Smoggy China

Published on Author kavanaght16

The thing that comes to most westerners minds when thinking of Chinese cities is smog. This first came to national attention during the Beijing Olympics, however it has not improved from there. In fact, the Chinese government has finally admitted that the pollution has reached unacceptable levels and pledged to take action. Among potential action plans, the government has considered shutting down the factories producing the most pollution and limiting the number of cars within the country. Additionally, the government has pledged to cut the country’sies dependence on coal, its main energy source, in half within two years. These measures are all aimed at reducing the health risks associated with the smog in the city.

The question now is how will these actions affect the Chinese economy? In the short run these up coming policies will most likely be detrimental. The closing of factories should decrease GDP immediately in both consumption and foreign exports, depending which factories are closed. Additionally, by limiting cars they will increase the cost of production in some cases. Finally, switching away from cheap coal to more expensive alternatives should also cause problems. These short run negatives could be off set by the increase in the productive working life of Chinese labor. Additionally, the government spending to move the country away from coal could offset some the decrease in GDP from the shutting down of factories. The real question of which of these positives or negatives will be greatest, that will determine whether these are economically responsible actions.

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3 Responses to Smoggy China

  1. See my blog post “Is New Delhi’s Air Twice as Bad as Beijing’s?,” as well as Zack Westermann’s: “China Aims for Food Security as Pollution Destroys Crop Land,” Gyung Jeong’s: “China’s 12th 5-Year-Plan,” and Austin Miller’s: “Cleaning Up Pollution.” These posts all bring up very good points about the cost-benefit analysis (CBA) involved in the policy decision of whether/how to internalize the social costs of pollution and the difference in the outcome of CBA depending on whether we are looking at static efficiency or dynamic efficiency (and if dynamic, on what timescale).

  2. I don’t believe that China is going to put the environment over their economy anytime soon, or the US for that matter. They will do things to clean up the situation so that conditions are workable, but the economy will always come first. In the example of the Olympics, things were cleaned up just to make it clean enough to compete in. Things were also cleaned up so that China didn’t get a bad name, and to make things appear to be clean. In reality they only do enough in terms of the environment to get by, the economy will always come first.

  3. As per Asher, there’re many posts on this general topic. How does yours add value?
    The economic impact is a function of the costs involved – if for example you can close inefficient plants which also tend to be highly polluting plants, then the economic costs are smaller than at first glance. Aren’t there studies that targeting the worst 40 coal plants would make a huge difference? If you close the worst 20 steel mills, then because of overcapacity you don’t damage the economy at all – only the workers involved, and the SOE managers who are in effect living off of the difficulty of the government in Beijing in affecting the status quo.