Local governments caught between pressure for clean air and increased GDP

The central government has put pressure on local governments to tackle air pollution, but in Hebei province many officials are struggling to reconcile economic and environmental goals

“We haven’t had a full weekend off since National Day,” said Li Gang, head of the environmental bureau office in Shahe city, in the eastern province of Hebei.

Hebei is at the heart of the “war on smog”: for a time the province accounted for seven spots on the list of the top ten most polluted cities. The governments of different regions in the province are under great pressure to deal with air pollution. Officials in Xingtai, the prefecture level city that surrounds Shahe, are particularly anxious, as it has appeared near the bottom of the Ministry of Environmental Protection’s (MEP) air quality rankings.

Li Gang says he spends his days rushing between meetings and inspections, and enforcing environmental regulations. Since the latter half of 2012 a number of county government and environmental officials have been sacked after incidents of pollution. In Wen’an county the head of the environmental bureau was sacked after the MEP singled out local steel plants for criticism.

Li also said that the Shahe government now requires the environmental bureau to text the latest PM2.5 monitoring data to the city’s top politicians three times a day.

“If they see PM2.5 figures are on the high side they phone us and tell us to do something about it. I have to be available and ready to take orders 24 hours a day.”

“What will we tell the People’s

Zhang Qingwei, the Governor of Hebei, once said he had two worries: “First, that pollution will be bad this winter and next spring and I’m going to be embarrassed to show my face at the National People’s Congress in Beijing next year. Second, that dealing with pollution will affect GDP – how will I explain that to the provincial People’s Representatives?”

The attempt to satisfy the first worry means that old, heavily polluting factories are often shut down without warning. But the second worry remains.

Shahe’s economic development zone is home to almost one hundred glass manufacturers and processors. Data from local government puts sales from these firms at 39 billion yuan for 2012, and taxation on that figure accounts for more than half of local government income. The city’s ability to both manufacture and process glass has made it an important supplier of glass products for the entire nation.

During the 12th Five Year Plan (FYP) period the local government set a target of increasing the value of the glass industry to 100 billion yuan. But in the first half of 2013 37 production lines across 17 companies were shut down. Another 12 were closed in October, affecting over one thousand workers.

Since the factory he worked at closed, 43-year old Mr Li has picked up odd-jobs to make money, but he still walks around the economic zone hoping the factories will open again.

He remembers the factories starting up in the 1990s. “The air stank, you choked on it.” Some of his relatives got respiratory diseases, but he was happy with this 3,000 yuan a month wage.

Li goes on: “The pollution doesn’t just appear overnight. The sulphur and nitrate scrubbers are so expensive now, the bosses will just not use them. The chimneys at many factories are smoking 24 hours a day – they turn the scrubbers on during the day, but not at night. But it’s the people who suffer, whether from air pollution, or from the factories closing.”

A glass processor at the Shahe Industrial Zone glass market said that he employed ten locals at his factory, and the dozens of other firms at the market would be doing the same. But with glass makers being shut down, the processors were also suffering. “I live in a village outside the city. If I lose my living I don’t know what I’ll do.”

And it’s not just Shahe. Thirty coking furnaces have been shut down this year in Guye, Tangshan, with 4,000 employees out of work.

No one-size-fits-all solution

In December last year the city of Handan held a meeting on improving the environment by shutting down excess industrial capacity. Staff from the MEP’s certification centre and pollution prevention department listened to the opinions of local environmental officials and representatives of local industries on the proposals for industrial restructuring. But all the representatives of the industries did was air their grievances.

One steel company official complained that the proposed standards would be catastrophic for Xingtai’s steel industry. He explained that the technological and size requirements were appropriate for large state-owned firms – but the city his firm was based in has 60 private steel mills, almost none of which could meet those standards.

Another steel industry representative pointed out that private steel firms currently account for nine-tenths of the industry’s profits in Hebei; that large firms have been installing sulphur and nitrate scrubbers as required; and that new technological requirements were simply kicking loss-making firms while they were down. 

Plate glass manufacturers also had complaints. The government’s plans would require them to fit sulphur and nitrate scrubbers, heat recycling equipment, and most importantly to not use gas generators, which cause high levels of pollution through incomplete combustion of coal and should be replaced with natural gas or gas-from coal.

One senior official with a glass-maker said that the local firms are all using low-sulphur coal and have installed the required environmental protection equipment. When that equipment is running normally, levels of pollutants in waste gases are all up to standard. But now they are being told to change fuel inputs, which will mean huge costs.

They estimate the entire plate glass market to be worth 80 billion yuan, but the cost of changing fuels and furnaces will run to 17 billion yuan – more than the companies themselves can afford.

Similarly the concrete and aluminium industry representatives complained of the difficulty of keeping up with constantly increasing standards.

One MEP expert at the meeting explained that there is no time to waste on dealing with air pollution. This means the government needs to stick to the required policy standards, but also that policies must be more scientific and suited to local conditions, rather than a one-size-fits-all approach being taken.

This article was originally published in the China Securities Journal.