Environmental Economics 101 in China

I am in Hong Kong, spending some time at CUHK. Being in China, I have started following local newspapers, and stumbled yesterday upon this story in South China Morning Post.
The described situation is typical for societies that take early steps towards environmental remediation. The decisions to clean-up are made based on idealistic views, without considering associated costs and benefits, or possible alternative projects. This was, for instance, evidenced in the US in 1970’s with the Clean Water Act, which cost a lot of money, but whose cost-effectiveness (amount of environmental improvement per monetary unit spent) was disastrous. It seems that China is repeating the same mistakes, as this example from Guangzhou is clearly showing.
While I am not sufficiently familiar with the environmental situation here, I could almost bet that there would be many other clean-up projects that would have brought about much higher environmental benefit than the funded canal remediation in Guangzhou. Indeed some of the most cost-effective projects are rather simple and perhaps not flamboyant enough to attract big political attention, in contrast to the canal project that was visited by many Chinese dignitaries. Certainly, what should matter to politicians is the ultimate environmental and human health benefits attained by funded environmental projects, and not the photo ops and environmental posing. Hopefully, Chinese authorities will quickly learn from this mistake and start making more rational choices about environmental protection.

Author: Tiho Ancev

Tiho Ancev is a Professor of Agricultural and Resource Economics in the School of Economics, University of Sydney. His main research areas are agricultural, environmental, natural resource and energy economics. Tiho’s main contributions have been in water economics and policy, economics of energy, economics of air pollution and climate change policies, and economics of precision agriculture and agricultural input use. He has published widely on these topics in top international peer reviewed journals. Tiho has led and contributed to national and international research projects in these research areas. He is currently the Managing Editor-in-Chief of the Australian Journal of Agricultural and Resource Economics.