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December 22nd, 2008:

Campaign To Clean Up Gets Lost In The Smog Of Bureaucratic Resistance

Martin Zhou, SCMP – Updated on Dec 22, 2008

Despite years of small-scale experiment and debates, the mainland leadership has yet to implement a sound system that ensures sustained political and economic motivation for governments and enterprises to go green.

The much-talked about Green GDP – a device initiated to tie environment protection to officials’ promotion – has apparently been thrown out of the window because of resistance from bureaucrats, especially local officials.

Similarly, development of the fledgling emission trading markets intended to reward corporate China’s green innovation has stalled.

“To me, it all comes down to an independent credible mechanism to precisely quantify the environment impact of economic activities,” said Luo Jianhua, the general secretary of China Environment Service Industry Association.

So far, the maths involved to measure the extent of pollution is not always untainted. Authorities have repeatedly discovered data on the volume of contaminated water processed in treatment plants – one major indicator of local officials’ environmental achievement – is tampered with, as sensor makers collude with unscrupulous officials to produce equipment that deliver findings to the officials’ favour.

“As a result, environment inspectors now turn to electricity consumption to determine exactly how much water has been purified,” Mr Luo said. “But such dirty tricks do invoke a lot of concern over moral risk in the sector.”

The domestic trading in pollutants has also been hampered by the absence of a complete legal framework. Three major emission trading markets in Beijing, Tianjin and Shanghai had been launched in the past year, but none has begun operation in earnest.

For example, the first to be set up, Beijing Environment Exchange, had before its August inauguration promised to provide clearing service for trading of credits backed by a cut in emission of sulphur dioxide, the main airborne pollutant from coal burning – and CDO, a measure of water pollution. China has set overall caps for annual CDO and sulphur dioxide emission, making the markets possible.

But one environmental official said the business was still in the preparatory stage as there was much to clarify on how the underlying assets of those emission credits in the market was being defined.