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China’s Environment Is Killing Its Economy (Which Is Killing Its Environment)

The BRICs are crumbling. Last month Beijing residents choked on the fumes from the exhaust of China’s extraordinary growth engine. In an article for Fortune, Claremont McKenna professor Minxin Pei calls China’s environmental woes an “economic death sentence”:

The World Bank estimated, in a 2007 report, that pollution caused 5.8% of China’s GDP in premature deaths, health care costs, and material damages. Air pollution alone is estimated to kill 700,000 people a year.

A 2012 MIT study estimated that air pollution in 2005 cost the Chinese economy $112 billion in lost labor and health care costs, roughly five times higher than it was in 1975. [ . . . ]

At the moment, China spends $91 billion a year, or 1.3% of GDP, on environmental protection. This is far from adequate. To remedy the consequences of past under-investment, experts believe China needs to spend 2-4% of GDP on its environment.

Pei argues—correctly—that China must move away from energy-intensive industries like steel and automotive manufacturing and into the kinds of high-tech service industries associated with post-industrial societies in order to save its environment and ensure continued economic growth.

There is no precedent for this. Typically developing economies like China have had to rely on heavy industry because of a lack of skilled workers and access to capital. But the productivity gains of the information revolution aren’t just changing developed economies; they are also opening up alternative paths for development for emerging economies. Why should countries like China retrace the steps of the developed world when best-practice technology is so diffuse?

The lesson most greens will take away from this news is that China should slow its economic growth to save its environment, but this is wrong. Faster, smarter growth is needed to get economies beyond material- and energy-intensive industry. And if the BRICs don’t figure that out, they and the environment are in big trouble.

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