympic Games.

China Pollution Cause #5: The Link Between the Chinese Yuan and the U.S. Dollar
Over the past several months, the value of the U.S. dollar has begun to drop. Inflation appears to be on the rise as the prices of houses are falling. The U.S. dollar has entered a dire period and it’s taking the Chinese yuan right along for the ride. This has little impact on the Chinese themselves, but for the millions of Asians from neighboring countries that travel through China, this is having a huge effect. Chinese fuel, which we’ve already learned is fixed at a low price, is also priced in American dollars. This means that if a Thai businessman is traveling to Beijing, he can fuel his car for much cheaper than anyone else if he is paying in the Thai currency, the baht. The baht has never been higher compared with the dollar as it is right now.

China Pollution Cause #4: Rising Oil Prices
While gasoline prices for consumers remain fixed in China, the fuel being used by the factories that produce all the products is still being purchased at market prices. As the prices of oil and electricity continue to rise, Chinese industrial plants have no choice but to turn to the cheaper, yet much more environmentally harmful, coal. The demand for Chinese-produced goods will be too much for Chinese factories to switch back to oil. The byproducts of the coal-burning plants add much more air pollution than you would see from another form of energy.

China Pollution Cause #3: Changing Transportation Needs
The industrial revolution in China over the past several years has been nothing short of extraordinary. The economy that was once light-years behind the West has now joined us, and joined with vigor. As millions of rural citizens begin living and working in much more modern conditions, the environment is struggling to welcome them. Many Chinese who once simply worked in agriculture and used primitive forms of transportation are now commuting to the cities and metropolitan areas. This just adds to the growing problem.

China Pollution Cause #2: A Lack of Governmental Control
It seems odd, but while the Chinese government has historically controlled everything, the one thing it has not been good at controlling has been the country’s own pollution problem. Factories and companies are fined a small amount for their water and air pollution, but many companies find it cheaper to continue polluting and pay the fine, rather than make significant changes to their production. Recently, the government has considered using a much more capitalistic approach. Soon it may be instituting the kind of cap and trade system that we have been exploring in the U.S. Under that system, companies would receive pollution credits that they could trade with other companies. If a company wanted to continue polluting, they would simply need to buy enough credits.

China Pollution Cause #1: China Simply Grew Too Fast

As the Chinese economy opened and the Chinese way of life became increasingly more modern, the citizens and businesses in the country rushed to experience modern life. Factories and skyscrapers appeared nearly instantly, while millions of bicyclists began driving their first automobiles. The incredible new levels of productivity meant that more people than ever could now afford to pollute just like the rest of the industrialized nations of the world. Now the country with the largest population is able to affect the environment just as we do, and it is using its record numbers of people to add record levels of pollution.

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Jamie Ellis

The Daily Reckoning