Ken Silverstein
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China's bright lights may fade. While the nation is producing billions of tons of coal to feed an economy that is growing at 10 percent annually, the ancient civilization is getting overrun with pollutants that threaten all of its gains.

Foreign investors are flocking to China. Power production there can't keep pace with the growth rate. It's good news in theory. But, the ambient air quality is killing its people, by the thousands. The nation therefore is grappling with how to feed its economic engine.

China is awash in coal, which provides 70 percent of the fuel for its electric generators. Meantime, it is on target to mine 2.4 billion tons this year, up about 8 percent from a year earlier and double that produced in the year 2000. Even with that level of production, it still has to import coal.

The irony is that China has entered this economic boom at the same time the global community is trying to deal with climate change. China, too, is trying to cope with some leaders of the ruling party there noting that growth must be guarded until the nation gets the tools it needs to regulate emissions.

China recognizes that it must clean up its act if it is to remain an enduring place to do business. It's trying to diversify its fuel mix and become a leader in nuclear and renewable sources while taking steps to implement efficiency standards. It's also advocating the relaxation of patent rules so that the most innovative pollution control technologies can be used to help offset its emissions.

"If China could replace all its old technology with new, more efficient technology, it could cut the growth of Chinese emissions by as much as half," says Alan Oxley, chairman of World Growth that is dedicated to fostering economic growth while limiting emissions. "Unlike Kyoto, such reductions can be achieved without stifling growth and penalizing business."

China and other developing nations are not required to meet the targets set forth by the Kyoto Protocol to reduce greenhouse gas emissions by 5 percent from 1990 levels by 2012. But, the country has set a goal to cut all pollutants by 4 percent a year for the next five years -- a promise made in response to a recent proclamation by global scientists that global air temperatures could rise by 3-7 degrees Fahrenheit by 2100 and bring with it more droughts, heat waves and rising sea levels.

China's Boom

Power plant construction in China rivals that of Western Europe. China built 51 gigawatts of new capacity in 2005 while it constructed another 102 gigawatts in 2006. Most of those facilities are to be powered with coal because it is cheap and abundant. Coal use in China is not just affecting its domestic air and water quality. It's also touching many other countries around the globe. In fact, China is expected to outrank the United States as the greatest contributor to global greenhouse gases.

To be sure, the world's most developed nations all went through their own economic revivals around the middle of the last century. They weren't consumed with the harmful effects of pollution until long after they had the accumulated the wealth to address the problem. The United States, for instance, enacted the original Clean Air Act in 1970 -- a law that is given credit for greatly reducing pollutants and cleaning the air.

So, who can really criticize China for trying to spread prosperity to its impoverished citizens? American investors find Chinese companies irresistible and particularly coal companies. Such names as Fidelity, Merrill Lynch and Oppenheimer are investors there. Specifically, they are backers of Shenhua Energy, which has been booming and which raised about $9 billion in an initial public offering that was held in September. Massey Energy and International Coal Group, meanwhile, are satisfying China's demand for more coal imports.

Global investors say that they can be a force for good by staying involved with China and leveraging their financial resources. "It has been widely acknowledged that China has made significant strides on the corporate governance front with respect to laws, rules, regulations and standards," says Lee Kha Loon, head of Asia Pacific CFA Institute Center that works on matters of corporate governance. "But, the acceptance of good governance practices by Chinese companies will likely be a long and involved process, and will not happen overnight."

Critics of additional coal plant construction in China argue that multinational corporations must become more environmentally conscious. China's blessings, they add, will be wiped out unless it curbs the rate of emissions.

The Rainforest Action Network says that the priorities must lie in developing responsible energy solutions that focus on efficiency technologies and renewable sources such as wind and solar. It's a message that they are taking to Wall Street, trying to persuade the big institutional investors that bankroll the development of new coal generation to stop. If the use of coal continues to rise in China, the group says that the country will be locked into another 50 or 60 years worth of dirty fuel.

"This miracle will end soon because the environment can no longer keep pace," says Pan Yue, deputy director of China's State Environmental Protection Administration, in an interview with the German magazine Der Spiegel.

China may be magnet for foreign investors. But, it's also a haven for toxic pollutants that have worked to maim public health there. The paradox has some scratching their heads. But, the immediate solution is to equip the nation with the best available coal technologies while making a long-term transition to clean fuel sources.



 

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