Chapter1
Introduction
1.1 Innovation, Environment and Development: Challenge and Opportunities
Today, it seems that there is still no globally recognized strategy for economic growth leading to sustainable development. The global resource and environmental situation is already beyond the earth’s long term carrying capacity. Industrial nations struggle to reduce effects of high per capita consumption levels. Many developing countries face the challenge of conquering poverty, while addressing declining environmental conditions. Others, including China face the dual challenge of rapid growth, export-led, while modernizing and eliminating poverty. Environment suffers, and with declining conditions, so also does people’s health and the health of ecosystems.
Though many governments, international organizations and non-government organizations have expended major effort to reverse the decline, incremental environmental improvements are no longer good enough to deal with the ecological, health and development challenges of rapidly rising consumption and population growth.
Technological, institutional and social innovation is the only way to reconcile continued rapid economic development with environmental sustainability. This means innovation will require much faster, and more widespread, adoption of currently available cleaner and more efficient technologies. As well it means development and deployment of sustainable technologies globally on a scale and over a time frame never before experienced in the world.
China, as a fast catching up country, has experienced a period of rapid economic growth from 1978 onwards. China has created many outstanding economic and social advances over this 30 year period. However, these achievements have come at a high price to resources and the environment. The conflict between economic growth on the one hand and resources and environment on the other is becoming increasingly acute. It is very unlikely that problems can be solved without transformative change in regulation and enforcement, supportive institutions and stronger management within both government and enterprises. And, there is a pressing need to apply environmental science and technology at an unprecedented level—perhaps at a scale and time frame never before experienced by any other nation. China could lead the world in environmentally-friendly technologies, provided it seizes the opportunity.
The unique Chinese growth pattern, its crises and new opportunities have their roots. First, China is a world manufacturing base and produces a lot of goods for the world, while much of the pollution remains within the country. Secondly, China is entering its heavy-chemical stage of industrialization—a stage often associated with heavy pollution elsewhere. Thirdly, for a long time, there has been mismatched strategy: government emphasized economic growth while neglecting the magnitude of the challenge associated with the equally important subject of sustainable development. The opportunity for change comes from the growing wealth of the nation, the desire of government and the people for action on environment, and certain advantages of China.
These advantages include the existing low per capita level of consumption, adaptive people and communities, low manufacturing costs which allow China to produce and distribute sustainability products (e.g. solar panels) worldwide, and a commitment to scientific development (including the 15 year science and technology strategy) intended to make China a science-oriented and innovative society. Additionally, China’s access to knowledge, capital and technologies via foreign direct investment exceeds almost all other nations.
The Chinese government has decided to build an environmentally-friendly society by 2020. Introduced into China in 2005 as a development concept, an environment-friendly society is one where harmony between man and nature, and among people is promoted on the basis of the carrying capacity of the environment and resources, under the guidance of natural law and by means of sustainable economic, technological and cultural policies. The aim of such a society is to create an efficient productive system, a moderate consumption and living system, sustainable and recycling resource environmental systems, a stable and efficient economic system, an innovative technological system, open and orderly trade and financial systems, a fair distribution system and an enlightened and progressive socialist democratic system.
Furthermore, Premier Wen Jiabao has pointed out the need to give equal weight to environment and to economy, to treat environmental concerns at the same time and not to wait until after economic development proceeds, and to employ a variety of environmental measures including economic and voluntary approaches, not just command and control regulations. These imperatives should help to move environmental action beyond the costly, but necessary, compliance-driven approach in China today.
Action will need to move towards a situation of innovation where policies and incentives exist to explore re-design within industries and communities. Also, where innovative technologies are available, either externally or through indigenous development, a concerted effort will be needed to broaden deployment. New approaches can then emerge, leading to new levels of prosperity while improving resource efficiency and creating better environmental conditions.
Often during this journey towards sustainable development there is a stage where risk management becomes important. An example is the chemical industry which depends on the right to operate in particular settings and to get continuous access to insurance and financing. In the USA, Canada and the EU countries during the 1980s and 1990s the chemical industry realized that it would be necessary to undertake innovative approaches, not only to clean up the environment, but also to substantially reduce or eliminate harmful substances in manufacturing processes. Individual companies faced drastic action on the part of communities, banks and insurers as well as heavy pressures from regulators. The Responsible Care Program was introduced through industry associations and quickly led to reductions in harmful emissions. It was driven by risk management but led to substantial environmental improvement. Responsible Care Programs are voluntary and have been introduced into other sectors and countries, including China.
Now, however, there has to be to be a level of action that moves into creation of new technology platforms and more effective deployment of existing ones intended to address such issues as tapping energy from renewable resources, and replacing fossil fuel use for chemicals with biological sources such as agriculture and wood fibre. These are demanding tasks that can be considered as sustainable development technologies with the potential for profitable returns as well as contributing to environmental problem-solving.
Environmental protection innovation needs will increase and grow more complex with the transition from compliance-driven action to risk management action and to proactive sustainable development. At present China is at a stage where most attention is focused on compliance and enforcement concerns. But for a significant number of sectors and especially for large-scale heavy industry there will be a rapid transition beyond this stage, as has happened already in the modern steel mills, for example. Many SMEs, are not at a point where environmental compliance occurs. Conversely, there are substantial numbers of both large enterprises and SMEs engaged in the environmental protection sector and fields such as recycling and renewable energy that depend on innovation for their future. Thus China’s environmental innovation situation is complex, with a need to focus on compliance, risk management and sustainable development solutions simultaneously—for the foreseeable future.
Currently, a conspicuous problem that China faces is that it has accessed or developed some advanced environmental protection and energy-saving technologies, but without strict technical controls that would guide their application and performance. Nor are they sufficiently deployed. Some highly relevant technologies from the developed world have yet to be introduced to businesses and households. And while China’s stated goals regarding development of indigenous technology include a strong focus on environment and sustainable development, how this is to be done is unclear since there is no overall strategy for environmental and sustainable development innovation.
It is imperative for the nation’s environmental sector to accelerate the entry of environmental and sustainable development technologies into economic activities and to put them to the best possible use. In response, this study aims to find a workable solution from the perspective of the national innovation system (NIS) and from the perspective of environmental and sustainable development management, to help China transform into an environment-friendly society by 2020, with ramifications for patterns of innovation well into the period to 2030 and beyond.
1.2 China at a Transformative Point on Environment and Development
The rapid economic growth of the nation has brought unprecedented pressure on its resources and its environment, thereby giving rise to a host of social problems. Relative to the 1980s, profound changes have taken place in the nation’s ecology and environment in terms of type, scale, composition, technique and influence.
This growth of problems has included a number of very disturbing characteristics:
1) The discharge of major pollutants has exceeded the carrying capacity of the environment. Worse still, pollution and damage caused by pollution has spread from land to offshore, from surface to underground, and from single environmental sources to complex multiple sources. Industrial pollution is rapidly increasing and spreading widely. In many key economic regions and river basins, there is major pollution. Industrial production and domestic pollution combined stack up; new and old pollutants are mixed; pollution of water, air, and soil mutually interact.
2) Harm caused by new pollutants and persistent organic pollutants (POPs) is increasing dramatically. Some new pollutants, such as antibiotics, endocrine disrupting chemicals, algae, toxins, pesticides, oxidation byproducts, pose larger and longer-lasting threats to the ecosystem, to food safety, and to human health.
3) Ecological and environmental problems have become more complex with more risks. Social stability and the environment are severely imperiled by such problems as eutrophication of lakes and inshore waters, regional acid deposition, combined air pollution, soil pollution, and distributed-source pollution, toxic and hazardous pollutants, regional (river basin) ecosystem degradation, biodiversity reduction, alien species invasion, genetic resource loss, and environmental emergencies. Ecological restoration and ecological construction have become expensive additions to national and local budgets.
4) Rapid increases in energy consumption and heavy reliance on coal and rapid increase in the use of other fossil fuels are creating new concerns related to localized smog, regional air pollution and climate change.
5) Environment has become a hot topic in China’s foreign policy. As globalization and market integration advance, international trade disputes, and friction regarding resources and the environment have become more serious. Delivery of national environmental obligations, improvement of global environmental quality, guarantee of natural resource supply, and breakthroughs in green trade barriers have emerged as new topics and as a basic part of China’s foreign policy.
While China is faced with an extremely grave situation in pursuing its sustainable development agenda, it has been taking many actions in terms of its legal frameworks and in reducing emissions on a per unit of GDP basis. These steps represent a genuine commitment. For the 11th Five Year Plan period, China has set the goals of reducing energy consumption per unit of GDP by 20% and cutting down the total discharge of major pollutants by about 10%. We know that while these are laudable targets, the proposed intensity reductions are inadequate. As GDP grows, pollution must decrease even faster on a total emission basis. To achieve these goals, it is necessary to uphold the scientific development outlook, develop a Circular (recycling) Economy by using advanced technologies, and accelerate the building of a resource-efficient and environment-friendly society through innovation. These efforts are also fundamental to realizing better and faster socioeconomic development.
The results so far have been mixed. For example, the total discharge of wastewater in 2006 was only up 2.3% from the previous year. The volume of soot emission fell by 7.9% from the previous year. However, the quality of 26% of the nation’s major rivers was still below acceptable standards. Seventy-five percent of the lakes have become eutrophic to varying degrees. Among the rural population, 360 million people had no access to up-to-standard drinking water. It is estimated that China’s current emission of major pollutants, like sulfur dioxide, carbon dioxide, and chemical oxygen demand (COD) far exceeds the environmental capacity for absorption. In light of the current environmental situation and development trends, the former Chinese Vice-Premier Zeng Peiyan recently pointed out that “China faces an extremely grim situation in its sustainable economic and social development.”
China Environmental Statistical Bulletin 2002-2007, Ministry of Environmental Protection, http://www.sepa.gov.cn
CCICED in 2007 declared that China is at a transformative point where action on environment will accelerate. The evidence for this includes significant increases in total investment for pollution control. In 2007, government spent about 338.76 billion RMB(1.36 per GDP) for pollution control, about 2.5 times of the level of 2002..
The Chinese leadership has identified several key considerations. First, in terms of the economic growth pattern, there should be increased emphasis on consumption and domestic demand while continuing investment and exports. Secondly, from the perspective of its industrial structure, China should give increasing weight to the knowledge intensive sector and cleaner manufacturing. Thirdly, the basis for development should be shifted from natural resource intensive endeavors to human resources and technical progress. Fourthly, with respect to resource utilization, the uni-directional linear process of resources—products—waste should be replaced with the Circular Economy process of resources—products—waste—resources. The purposes are to enable China to base its economic growth on better economic structure, higher technical content, improved quality of life for its population and enhanced quality and efficiency of its economy, and to develop a growth pattern characterized by low inputs and consumption, high yields, little discharge, recycling, and sustainability.
China plans that its GDP should grow by a factor of four by 2020 in order to provide an improved quality of life for its people. In the process:
1) emissions must be dramatically reduced in absolute terms from their present levels for the benefit of the people of China, and potentially for the wider world, and
2) the present industrial strategy as manufacturer to the world must evolve to being more knowledge-intensive and lead to cleaner businesses.
3) The Chinese people have to be resource conserving and environmentally-friendly.
It has been noted that technology innovation has been incremental to date and largely imported. But increasingly it needs to become more indigenous, more demand driven, and the time to deployment needs to be reduced.
It is difficult to know whether China or any other nation will be able to fully make such major transformations within such a short period of time (between now and 2020), and in the process to fully reconcile the relationship between environment and economy. From environmental, inflationary and perhaps other perspectives, there may be a serious conflict of goals and strategies by being in the middle of heavy chemical industry and infrastructure build-up that is still highly dependent on obsolete coal technologies for massive build-up of electrical supply. Environmental degradation may still continue to rise, and not be contained even through the promise of massive investment in science and technology. It is a great challenge, but one that must be undertaken.
1.3 How an Environmental Innovation Strategy Can Help
During the transformations over the coming 10 to 15 years to build a society that is well-off, environmentally-friendly and harmonious, and to realize sustainable economic development, it is essential to:
1) enforce the evolving legal framework for environmental protection;
2) establish a better incentive framework for companies, individuals and others to innovate;
3) create a strategy to give full play to business as major players in innovation;
4) create markets for environment and sustainable development innovation;
5) develop an environmental innovation system that enables effective interaction and participation of governments, businesses, research bodies, colleges and universities, and citizens;
6) put in place an open innovation system whereby both China and developed nations can work together on innovation efforts;
7) stimulate, support and be responsive to public participation on environmental issues and technology innovation; and
8) strengthen the Ecological Civilization mindset.
In the process of transformation, technological innovation is the source, institutional innovation provides the guarantee, social innovation serves as the basis, and promotion of development and application of energy-saving and environment-friendly technologies represents the core.
1.4 Innovation Challenges
Innovation comes from the bottom up, not from the top down. China needs to develop incentives to stimulate innovative ideas. In the longer run, it is clear that many ideas need to be supported, as only very few innovations will become commercially relevant in the short term. Basic and applied research in platform fields such as (1) Information and Communication Technology, (2) Nano-Material technologies, (3) Bioscience and Biotechnologies, as well as the rapidly developing field of (4) Clean Technology, need to be fostered within China at globally competitive levels. Some of these will lead to short term implementation while others will provide the basis for ensuring the longer range flow of innovations. Innovation is a continuous process.
Notwithstanding the significant commitment and progress made by China in dealing with its environmental pollution, much needs to be done to ensure that total emission is reduced from its present level. This is a dramatic challenge given the commitment to grow the GDP significantly in the coming decades.
We have identified a number of key gaps which should be addressed if innovation adoption is to be a major part of the solutions for a better environment and development relationship in China.
1) Lack of effective incentives to create the necessary markets. Innovation is driven to a large extent by the opportunity created by market potential. In the case of environmental technology innovation, government must create the conditions that will allow the innovator to realize the market potential. Smart government procurement is a key element of market creation.
2) Effective institutions. To be effective, institutions must be given the tools to create and enforce incentives. Enforcement of regulations and standards are key to creating demand for environmental technology innovation. This means the creation of a monitoring and reporting system on environmental conditions relative to standards and regulations that is firm and fair and available on a completely open basis. Reporting must be directly to a central body and dependable information must be readily available on a nationwide basis.
3) Public Empowerment. The public must have full and open access to credible information on the pollution situation at a local and regional basis. Individuals or groups or local or national NGOs need to have access to information and need to be encouraged to present their views and to be listened to without fear or favour.
4) Technology Innovation. If the above processes are firmly in place and with an independent data acquisition centre in place, many technological innovations whether domestic or international will be adopted. The innovation process includes a number of interacting elements: basic research, applied research, new company creation and precompetitive research, demonstration and niche deployment, widespread deployment and diffusion. Sponsoring innovative SME companies can lead to new technologies that may be adopted. China must be strong in all parts of this interactive process with all of the various feedback mechanisms from one part to the other. Some innovations may be ready for adoption now. Strong basic research must be at the highest international standards to ensure that China will play a key role in creating the next generation of technologies.
5) Financing. Funding of the various crucial steps must be in place through funding basic and applied research, funding precompetitive research and new company creation, funding demonstration projects, and funding a comprehensive centre for collection and dissemination of credible and open pollution information. Smart procurement of new technologies and creation of markets by regulation and standards and by proper pricing, will allow China to meet its own urgent needs. This will also lead to potential export markets as China takes the initiative and the global lead.
One of the key elements of a successful innovation system is a cultural setting that allows entrepreneurs to try a new idea, fail without being disgraced and be given the resources and opportunity to try again.
Creativity and innovation while having somewhat different meanings, to a very large degree are one and the same. China (along with many other countries) has focused much of its education system on developing highly specialized skills. These are important in today’s global world. But it is important also in today’s world to release the creative potential of individuals and groups. The culture of breaking down discipline boundaries is essential for innovation in science and technology, in institutions and in societies.
1.5 Conclusion
China has both the capacity and the need to become a global leader in sustainable development and environmental technology innovation. In the process it can successfully address its own pressing environmental problems while continuing to meet its domestic goals for economic growth and social development.
Chapter 2
Current State of China’s Environmental Innovation
2.1 Brief History of Accomplishments and Failures Related to Innovation
It was not until the 1970s that China initiated environmental protection. In the 1980s, China carried out assessment and studies on environmental background values, environmental capacity, and environmental impact, laying a foundation for environment management. In the 1990s, there were studies on acid rain control, on control of eutrophic lakes, on cleaner production and new pollution control technologies-based environmental management in key basins, areas, cities, and waters, and on industrial pollution control. In the new century, basic studies on persistent organic pollutants (POPs) and on pollutants movement and transformation, demonstrated the environmental behavior of some pollutants. With the development of a number of key technologies such as desulfurization, dust removal, removal of organic pollutants, and ecological restoration of water, China made progress. Studies on key supporting technologies for national environmental management made positive contributions to the improvement of China’s laws and standards, strengthening of macro environmental management and enhancement of international environmental cooperation.
Overall, the introduction of new technology and innovation was mainly based on technology imports and to a lesser extent on local R&D efforts. The general picture is this: China has reduced its technological gap in many fields; some have already reached the stage of being at the technological frontier. University research programs at institutions such as Tsinghua University are competitive with international universities. However, the strength of the existing Chinese environmental technology approach is in cleaning up pollutant emissions. The weakness is in the development and deployment of clean technology (clean tech) to reduce the emissions of pollutants in the first place and the use of various approaches to make recycling more effective.
2.2 Achievements of Governmental Programs and Projects
Technological innovation serves as a basis for environmental protection and progress towards an environmental-friendly society. The emergence of a series of key technological breakthroughs as the result of government programs has solved numerous environmental problems.
During the 10th five-year plan, as part of its efforts to control pollution of lakes and rivers, China launched key basic research (973) programs, such as Research on Eutrophic Process of Lakes and on Mechanism of Blue Algae Bloom, as well as special research into the hi-tech field (863), such as Water Pollution Control Technology and Treatment Project. These programs led to better pollution control and environmental quality in some areas (river basins) and made significant contributions to boost the ability of China to control pollution in key areas and basins.
In the 11th breakthrough program, R&D for applied environmental technologies was selected for some industries. The most important one is the new generation of recycled steel processing technology. This project will cost about one billion yuan. It is hoped that this technology can be diffused in China in the future. One important R&D project is “monitoring and recovering of ecology of rural areas.” It will establish a system of wireless communications for monitoring the water, earth, and air in rural areas.
A host of new municipal wastewater treatment processes and technologies that are suitable to China’s conditions have been developed in the field of water pollution control, particularly in the fields of intensified biological treatment, catalytic oxidation and membrane bioreactor treatment of refractory wastewater, and high-efficiency inorganic polymer flocculants. Application of these technologies has helped to effectively control water pollution in the key river basins nationwide. In the basins of the three rivers (Huaihe, Liaohe, and Haihe) and three lakes (Taihu, Dianchi, and Chaohu), 416 wastewater treatment plants have been completed or are under construction, with a combined daily treatment capacity of 21 million tons. More than 80% of the over 5,000 heavy polluters in these basins have met the standard discharge level. As a result, water pollutants there have been substantially reduced. Water quality deterioration has been contained, and the quality of water in some parts of the rivers and lakes has notably improved.
Statistics show that adoption of new environmental technologies and strengthening of pollution control from 2002-2006 led to reductions in the intensity of China’s COD emissions in the period . The absolute level of total COD increased slightly from a level of 13.7 million tons to 14.3 million tons in 2006. So, the intensity level of the emission of COD per unit of GDP has decreased from 11.36 (1000 tons/billion Yuan) in 2002 to 6.8 in 2006.
Following the 1992 UN Conference on Environment and Development, China drafted China’s Agenda 21 and made positive headway in environmental protection by way of legal and economic means. The country’s energy policies began to feature reduction and some level of control of environmental damage and pollution caused in the course of energy development and utilization.
The 10th Five Year Plan period witnessed breakthroughs in technologies and facilities for desulfurization of flue gas from coal-fired power plants and from large and medium industrial boilers, in technologies and in facilities for the effective control of the particulates of gas discharged by coal-fired power plants and boilers, and in the key technologies for purifying nitrogen oxide from diesel engines and for diesel trapping particulates. These breakthroughs provided a basis for the application of advanced technologies in air pollution control and helped control pollution in sulfur dioxide and acid rain pollution in control areas. Two control zones have been established. In these zones, acid rain and SO2 have already exceeded acceptable limits. These two zones cover about 10% of China’s landmass. In these areas, the state controls the energy structure by promoting clean fuels and low-sulfur coal, and by prohibiting the household use of coal and adopting technologies for controlling coal-fired boilers in large and medium sized cities.
There was development of environmental protection technology, including research on processing technology of municipal sewage, on polluted sources of drinking water, on organic industrial effluents, on clean coal technology, and on localization of waste incineration facilities. This provided a number of key technologies and equipment for the control of air pollution, municipal sewage, and solid waste. Flue gas desulfurization saw great progress in technology but a slow rate of deployment.
Adjustment of industrial pollution control strategy, combined with progress in environmental technology has resulted in substantial achievement in pollution control in China’s key industries. Take the case of wastewater discharge as an example. The level of waste water discharge in 2002 is about 43.9 billion tons, in 2006, it was about 53.7 billion tons. But as GDP has doubled in that period, the intensity per GDP has decreased.
China’s total energy consumption in 2006 was about 1.62 times as much (in tons of standardized coal energy (SCE)) as it was in 2002. As GDP almost doubled, the energy consumption per GDP has decreased gradually.
2.3 Diffusion of Innovative Technology has Boosted the Level of Environmental Protection
In a bid to facilitate technological innovation and apply more technological results in production, the State Environmental Protection Administration (now the Ministry of Environmental Protection) created the Best Practical Technology Evaluation Committee and the Best Practical Environmental Technology Extension Office in 1991, and carried out selection, appraisal, and extension of best practical environmental technologies throughout China. The extension work was originally the responsibility of the Department of Science, Technology, and Standards and began to be overseen by the China Association of Environmental Protection Industry after 2000.
In 1999, SEPA launched a program called “National Key Environmental Protection Practical Technology Program (NKEPPTP)”. It aims to diffuse information about the best practical technology. Chinese companies can apply to have their technologies listed in the National Key Environmental Practical Technology file. After evaluation, they will be included. MEP then has the responsibility to diffuse the technology list throughout China. Different regional governments must adopt the technology as their first priority. They can give the deploying company or government subsidies. In 2008, about 49 technologies were selected by MEP. The number one technology is the denitrification technology for 600 MW power plants. The owner of the technology is China Da Tang Group.
Based on incomplete statistics, by the year 2000, about 320,000 companies adapted practical technology in China with a total investment of RMB 18.1 billion Yuan and generated RMB 14.5 billion Yuan in economic returns (resource recovery, water and energy saving)[1].
The 11th Five Year Plan is a golden period of development for the environmental protection industry of China. The implementation and popularization of National Key Environmental Protection Practical Technology plays an important role in fulfilling national pollution reduction by way of environmental industry development of China.
2.4 Case Histories
Environmental improvements and sustainable development are all at different stages of development in different parts of China. Case histories for Baoding, Ningbo and Wuhai are presented in appendixes 2, 3 and 4. These examples are based on very different stages. Baoding is a city that has undergone dramatic transformation and is developing as a high technology city based on materials sciences affecting products such as photovoltaics. It is at a relatively advanced stage of environmental awareness. Ningbo is a manufacturing city but one in which environmental action and public involvement is high. Wuhai, in Inner Mongolia is a heavy industrial city based on coal and in which pollution emissions are very high. There is little public participation.
2.5 Conclusion
China has been active in environmental protection and has had made many steps forward since the 1970s. It has developed a strong science and technology strategy (NIS) that incorporates environmental technology innovation. Much remains to be done. Desulfurization technologies for example, although mature, are only now being deployed. As illustrated by the case histories (Baoding, Ningbo and Wuhai), developments in environmental innovations are at very different stages in different parts of China.
Chapter 3
Technology Innovation for Environment and Sustainable Development
“Innovation is interactive, one thing built on the back of another”
Mike Lazaridis, founder of Research in Motion, inventor of the Blackberry
“Innovation is a bottom-up process, not a top-down process.”
Daniel Dudek, Environmental Defense Fund
3.1 Environment and Competitiveness
Today the need for technology innovation is dramatic and increasing. At the same time the opportunities for transformative changes have never been higher. The opportunities shown in Appendix 1, Grand Challenges of Engineering, for example, document a view presented by the National Academy of Engineering of the U.S. Many of the grand challenges and opportunities are well known. Many of them relate directly to environment and sustainable development. There is much to be done, but there is much that can and must be done. New research is constantly opening new doors and opportunities.
In 1995, Michael Porter and Claas van der Linde presented a compelling view of the direct relationship between environment protection and competitiveness. As they point out succinctly, the view that there is a struggle between ecology and economy is based on a static view of environmental regulation. But we live in a dynamic and changing world.
In the case of environmental innovation, the capacity for innovation is then to a large degree driven by the establishment of properly designed regulations and standards. China has established regulations and standards, but these have not been effectively applied in order to meet Porter’s paradigm of the relationship between competitiveness and environment. Currently in China, it is frequently possible to ignore or bypass the standards. Penalties for violating the standards are minimal, so it is commonly cheaper to violate and pay, than it is to meet the standard. This means that China is not able to capitalize on the challenge “that properly designed environmental standards can trigger innovation that may partially or more than fully offset the costs of complying with them.” (Porter and van der Linde)
3.2 Environment and Economic Growth
Grossman and Krueger (1991) some years ago wrote on the reduction of trade barriers and the effect this would have on environment. They create a framework to categorize the potential environmental impact of the resulting economic growth. Their framework is relevant for China as its economy is growing rapidly.
Scale – in this category they talk about increasing the volume of what is presently being done. In the case of China, where much of the present economic activity is massively polluting, more of the same would simply mean massive further increases in pollution.
Composition – in this category they talk about changing the mix of the existing industries. For China this would mean more growth of less polluting industries and less growth or even shrinkage of the more polluting industries.
Technique – in this category one can place innovations that will lead to improved environmental performance in the processes of the current heavily polluting activities and the evolution of newer cleaner businesses. As China must reduce its total emissions from present levels, the focus for China must be on innovations that reduce total emissions dramatically. By requiring that standards be met, much innovation will follow.
Contradiction between its ever more severe environmental problems and the slow transition of its growth pattern makes it difficult for China to harmonize the relations between its economy and its environment. Contradiction between the pressing demands of its people to improve the environment and the long time needed for environmental controls to take effect is a “focus” problem, triggering social conflicts. Contradiction exists between the increasingly grim pollution in the nation and the ever higher demands of domestic environmental standards and international environmental standards.
The contradiction among these imperatives is not whether they can be resolved, but how fast the necessary changes can be made.
3.3 The Innovation Process
In a treatise on industrial innovation and environmental regulation Kemp states the following.
“In most countries, environmental and innovation policies are not fully or adequately integrated. Yet; it is widely accepted that there is constant interplay between innovation, environmental protection and further innovation. Given that numerous countries, particularly in the north, have at least a formal environmental policy and an innovation policy, it is only the next logical step to attempt to integrate the objectives of the two policies. Innovation policy can be more explicitly directed toward environmental protection by providing support for R&D in the development of environmental technologies.” Parto and Herbert-Copley (2007)
Gallagher et al (2006) have written comprehensively in a literature review on Energy – Technology Innovation (ETI). Although the article focuses on energy, their description of the innovation process is useful for all aspects of innovation.
“ETI is the set of processes by which improvements in energy technology, which may take the form of refinements of previously existing technologies or their replacement by substantially different ones, are conceived, studied, built, demonstrated and refined in environments from the laboratory to the commercial marketplace; and propagated into widespread use. Innovation, then, does not consist of research and development (R&D) alone; it is not complete unless it includes the further steps through which the new technologies or improvements attain widespread application.”
They describe the elements of innovation, but are careful to point out that these are not in a linear sequence as often portrayed. Each stage of innovation interacts with each of the other stages. New technologies can lead to new basic research. Implementation of new technologies can open the mind to new and better approaches in ways that may be unpredictable. Gallagher et al (2006) document the work by Margolis and show a chart that shows a typical set of stages and the dynamic feedback between them.
The chart in Box 3.1 divides the innovation process into supply side and demand side on the one hand , and into various performers – government, others (universities and academies), and firms. This is a useful description of the various actors involved. New research ideas and new technologies may come from the research or supply side. But frequently it is these new ideas and techniques that then create the demand.
The elements of the innovation process can also be shown in the following way, while recognizing that each element is fully interactive. New research can lead to new technology and new technology can lead to new research breakthroughs.
3.4 Basic Research
Basic research is typically pursued in universities and research institutes. It is typically publicly funded and most commonly on a peer reviewed competitive basis. There are many dimensions to basic research and a wide range of activities need to be supported. Today it is common to emphasize the platform sciences and technologies. Traditionally these are:
Information and communication technology (ICT)
Nanoscience and Technology (NT)
Bioscience and Technology (BT)
Today, given the focus on meeting environmental necessity, we can add:
Green Science and Clean Technology (CT)
It is common to use the Gross Expenditures on Research and Development (GERD) as a percentage of GDP as an indicator of innovation potential in a country.
The highest GERD/GDP ratios are in the Scandinavian countries (e.g., Finland, Sweden) that are as high as 4%. It is common to think of 3% as the aim for most developed countries (U.S. 2.7%; Germany 2.5%; Japan 3%). In China’s “Medium to Long-Term Plan for the Development of Science and Technology” (MLP) published in 2006 a target of moving from 1.34% in 2005 to 2.5% by 2020 will ensure that China is fully competitive with the EU/US/Japan (Cao et al, 2006)
It is useful to point to a few examples in which basic science is a known key driver of the innovation process. Many others will develop as science continues to evolve presenting new opportunities.
Biofuels
There is a great deal of emphasis on biofuels and in particular cellulosic biofuels. The opportunities are remarkable and are directly connected to the revolution taking place today in the life sciences from functional genomics, to enzyme creation, to mutagenesis and to synthetic biology. This has been well documented in a report of the Interacademy Council. The venture capital going into these new companies is dramatic, as documented by Krupp and Horn (2008).
Photovoltaics
Appendix 5 describes the status of the photovoltaic industry in China. Fast developing strategies to improve the functioning of photovoltaic solar cells depends on breakthroughs in nanotechnology. These techniques have evolved from the concepts of solid state physics. Today nanotechnology promises to dramatically improve the conversion rate of solar energy by creating energy trapping surface films. Suntech power based in Wuxi, China, was created by Shi Zhenrong and is now one of the largest producers of solar-cell modules in the world. He was a student in the 80s in Australia. He moved to a university spin-off company and was one of the first to grow crystalline silicon on glass at low temperatures. In 2001 he returned to China with his patents and the result has been dramatic (New Scientist, 2007, Nov.10)
3.5 Applied Research
The boundary between basic and applied research is not sharp, but rather is a continuum. For example, medical research on a particular disease is applied research, but today draws heavily on basic genomic and proteomic research. Funding for applied research in engineering and agriculture is oriented to practical problem solving.
It is in this element that the focus on industry partnerships develops most effectively. Industry-university partnerships should flourish. Patents are likely to be developed in this element. These may lead to the creation of new spin-off companies or to processes that may be adopted or adapted by larger organizations.
Research parks typically associated with universities become a hotbed for entrepreneurial innovative activity. China has been actively creating such research parks associated with its major universities across the country.
3.6 Pre-commercial Research and New Company Creation
China is lacking pre-commercial research centres to support industry sector needs. These would support research on industry wide problems that are common to particular industries such as pulp and paper or forestry and to many others. The existing institutions in China have moved to form profit centres and typically address a company specific problem rather than an industry-wide need. This element of the innovation process is not well met in China. A series of such centres should be created within MEP to address the environmental issues faced, sector by sector. These could be established on a non-profit basis, funded jointly by government, groups and companies. The governance should be dominated by CEO level industry leaders to define the problems that most need to be tackled.
These could be located in association with universities and research parks and be a key element in reinforcing clusters.
There are examples in other places that address this need such as:
Australia – Australia has created a series of Collaborative Research Centres (CRC) that are funded by industry and by government. They are created as consortia of universities and industries to carry out research that is directly relevant to that industry’s needs.
Germany – Germany has created two sets of research institutions. The first are the better known Max Planck Institutes that focus on basic research. Less well known but equally important are the set of applied research institutions known as the Fraunhofer Institutes. These are institutions that work collaboratively with consortia of industries to develop training and research that is sector specific.
Canada – Some examples in Canada are funded jointly by the federal government, the provincial governments, and the industry sector. Their applied research is directly on problems of the industry sector and corporate presidents are on the board. Pulp and Paper Research Institute of Canada and the Forest Industry Technology Institute are examples.
In Canada there is an organization called Sustainable Development Technology Canada (SDTC). This organization was established by the Government of Canada in order to assist in filling the need that this element frequently requires. It is an arms length body from government and receives proposals from groups that cover pre-commercial needs, assistance with start-up needs, and demonstration projects. To be eligible to compete for funding for sustainable development and for biofuels, projects must have a strong private sector focus and they typically partner with a research institution. This shared funding mechanism provides significant incentive to private companies, both small and large, in taking projects through to the commercialization stage.
Selection of projects is based on expert advice. The governance structure has a predominance of private sector members. This model has been examined by many jurisdictions as serving a critical need.
A comparable body in Canada – The Canada Foundation for Innovation (CFI), was established by the federal government with $3.5 billion to be sure that equipment and facilities were accessible to researchers in Canada. Again this is a shared funding model supporting universities and hospitals along with their partners from other levels of government and the private sector. Proposals must be submitted by institutions and they must find 60% of the funds from other sources. Institutions must show the benefit to Canada including potential linkages to industry or the potential for creating spin-offs. This model has been widely examined by other countries.
3.7 Demonstration and Niche Deployment
This is a very important part of the innovation chain that starts to move projects through to the actual deployment level. China has many such projects at this stage. We see for example in sulphur dioxide flue gas reduction (Appendix 6) that there are many demonstrations in place or under way. Many of these should be and are being funded by the relevant industry as they determine how best to meet the regulations and standards most cost effectively. Hundreds of excellent examples were demonstrated during the Beijing Olympics. Many lessons can be learned from these demonstration projects.
3.8 Widespread Deployment/Diffusion
There are a number of widespread deployments of environmental technologies in place: the regulation and response of the automobile industry (Appendix 7), the wide range of activities documented at Ningbo (Appendix 4) and others. Many such as photovoltaics or wind power systems are in widespread use. Sulphur dioxide flue gas desulfurization had been installed in 12% of power plants by 2007 (Appendix 6). China has committed to the Green Gen Project which by 2015 will be the world’s first full scale coal-fired thermal power plant with zero emissions.
3.9 Innovation Ecosystem: Another look at the Innovation Process
Judy Estrin (2009) has published an interesting treatise on her view of innovation in a new book called “Closing the Innovation Gap”. She has been the CTO at Cisco and has created several successful startup companies in Silicon Valley.
She has interviewed hundreds of successful entrepreneurs as well as building on her own experience. She describes the innovation process as an Innovation Ecosystem. This is a useful description, as it emphasizes that all of the elements must be present and they must interact with each other. The core values that underlie innovation must all be met and they must be in the right balance with each other. These core values are: 1. Questioning；2. Risk Taking；3. Openness；4. Patience；5. Trust.
3.10 Global Learning Networks
Globalization is having a dramatic impact on innovation. Innovation can take place anywhere. It can happen in developed or in developing countries. India and China are remarkable examples that are moving fast to developed states.
China has rapidly become a centre to which research and innovation is outsourced as it has developed its pool of highly skilled and educated people and created globally competitive research focuses.
But what is now starting to happen and needs to be encouraged is that China’s industries are moving to be partners in global learning networks. China is now creating research facilities in developed countries such as the EU or the US, where particular expertise is concentrated. This is documented in a recent OECD (2008) report. In a sense China is joining “clusters of innovation” in other parts of the world and other parts of the world are joining “clusters of innovation” in China. A recent report in China Daily (Sept 25, 2008) states that in 2007, China invested $18.6 billion overseas. Given China’s dramatic need in environment and sustainable development, this is a process that will serve China well as people move around the world. Just as today’s problems must move beyond discipline boundaries, so today’s ideas know no geographic boundaries.
3.11 Venture Capital in the Field of Clean Technology
Venture capital (also known as VC or Venture) is a type of private equity capital typically provided to immature, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. Venture capital is very important in promoting the industrialization of various high-techs and economic development, including the field of clean technology.
Recently, China’s venture capital market has been developing rapidly. In the year 2001, the overall amount of venture capital in China was only 518 million dollars; however, by the end of the second season of 2008, this figure has risen to 3845 million dollars, nearly 8 times that in the year 2001. Especially in the last two years, the number and amount of venture capital both maintained high growth rate, reaching an average rate of more than 50 percent per year. See table 3.1.
Table 3.1 Annual amount of venture capital in China, 2001 to 2008 August
Year Number of Cases Growth rate VC amount（US$M） Growth rate
2001 216 — 518.00 —
2002 226 4.6％ 418.00 -19.3%
2003 177 -21.7% 992.00 137.3%
2004 253 42.9% 1,269.00 27.9%
2005 228 -9.9% 1,173.00 -7.6%
2006 324 42.1% 1,777.42 51.5%
2007 440 35.8% 3247.05 82.7%
2008
（up to August） 198 — 3845.04 —
Data source: zero2ipo research center, www.zero2ipo.com
What's worth mentioning is the rapid increase in the demand of clean technology and new renewable energy. Recently, with the continuous rise of traditional resource’s price, the business value of clean energy resources, such as solar energy and wind energy, has constantly grown. Additionally, the policy direction has also promoted the market demand of clean technology. Along with many long term capitalists, venture capitalists are making this investment in the fields of solar energy, wind energy and other sustainable energies.
In the year 2007, the clean technology market in China has undergone drastic development According to Zero2IPO’s (A Chinese leading VC management and consulting company in the field of clean technologies) statistical data, in 2007 alone, venture capital related to clean technology and new renewable resources has amounted to 100 million dollars. And what’s more is that in a single month, August of 2008, Venture capital in the field of clean technology has reached 700 million dollars, accounting for 19.2% of the total in the month. Despite few investments in this field, the clean technology industry in China is witnessing stable progress and the field is rapidly emerging.
In China, there are more and more demands and investments in the fields of clean technology and new energy resources. 9% of the world's energy resource investments are in China (Zero2IPO, 2008). According to the report of Zero2IPO, in 2007, the capital funds put into solar energy industry, from silicon chips, silicon cells to the whole solar energy system and relevant products, achieved more than 10billion RMB. The passion for new energy resources could certainly be seen by the senior managers of international investment banks. For example, in the year 2007, investment in the field of clean energy resources worldwide by Goldman Sachs, from wind power to ethanol manufacturers, reached 1billion US dollars. And JP Morgan Chase& Co has invested in 17 wind power generating stations and is on its way to solar and geothermal generating. Operated by “Stock god” Warrent Buffet, Berkshire Hathaway has invested 385 million dollars on the construction of wind power generating stations worldwide.
Venture capital and regional government support have given great support for those clean-tech companies in China. For example, the development of Wuxi Suntech, set up in 2001, has came at a very high speed. In 2004 alone, the achievements were 20 times that of the previous year. In 2006, Suntech got access into NYSE and became the company in solar photovoltaic industry that had the highest market value. The president and CEO of Suntech, Dr Shi Zhengrong thus became the richest man in China. Both government support in form of government venture capital and commercial venture capital helped Suntech in its startup stages. After Suntech, China witnessed a hot investment in solar photovoltaic industry. Some companies in the industry, such as LDKsolar in Jiangxi province, YingLi solar in Hebei province, and China Sunergy in Nanjing, are involved in IPO Financing.
3.12 China’s Environmental and Sustainable Development Paradigm – The “China Advantage Model”
China, in addition to its profound need for emission reduction, has a number of advantages. It has a global manufacturing advantage recognized universally. It has a large domestic market that is growing fast. It has an export advantage in terms of price, skilled workers, flexibility, and speed. It has made significant investments in the research at its universities and academies and is building international competitiveness and recognition and attracting many of the best minds. The skilled labor force is developing very fast through education and training and through sending large numbers of people for educational opportunities abroad. It is committed to the concept of the circular economy. It has and is establishing a number of well focused clusters or learning networks where universities, academies, businesses and supply chains can learn from each other. China is committed to the idea of the Innovation Society including basic science, technology, national institutions and to building the public capacity for understanding science.
In transportation and in the home electronic appliance industry, companies, such as Haier, Huawei, Lenovo, take advantage of the big domestic market and become a global leader in those industries. We believe that in the environmental sector, China’s comparative advantage can also give Chinese companies the power to become highly innovative global companies.
3.13 Creative Mindset
“China has yet to establish a research tradition that is both conducive to creative achievements and tolerant of creative failures.”
“Research is too often derivative in nature, which wastes resources and discourages creativity and independent thinking.”
These are quotes from Cao et al (2006). They reflect on the need to engender a creative mindset in China’s S&T community if the objectives of the MLP are to be realized.
The idea of creative mindset at the individual level, at the corporate level, and at the government level is increasingly seen as a necessary condition for innovation. As Daniel Dudek said at the Enterprise Forum “there is a need to create broader-based incentive programs here. The challenge for innovation is empowering and harnessing China’s vast entrepreneurial talent. Innovators are highly creative people and are not and should not be constrained in their thinking by traditional approaches to problem solving” or even by the prospect of failure.
Innovations in today’s increasingly specialized world require that individuals and organizations must be able to get beyond this specialization and not be constrained by various boundaries – these include boundaries between disciplines, boundaries between government ministries and boundaries between different jurisdictions, both within and between countries. This may mean a need to rethink the objectives of the education system at all levels. Can creativity, imagination, and entrepreneurship become a significant part of educational curricula? Can individuals be empowered and given incentives? Can they be encouraged to be risk takers? Judy Estrin (2009) describes the need for T shaped people. Broadly educated across discipline boundaries on the one hand with depth on the other.
3.14 Selected Needs and Technology for the Future
In January 2006, China initiated a 15 year Medium to Long-term Plan for the development of science and technology. China aims to become an “Innovative Country” by 2020. It commits China to developing capabilities of “indigenous innovation”. China will invest 2.5% of GDP by 2020 to R&D. As the GDP is growing rapidly, the absolute size of R&D will be much larger than it is now.
Environmental innovation is also within the scope of the 15 years S&T plan. It covers ecology, energy and environmental S&T and innovation. To reach this ambitious goal, China will spend more money on environmental technology and innovation. China must find solutions for new energy and for other kinds of needs. At the same time China has to find a way of clean manufacturing to reach the goal of fast and sustainable economic growth. All of this leads to China fast becoming a global leader in the clean tech revolution now under way.
At present one of the most important science and technology projects for environmental protection is water pollution control. This is the first key science and technology project administered and managed by the Ministry of Environmental Protection. The estimated budget for water projects is RMB 14.168 billion Yuan from the central government and RMB 21.483 billion Yuan from local financing and enterprises. With a total budget of RMB 35.651 billion Yuan, the plan will be implemented in the 13 years from 2007 to 2020.
Automobile Pollution
Starting in the 1990s, China improved its level of vehicle exhaust treatment by improving its own technological capabilities, and most importantly by implementing vehicle emission standards in stages. By imposing a requirement for tailpipe emissions control through policy, foreign and Chinese automakers alike had the incentive to transfer and/or develop vehicle emissions control technologies, and install them in every new vehicle (see Gallagher 2006). (Appendix 7)
Clean Coal Technology
Zhou and Gallagher (2008) document the move to cleaner coal using coal gasification and polygeneration technology in China. China has committed to a zero-emission coal-fired demonstration power plant by 2015. This is now under development as GreenGen, which is led by Huaneng, one of China’s leading power companies. This integrated gasification combined cycle (IGCC) coal plant will capture and store carbon dioxide underground and the hydrogen will be used to power fuel cells, resulting in a highly-efficient co-generation plant.
Krupp and Horn document exciting developments in progress in a number of areas. They give examples of science and technology which is one of the necessary conditions for innovation. They show many examples of the elements of the innovation process including basic research to demonstration and the investment of major amounts of venture capital in promising technologies. Based on a consideration of supply and needs, we list a number of areas important to the future of China.
1. Solar Cells, Photovoltaics (PVs), Solar Thermal Technology (STT) and Enhanced Geothermal Systems (EGS)
While China enjoys a large and growing export market for solar PV, this technology remains very expensive for bulk power applications. Ongoing global research will, however, probably deliver cost competitive solutions throughout the value chain in the near future (see Appendix 5). Solar thermal technology, which heats a working fluid (with high heat capacity) which is then used to make steam to generate electricity, is potentially more cost effective than PV to generate bulk power in desert regions. Further, heat can be stored in insulated vessels, and then used to carry over to generation, when there are clouds, or during peak demand in the early evening when the sun has set. While there are a number of solar thermal plants now operating, development challenges include reducing the cost of collectors (e.g. with flat plate Fresnel zone lenses) and developing thermal storage systems. In addition to meeting domestic energy needs, China might also develop a substantial export market for such technology. China is addressing many of these topics. See photovoltaics Appendix 5.
Enhanced Geothermal Systems do not need the naturally occurring pockets of steam to turn a conventional turbine. The advantage of EGS is essentially targeting heat rather than other specific geological conditions. Priority targets are the most geothermally rich resources with the highest temperatures closest to the surface. With further technological improvements, the reach will become vast, even with relatively low temperatures.
2. Wind Power and New Nuclear Power Systems Now in Advanced Stages of Development
For renewable energy use, China lags behind advanced countries. In total, energy, hydro, wind, and nuclear only had a 7% share. As China has a vast land and many parts have good resources, so wind power has a good potential for a future in China. China has become a leader in manufacturing and installing wind power. Now, the installed capacity of wind power in China is number 3 in the world in 2007, about 6.05 million KW.
New generation of nuclear power is also one of the important potential sources of energy. China will establish about 30 new nuclear plants to have a better energy system (amounting to 6% of the total electricity supply by 2020). China lags far behind other countries in nuclear and radiation safety. This is reflected in the following aspects: (i) nuclear power plants are short of risk control technology as well as measures and means to prevent and mitigate serious accidents; (ii) since most of the nuclear safety software is from overseas, much research work is still needed to assimilate and apply such software; (iii) efforts are lacking on nuclear safety risk assessment, radioactive waste pollution control, optimal management of nuclear radiation, and electromagnetic radiation and environmental safety; (iv) study of nuclear facility decommissioning technology is still at a low level; (v) study on the disposal of high-level radioactive waste (including spent fuel) is at an early stage and there will be a long way to go before realizing final disposal; (vi) security study (especially fast discrimination and probing technologies) of nuclear materials trails far behind that in other countries; and (vii) study on the technologies and measures to counter nuclear and radioactive terrorist attacks is still in its infancy.
3. Carbon Capture and Sequestration and Integrated Gasification Combined Cycle (IGCC)
Coal fired utilities in China provide more than 70% of the electricity demand. Over the coming decades it will simply not be possible to reduce dramatically the use of coal, while meeting energy needs. While there has been a great deal of discussion of advanced coal technology and deep geological sequestration in the industrialized world, actual progress has been slow. Indeed, today it appears that China may be as far or further along in actual development and demonstration of these technologies as any other country. With some serious push, China could become a world leader in this area, not only contributing to reducing its own contributions to local and global environmental loads, but also to become a major international supplier of advanced clean technology. Gallagher documents the move to using cleaner coal using Integrated Gasification Combined Cycle (IGCC) in China. China has committed to a zero emission coal fired demonstration power plant by 2015. This is now under development as Green Gen operated by a consortium of the leading power companies. This will use IGCC super critical technology, CO2 will be captured and stored underground, the hydrogen will be used to operate fuel cells and the output will be combined heat and power (cph) as a highly efficient cogeneration plant.
4. Desalination of Saline Water
China faces serious and growing problems with fresh water supply. The same is true in many other parts of the world and as climate change becomes more serious, the number of regions around the world that are running short of fresh water will grow. Today, reverse osmosis is the leading technology for desalination of sea water and other saline waters. This technology is expensive, but costs have fallen sufficiently such that the technology is seeing growing application, especially in wealthier parts of the world. There are a variety of other technologies that hold potential for supporting desalination at lower cost. If China is able to develop such technologies, they could both meet a growing domestic need and also provide an important and growing export market.
5. High Efficiency Buildings and Infrastructure
Buildings consume about 1/3 of the total energy. Efficiency in buildings and infrastructure can save a lot of energy for a big country like China. In this area, new technologies will find many applications. Appendix 7 gives a review of what is and can be done in regard to reducing pollution with well designed and regulated transportation systems.
6. Ecological Conservation, Reforestation, and Grassland Development
Eco-environmental damage in China is showing some new features: First, the damage has expanded from small local areas to large regions; and second, the damage caused by a single factor has become functional damage in regions or areas, resulting in badly degraded or even loss of ecological functions in many important ecological zones. It is necessary to attach strategic importance to the study of the carrying capacity of the eco-environment, strengthen development of ecosystem health management technology systems, and carry out monitoring, assessment, and study of typical regional eco-environments. The attached
Box 3.12 documents a remarkably successful rehabilitation project in Sudbury, Canada, driven to a large extent by local citizens.
7. Key Technological Aspects in the Development of the Recycling Economy
As one of the important strategic objectives of China’s sustainable development, the recycling economy has an enormous bearing on the improvement of resource productivity and building of a resource-efficient and environment-friendly society. This represents the long-term and future-oriented direction for technological development. To achieve such development, it is necessary for China to develop platform technologies for the recycling economy at the earliest possible date. In terms of pollution control and environmental management, the first step is to develop environmental pollution assessment, control technologies for waste reclamation, and create well-functioning national policies and systems regarding reclamation. The second step is to develop technology for effective and clean utilization of resources, namely, cleaner production technology, and to enhance the capability for independent innovation. Furthermore, it is imperative to select typical cities and key industries for demonstration activities, and to develop technologies that will propel development of other technologies, ultimately serving as alternatives to the traditional technologies in the heavy polluting industries. The third, is to develop a business coexistence network, ecological industrial integration systems, ecological industry, eco-agricultural technology, and to explore the mode for the construction of ecologically friendly cities and countries.
3.15 Conclusions
Technology Innovation for Environment and Sustainable Development is a process that involves many dimensions and many elements. These range from basic research to deployment. We live in times sometimes referred to as the New Industrial Revolution, where new ideas and new deployments are urgently needed to ensure that China and indeed the broader world must be committed to the care of our environment. Innovation has a major role. Emissions, not just on a per GDP basis but in total, must be reduced on an absolute basis.
Perhaps the framework for innovation can best be described as an Innovation Ecosystem in which the various elements must work together to ensure that new ideas are quickly adapted to restore polluted sites and to reduce pollutant emissions. There are many actors involved in the process ranging from government to universities to enterprises. These must work together to meet both supply and demand. But in the world of innovation, the development of new research or supply may also be the source of demand. We describe various approaches that can be used to bridge the gap linking research to defined needs, for example in an industry sector.
China is a large country with various parts at very different stages of development. In some cases incremental improvements are needed, in others there are leapfrogging opportunities and in yet others there are major opportunities for China to lead with radically disruptive technologies.
Chapter 4
Environmental Innovation System of China
Describing the innovation system is a good approach to see the interaction of different actors in terms of knowledge creation, refinement and diffusion.
4.1 University and Government Research Institutes
In China, there are numerous research institutions related to environmental protection. At present, an environmental science and technology system has been created in China. It is composed of four parts including the Chinese Academy of Sciences system, the higher education system, the industrial department system, and the Ministry of Environmental Protection. The most important knowledge creators are university and government research institutes.
There are more than 230 scientific institutions at the country, province and district level and nearly 10,000 scientific researchers and administrative personnel in the environmental protection system. Research directions of the scientific institutions under the Ministry of Environmental Protection are greatly different from those of the Chinese Academy of Sciences, the higher educational institutions, and the industrial departments. They primarily aim at national and global environmental problems and address the needs of national environmental management. They provide technology support for the strategic policy of national environmental protection.
Their role in environmental innovation system can be seen from Table 4.1. As most of their budget comes from the government, we can see their performance in a national project called the 863 program. The areas of biology, new materials and advanced manufacturing are the top three in paper publication. Information, new materials and advanced manufacturing are the top three for patenting. The poor attention given to environment is relatively small compared to other innovation areas.
Table 4.1: Programs funded by the 863 project in 2004
Field Number of trained graduate students Number of published articles Number of applied patents Number of invention patents
Information 3777 2818 1022 590
Biology and modern agriculture 2787 6871 2115 1479
New materials 2852 5244 1557 1102
Advanced manufacturing 4452 7833 718 190
Energy 561 1169 380 270
Resources and environment 1117 1951 632 476
Total 15546 25885 6424 4107
Source of data: Database Online, The Ministry of Science and Technology of China
A major gap in the R&D system here is that research done by many government research institutes as well as in universities, funded by the Ministry of Science and Technology, does not fit the needs of industry well. Lots of research results remain locked in at the laboratory stage and are not being applied to industry.
At the same time, many applied research institutes have been transformed into private companies, leaving a gap between basic research done by the Chinese Academy of Science and universities and the consulting services done by the applied research institutes. Little real research is done in areas of general technological problems for industry sectors, such as standard setting, and demonstration research. A system based on public and private partnership, targeting industrial and regional level problem, is badly needed.
4.2 Domestic Enterprises
Overall, companies are important actors in the innovation system of China. But this is less true for the environmental innovation system. With the lack of strongly enforced environmental regulations for a long period, companies have not had a strong incentive to innovate.
Now, government has introduced tougher measures of environmental protection. Large scale, state-owned enterprises have higher pressure and have taken more responsibility for environmental innovation problems as part of their business practice. They are taking appropriate actions to solve the environmental problems they are facing.
Multinationals from developed countries often have a greater commitment to environmental protection because the regulations and business practices in their home jurisdictions require this. They pay attention to energy saving, as well as environmental conservation, so they actively participate in clean production and technology research and development of pollution controls as an element of good business practice.
There are two groups of small and medium enterprises (SMEs). Some are the leaders in introducing innovation in their industry. Some SMEs lag behind. They do some investment in environmental protection, but only under the pressure of local government officials.
Another set of important actors are the new environmental protection enterprises. Through years of practice, the environmental protection industry of different types and sizes has been formed in China. By the end of 2004, there were 11,623 units with income of more than 2,000,000 Yuan annual sales and 1,595,000 employees. Annual revenue of this industry has reached RMB 457.21 billion Yuan with profit of RMB 39.39 billion Yuan. (National 96-05 white book on environmental protection by MEP).
In China, large private companies are becoming dominant players in environmental innovation. Of China’s top 500 companies, 98 are private companies. Some of them are leaders in environmental innovation. For example, Wuxi Suntech Power Co., Ltd. reached an output of 364 megawatts of installed capacity with sales revenue of over 10 billion yuan. It came third among photovoltaic cell manufacturers in the world. Following is Baoding Tianwei Yingli New Energy Sources Company Ltd. The ENN group is a major power company located in Hebei Province of China. This company is one of the largest providers of clean energy. In 2007, it had revenues of 12 billion RMB with 20,000 people. The company invented a clean coal process to turn coal into dimethyl ether for power plants, household and vehicle use. One of its advantages is that it generates no sulfur dioxide or soot when burned. In the wind power sector, Goldwind has captured 33% of sales in China. In 2006, Goldwind installed 442 MW of wind capacity.
Although the domestic environment-engineering corporations have had a period of fast growth, their core technical skills and key equipment still have to be imported from abroad. In addition, a majority of consumers are reluctant to buy domestic made equipment and instead purchase overseas equipment. This results in low adoption of domestic technology and equipment.
At present, investment for environmental protection is hindered by the high cost of obeying the law and the low cost of breaking the law. Enterprises have little incentive for environmental innovation. Major steps must be taken to raise the cost of breaking the law and to continuously reduce the cost of adopting new innovative technologies.
4.3 Industry-Academic Linkage
Industry-academic linkage is one of the bridges for knowledge transfer from academy to industry. Though government has pushed hard to encourage this linkage, more effort is needed in China. In Chinese Academy of Science system, there were about 1265 patent applications before 2007, but only 20 of them are joint patent applications with industry. This is also true for Tsinghua University. In the department of environmental science and engineering, there are about 155 invention patent applications, but only 15 of these are joint applications with industry.
One of big challenge is that the former applied research institutes have been transformed into profit-seeking companies. Their technology capabilities gradually degenerated. They cannot respond to the needs of the market. For example, from our visit in Wuhai, we know that some large energy related companies cannot get the needed technology from those companies. They have to rely on imported technology and to improve by themselves.
Global industrial-academic linkage can play a role here. In the photovoltaic industry, for example, the leading scientists in China have learned the latest knowledge in a university in Australia. Those companies still have good connections with them.
China needs to increase incentives through R&D funds to encourage increased industry-academic linkages.
4.4 Role of Government
Government plays a very important role in developing the environmental innovation system.
Led by the Ministry of Environmental Protection, there are many governmental bodies responsible for the environmental innovation system in China. These include the National Development and Reform Committee (NDRC), Ministry of Science and Technology (MOST) and others. MEP and NDRC are responsible for the regulation of environmental issues. China has made great progress in terms of law making and standard setting and implementation. Institutional change in China is in transition. The environmental protection law and policy of China in this period basically follows a ‘command and control’ philosophy. End treatment of pollution is still the focus for pollution control. Implementation is the big challenge as regional governments cannot independently operate in some regions.
Funds for environmental science are allocated through a variety of national S&T programs controlled by the Ministry of Science and Technology of China. First, funds for operating grants of research institutions, refers to an allowance for experimental manufacturing of new products, expenses for pilot-plant test and subvention for major scientific research projects, which are established by the state. Second, funds come from national S&T program controlled by MOST. They are the principal funding source for research in China. The largest and most recent one is water treatment. It has about 30 billion Yuan for the project. Third, part of the pollution charge can also be used for research purposes. Part of this is used for pollution abatement and capacity building of environmental protection organizations; part is used for technological activities of enterprises and scientific establishments, especially local scientific institutions.
The big challenge here is lack of coordination in the environmental innovation system of China. China has a good tradition of coordination as it has five year plans and different forms of specialized committees. But the environmental problem is a horizontal issue. The specialized function of each ministry means cross boundary problems remain an issue. The National Environment Information System proposed later in this report would cut across all aspects of government as well as businesses and public institutions.
Water pollution presents a very important example. The distribution, dispatch, protection, supervision, and administration of fresh water resources (the seawater resource is under the administration of the State Oceanic Administration) are within the purview of the Ministry of Water Resources. The utilization quota of water resources and the use of water by industry, construction, and production are determined and supervised by other departments including the National Development Reform Commission, the Ministry of Construction, the Ministry of Communications and so on. Sewage disposal facilities are administrated by the Construction Administrative Department, but not by the Ministry of Environmental Protection. However, sewage drained to the surface water (lakes and rivers) is administered by the Ministry of Environmental Protection. The water drained to the sea is under the administration of the State Oceanic Administration. The drainage process of motor vessels is out of the administration of the Ministry of Environmental Protection but within the administration of the Department of Transportation.
Money for R&D and for diffusion of technology is an interesting example. The distribution, dispatch, protection, supervision, and administration of environment are in the purview of the Ministry of Environmental Protection. They know what kinds of innovations are required for the problems. But they do not have the fund to do that. The Ministry of Science and Technology controls most of fund for environmental R&D, but they do not have the ability to allocate the funds to the right agencies. At the same time, government procurement of clean tech products is still inadequate. Nobody is responsible for the pilot stage of innovation.
4.5 Global Linkages
Since opening to the world, the World Bank and many developed countries have helped China very much in terms of regulation, standard setting and transfer of best practices.
The Clean Development Mechanisms (CDM) for example, is one of the mechanisms established according to the Kyoto Protocol (1997). CDM is deemed to be a double-win mechanism, for it provides more flexibility for developed countries to reduce performance cost and it provides the CDM project countries with new capital and advanced technology.
The World Bank has supported China with nine carbon-purchasing agreements since the beginning of the first three proposals in September 2003. The agreements relate to energy sources (coal mine methane, hydropower stations in river channels and wind farms), energy efficiency (exhaust gas reclamation during steel production), carbon sequestration (forestry), and industrial gas destruction (HFC-23). China is the largest HFC-23 emission source in the world. In December 2005, the World Bank and two project units supported by the Chinese government signed a CDM trade purchasing agreement with the largest registered amount thus far, including two HFC-23 reduction and emission projects with reduction or emission amounts exceeding 129 million tons. Due to the support of the World Bank, China increased its share in the global CDM credit market, acquiring 60％ of the global amount. Up to now, the World Bank has signed nine purchasing agreements in China, with a total value of 1.1 billion U.S. dollars, reducing 170 million tons of exhaust gas emissions. This kind of global tool not only brings benefits to China, but also strengthens the local capability of China’s energy industry (China and World Bank: the fellowship of promoting innovation, 2007). But whether CDM is leading to innovation and diffusion of technology is an important question. The effectiveness of CDM as a driver of innovation must be examined carefully as there are conflicting views. This proposed study should be completed in time for the Copenhagen 2009 meeting.
FDI is another important factor for knowledge transfer. Many multinational companies from developed countries have good environmental consciousness and a sense of social responsibility, because they are driven by home-based, tough standards, that must be met. However, with its lower pollution standards and lack of enforcement, China has selectively attracted more heavily polluting industries. Research done by Jing Zhang and Xiao Lan Fu1 found that FDI prefer to locate in regions with relatively weak environmental regulations. They suggest some evidence of a pollution haven within China. They also found that in terms of environmental protection, multinationals from developed countries do better than those from Hong Kong, Macao and Taiwan. Enterprises with polluting industries can use low technology in China with huge pollution as a result. But many multinationals stand out as models of environmental protection in a lot of regions. We expect that by green purchasing of local suppliers, they can help local companies to acquire related knowledge. China Daily reports that in 2007 China received 82.6 billion in FDI and this is rising further in 2008 (China Daily Sept 25, 2008). Government has started to curb investment in energy-consuming and environment-polluting industries, instead encouraging investors to go into hi-tech, modern agriculture, and service industries.
4.6 Conclusion
The system of environmental innovation is inadequately developed in China. Domestic companies do not have enough incentive to do R&D as there is a lack of necessary regulations and their implementation to make innovation a competitive enhancing force. Most university and government research institutes are inclined to do basic research and it is far away for transfer. The key between R&D and commercialization of technology is missing, as there are not enough capable applied research institutes. The coordination and funding system needs to be improved to strengthen the pilot and test elements of innovation. FDI and other kinds of global linkages help China to access the latest technology. Multinationals can play an important role by green purchasing from local suppliers. They can help local companies to acquire related knowledge.
Chapter 5
Regulation, Standards, and Enforcement
Regulations and standards are the rules of the game for environmental innovation.
5.1 Need for Enforcement of Regulations and Standards to Drive Innovation
Environmental technologies are managed centrally. Government implements related regulations and standards approved by the National People’s Congress and requires businesses and other entities to follow. Under the socialist market economy, the involvement of the market diversifies interests. The interests of local and central governments often do not agree. Local governments base their decisions on their understanding of their maximum interests. The current environmental legal system and the status of law enforcement do not motivate businesses to meet environmental regulations.
In the ideal situation, environmental regulations and standards would be stringent and they would be strictly enforced. Businesses would pay far more for causing pollution in violation of the law, than they would for acting within the regulations and standards. They would get far more benefit from operating within the regulations than they would in avoiding the controls. In this event, businesses would be motivated to seek every technology possible to lower their pollution control costs. The strong market demand would then push forward needed innovation. This in turn, would generate returns from the market. The problem is how to ensure that regulations and standards are enforced to achieve these results. It is impossible now, since decisions must be supported by information on pollution levels established relative to standards. Obtaining such information entails huge costs and difficulties. Governments have adopted a series of regulations, policies and incentives and carried out promotion and education activities with the aim of encouraging technology flow and application to improve the situation.
Only by providing corresponding organizational guarantees and pushing forward system reform, can the obstacles to building the environmental portion of the National Innovation System (NIS) be addressed. The existing organizational systems must be reformed and a system must be created which allows environmental technologies to flow among the developers, the disseminators and the users. Governments, businesses, universities and colleges, research institutes, intermediaries and individuals, need to be involved in the process. Businesses are the main force in the operation of NIS, while governments are responsible for implementing and enforcing the regulatory environment and for creating markets and for correcting system failures.
There are a large number of regulations and standards. These are regularly reviewed and updated. Over time they are increasingly meeting international standards. It is clear that China has an effective set of regulations and policies, but these are not uniformly, rigorously and fairly applied from jurisdiction to jurisdiction. One only has to read the three case histories – Baoding, Ningbo and Wuhai, (Appendices 3, 4, 5) to understand the dramatic differences in different jurisdictions in China. It is also clear that many SMEs have been able to escape these regulations – sometimes by simply shutting down and reopening elsewhere.
The task force is explicit in making the following statement:
“Without strong and uniformly enforced regulations and standards, there is no market and hence no incentive for investment in or deployment of innovation environmental technologies.”
A big incentive to create a market for clean technology is good regulation, standards, and tough enforcement at all levels.
5.2 Creating a Market for Clean Technology
China has seen enormous economic growth in areas in which there is a clear domestic or international market that demands products and services. However, until there is a clear market demand for clean technology (including both pollution control for existing processes and newer clean and efficient technologies) growth of markets in this area will be slow. When we look internationally at how industrialized countries have made the transition to cleaner and somewhat more sustainable economies, several factors have been essential. These include:
Strong public demand for clean and efficient products and processes based on good access to information and effective organizations to support regulation and continued adoption of best practices;
Good environmental standards, actively and uniformly enforced, which start with levels that are technically and economically achievable, and continue to get more restrictive over time as progress is made.
Incorporation of environmental externalities into the pricing of resources like coal and water, usually done with some form of taxation.
We have found from the Baoding visit that the Spring Wind program from National Development and Reform Commission has helped the wind power industry in China. The high price for wind power electricity and the allowance of wind power electricity to integrate with the national grid system stimulated this new industry in China. Many local regions and local power companies have taken active steps to implement wind power stations in their regions following government financial program.
There are cases where voluntary standards have led to improvement, but for the most part, voluntary standards have not been effective in driving innovation in the developed world. On the other hand, once strict standards have been put in place, markets, and associated innovation to reduce costs have grown rapidly in developed countries. For example in the United States, innovation in sulfur dioxide pollution-control technologies largely occurred after strict well enforced emission control regulations were put in place. Also, innovation to reduce emissions from motor vehicles largely occurred after strict well enforced emission control regulations were implemented. We can also see evidence of this phenomenon in China where once pollution-control standards were established for motor vehicles, emission-control technologies were transferred, developed, and deployed in China (Gallagher 2006, Appendix 7).
Increasing costs associated with bad practices can also be powerful signals to the market. Sometimes this happens naturally through normal market process, but sometimes the government must intervene and impose externality taxes. For example, China is beginning to use coal more efficiently than it once did, in part because prices have risen. Similarly, US consumers are demanding smaller more fuel efficient (and thus cleaner) cars because gasoline prices have recently doubled.
Public support, strong, well-enforced regulations, and correct pricing are essential to creating a market for clean and efficient technology. Two other factors can also play an important role in making progress in improving environmental quality and promoting clean and sustainable processes and technology:
The growth of a culture within corporations, especially among industry leaders, that takes pride in being a “best actor” and thus applies pressure on poorer actors in the same sector;
Direct (e.g. subsidy) and indirect (e.g. tax breaks) support from government to cover the incremental costs of demonstrating advanced technologies that have not yet become cost effective but hold great potential.
5.3 Leapfrogging and Standards
Leapfrogging to current and modern technologies is a very strong option for developing countries. Leapfrogging to modern approaches has been practiced in China and is included in China’s medium to long term science and technology plan. But the process is highly dependent on having in place a supportive and functioning regulatory system. Each leapfrogging activity needs to be considered on its own merits.
There are many opportunities for leapfrogging in China. We give below a few representative examples that have both domestic and export potential.
(1) Energy Storage Technology: As greater use is made of intermittent renewable energy sources, such as wind, and as more effort is placed on reducing emissions from vehicles fueled by petroleum products, the need will grow rapidly for efficient, cost effective energy storage technologies that can be cycled (filled and depleted) many times. Today the leading candidate is advanced battery technology. Other technologies include ultra capacitors, kinetic energy storage (flywheels), and electrochemical systems such as bidirectional fuel cells. If China can develop effective new products in this area, it should enjoy both a large domestic and international market while also making a large contribution to improving environmental quality.
(2) Advanced Materials Separation: China produces large amounts of solid waste and also imports large volumes of waste material and products (such as used electronics) from elsewhere around the world. At the moment, technology for separating valuable materials for recycling, and making use of the embedded energy in these wastes is still at a fairly primitive stage, both in China and in much of the rest of the world. Research and innovation that develops and commercializes advanced methods of separation could both help dramatically to improve China’s environmental quality and might also become a very lucrative export market since most developed and developing countries face very similar problems and needs.
(3) Low Cost Solid State Power Electronics: In addition to intermittency (capacity factors typically <= 20%), one of the things that makes photovoltaic electric power very expensive is the “balance of system” costs (the power electronics needed to convert DC into AC). Power electronics also play’s a key role in many other advanced applications such as wind, motor control, power system control, etc. Both the domestic and international markets would be very large if China could develop low cost “package units” that can perform simple tasks such as DC to AC conversion, synthesis of varying frequency three phase AC power for motor control, and similar products that would enable greater energy efficiency at low cost.
(4) Carbon Capture and Deep Geological Sequestration: Coal is central to the energy economy of China and of many other nations including the United States and much of Europe. Over the coming decades it will simply not be possible to reduce dramatically global CO2 emissions while meeting energy needs without continuing to make use of coal. While there has been a great deal of discussion of advanced coal technology and deep geological sequestration in the industrialized world, actual progress has been slow. Indeed, today it appears that China may be as far or further along in actual development and demonstration of these technologies as any other country. With some serious push, China could become a world leader in this area, not only contributing to reducing its own contributions to local and global environmental loadings, but also become a major international supplier of advanced clean technology.
(5) Solar Thermal Technology: While China enjoys a large and growing export market for solar PV, this technology remains very expensive for bulk power applications. Solar thermal technology, which heats a working fluid (with high heat capacity) which is then used to make steam to generate electricity, is potentially more cost effective than PV to generate bulk power in desert regions. Further, heat can be stored in insulated vessels, and then used to carry over to generation when there are clouds or during peak demand in early evening when the sun has set. While there are a number of solar thermal plants now operating, development challenges include reducing the cost of collectors (e.g. with flat plate Fresnel zone lenses) and developing thermal storage systems. In addition to meeting domestic energy needs, China might also develop a substantial export market for such technology.
(6) Desalination of saline water: China faces serious and growing problems with fresh water supply. The same is true in many other parts of the world and as climate change becomes more serious the number of regions around the world that are running short of fresh water will grow. Today reverse osmosis is the leading technology for desalination of sea water and other saline waters. This technology is expensive, but costs have fallen sufficiently that the technology is seeing growing application, especially in wealthier parts of the world. There are a variety of other technologies that hold potential for supporting desalination at lower cost. If China is able to develop such technologies they could both meet a growing domestic need and also provide an important and growing export market.
These are a few examples in which China can leapfrog and bypass various stages of technological development as it reaches to meet present standards or to establish new standards and the needed technologies to meet environmental and sustainable development needs. There are many others. Higher standards and strongly enforced standards will create the markets that will lead innovators to pursue such avenues. At the same time government policies and funding can accelerate leapfrogging development. As we see from the case histories of Baoding, Ningbo and Wuhai (Appendices 3, 4, 5) there are very interesting opportunities for the less developed parts of China to leapfrog based on the experience of the more developed parts of China. MEP should consider running an intensive workshop on this topic as it develops opportunities for joint funding of projects with private sector partners.
5.4 Enforcement
The fact is that lack of strong, uniform enforcement of standards and regulations is a phenomenon well known and frequently commented on previously by CCICED and by various task forces. Enforcement remains a serious challenge for China. As we have seen a strong system is necessary to trigger innovation. The supply side based on new technologies alone is not enough. The demand side must also be stimulated. This is where enforcement of regulations and standards are necessary at all levels of government. If a company knows it must meet standards, it will seek the most innovative and cost effective way to do so. As Stigson (2008) pointed out at the April 2008, CCICED Enterprise Forum, this means among other things, ensuring the security of the IP used in meeting these standards.
It is worth noting that the World Business Council on Sustainable Development (WBCSD), is creating a system in which member companies make IP openly available where this relates to environmental protection technologies. This IP commons is designed to increase diffusion around the world.
We see from the experience on SO2 pollution control in thermal power plants (Appendix 6) that enforcing standards is beginning to pay dividends, as the technology of flue gas reduction is increasingly being deployed.
But at this stage we find that China does not have an effective monitoring system. We have learned that environmental protection bureaus (EPB) typically report to local governments. This means that such data as are available may or may not be reliable. There is no independent monitoring available. What is available is often so aggregated that it is bears little or no relation to whether the standards are being met or not.
In the US, one of the early policies that was established was the Toxic Release Inventory (TRI). Over time this inventory has developed effectively as a tool for monitoring and it is managed independently. The results are company by company and are publicly available. As a result, the culture has changed and organizations seek to be good performers.
The US Toxic Release Inventory (TRI): A strategy to promote citizen involvement
In 1986 the US Congress passed the Emergency Planning and Community Right-to-Know Act (EPCRA), as explained on the EPA website (www.epa.gov/tri/):
Sections 311 and 312 of EPCRA require businesses to report the locations and quantities of chemicals stored on-site to state and local governments in order to help communities prepare to respond to chemical spills and similar emergencies. EPCRA Section 313 requires EPA and the States to annually collect data on releases and transfers of certain toxic chemicals from industrial facilities, and make the data available to the public in the Toxic Release Inventory (TRI). In 1990 Congress passed the Pollution Prevention Act which required that additional data on waste management and source reduction activities be reported under TRI. The goal of TRI is to empower citizens, through information, to hold companies and local governments accountable in terms of how toxic chemicals are managed.
When this requirement was first proposed, arguments were advanced by some in industry and academic circles that the data would not be accurate and that simply reporting total mass of emissions, without some estimate of actual exposure and toxicity would not be useful. Nevertheless the program went forward, and the data have been important in inducing reductions in emissions. This has happened in two ways. Some firms have been embarrassed to have to publish data that make them look bad, and so have taken steps to reduce their emissions and improve their public profile. Perhaps more importantly, these data have been widely used by environmental and community groups to bring pressure to improve local environmental quality.
Anyone can log onto the scorecard website and summary maps of emission data, including toxicity-weighted data, nationwide. Users can also input their local postal zip code and get data on emissions sources in their local region.
5.5 International Standards
There are thousands of standards in place around the world in different jurisdictions. In some cases these are in a form that could be adopted by any given jurisdiction. Examples include forest practice codes, biocontainment codes, biodiversity codes, and many others. Adoption of these can be a major stimulus to innovation in developing new approaches to meet these standards. Perhaps best known is the Montreal Protocol on HFCs.
The first standard was introduced in 1973 in China for three wastes: waste water, air and solids. Now, in China, there are about 1000 standards in environmental protection. Standards can be a driver for environmental innovation. It sets a goal for companies to realize. Therefore, it pushes companies to find new solutions to match the standard. Innovation can then follow from that action. For example, the standard of ISO14000 is a big impetus for movement of clean production in China. Many large companies are leaders in introducing the standards. This standard is the driver of managerial innovations in the case of environmental protection. For example, Bao Steel took a timely action to diffuse the ISO14001 standard in the whole company system, from design, to production, to the supply chain. This produced positive effects in energy saving and in pollution control. At the same time, the Ministry of Environmental Protection diffused the idea to regional levels, especially to many high-tech zones and economic development zones.
Standard setting is very important in some industries. For example, in vehicle and power plant industries standard setting is key to environmental innovation. Since the 1980s, China has been introducing vehicle emission standards. Modification of the old standard began in 1993, when the limit of emission was still very low. Several phases were developed following the EU standards over time. Now, the emission limit of HC, CO and NOx for gas vehicles at China Phase IV is less than 10% of that before China Phase I. As for heavy duty vehicles, the emission limit of NOx and particulates is about 10% of that before China Phase I (see Appendix 7) and meets current EU standards.
5.6 National Environment Information System
We urge that the Ministry of Environmental Protection (MEP) be empowered to establish a National Environmental Information System. For this to be successful the environmental protection bureaus (EPB) of the various jurisdictions need to be separated from the local governments and need to report their information directly to the central system of MEP. This system would build on and substantially extend the functionality of the 3000 stations under the China National Monitoring Station system that produces annual reports. Individual governments will not necessarily welcome this separation, but it would put MEP in the position of being a third party monitoring and auditing agency. Results put together in their Control and Information Centre (CIC), would then be openly published and available widely. This availability would ensure that all information of the nationwide system could be reviewed in real time by any organization or any local, national, or international NGO or the public at large at any time.
This will take time, money, and people to implement, but would go a long way to ensuring standards were being met as standards would be published along with the information. Violations could then be identified and enforced, and suitable penalties established and implemented. This independent “auditing” would have a big impact on driving innovation, whether imported or indigenous. This innovation would in turn provide credibility for China as it seeks to export environmental technology. MEP would establish advisory committees to assist in implementation and ensuring that the best technologies were in place for the monitoring and open reporting.
By making this commitment, China would have a strong key not only to drive technological innovation, but also institutional innovation, as agencies and businesses determined how best to deal with this open and independent reporting of pollution information. It would also provide an evaluation system that could monitor the results of deployment and adoption of new technologies. This evaluation could, for example, be used to document the actual effectiveness of the various CDM projects that have been and are being implemented. In turn new regulations and new standards could be developed from this information base.
The development and operation of a major environmental information data base is truly a massive undertaking that involves uniform gathering of information of much critical data. This needs to be routinely updated and of course new techniques in both hardware and software need to be developed and implemented. Production of information nationwide on a real time basis uniformly and without opportunity for intervention at any level will require many innovations. A new cluster of innovative activity could be developed in support of and in relation to this new centre. Activities in relation to this centre could be thought of as creating a central core for the new clean tech research platform. Today information gathering can be done by wireless techniques and satellite collection to a central location. This type of centre would in itself provide a steady flow of further innovation in support of the clean tech platform. One might even think of this centre as being something like a typical space agency control centre.
5.7 Conclusion
Good regulations, high standards, and tough but fair enforcement of them are absolutely necessary if markets for environmental technology innovation are to be developed. China’s enforcement is known to be inadequate. It is proposed that a National Environment Information System be developed and implemented. This system must be open and accessible and provide accurate and dependable information for all interested parties to use. Such an open system could provide confidence in knowing what is happening in a form of third party audit by MEP. This is a massive undertaking and could anchor a cluster of innovation in its own right.
Given such a system, there are also many opportunities to set the global standard and to aggressively develop leapfrogging opportunities.
Chapter 6
Public Participation and Environmental Innovation
In recent years public participation has been developing in China in respect of environmental issues and the related environmental innovation needed to deal with these pressing issues. In this chapter we consider the role of the public and community organization in achieving sustained environmentally-friendly economic and social development. For the public to be able play their role in the government – business – civil society triangle there is need for maximum transparency in information about existing pollution, about pollution associated with new developments, about mitigation possibilities in this pollution, and the potential health and quality of life impacts. Much has been done, but a great deal remains to be done to fully empower the public.
6.1 Why Public Participation is Needed
Public participation is a necessary condition for understanding the impact of environmental pollution on communities and the environmental innovation needed to deal with the pollution. First, the public is the end user of industrial products. The complexity of environmental problems and the universality of their impact create problems that cannot be addressed by government or the market alone. It is necessary to ensure that the public is empowered to play its key role by recognizing the impact of today’s pollution, as well as the potential impact of future projects. Secondly, the essence of a harmonious society is in how people can share in the benefits of regional economic development. There can be conflict between companies and local people or between governments and local companies. The company can take the profits of the project, and leave the environmental degradation to the public. The involvement of the public can bring stakeholders into the development process and thus reduce the conflict between the company and the local communities. Thirdly, economic development can only be done with public input in an environmentally sensitive way. Is it possible for regional levels of government to take the lead in competing with each other to be the best environmental jurisdiction? And in this way they can also be economically successful and help to create a harmonious society. An informed public that is listened to is a key to the harmonious society. What this means is that in the context of “It’s glorious to be rich”, it is necessary to be environmentally-friendly, if the objective of being rich is to be sustained. The devastation of pollution continues to rise in China and to cause dramatic health impacts on its people; the economy will in turn suffer.
6.2 Public can Play a Role
The development of environmental protection activities in western countries is inseparable from the active participation of the public. Many environmental issues have been resolved by the public, especially those who are the victims of environmental hazards. Groups who suffer from environmental hazards often launch environmental protection campaigns. These activities frequently lead government to create environmental legislation, to take management measures, and to create environmental assessment processes. But these results must be available to the public.
China’s environmental protection has been dominated by government. It is worth examining how to include people’s views in the process of environmental protection and slated technological innovation. The most typical and effective approach can be seen from an example. In April 2005, the State Environmental Protection Administration (SEPA) held the first public hearing on Yuanmingyuan’s anti-seepage project. In February 2006, the Provisional Measures for Public Participation in Environmental Assessment (EIA) were issued. Meanwhile, the higher specification and broader coverage of Measures for Public Participation in Environmental Protection have also been legislated. Public participation in environmental protection is important in creating the environmental policies that affect people’s daily lives. The rapid development of environmental NGOs has also been important in this regard. NGOS may help to focus public opinion and thus to form policies and to hold decision makers accountable.
The public through individual action, through community organizations and through NGO’s has a big impact on dealing with local environmental issues, impacting both governments and businesses. The resolution of many of these issues is through environmental innovation and again the public can both press for these innovation and assess their effectiveness. Today through the incredible power of various communication media including the internet, much can be done to keep the public engaged.
Attention should be paid for example to the Blue Planet Prize (established in 1992 by the Asahi Glass Foundation) awarded to support action for the protection of the global environment and its beauty. The list of winners is a remarkable list of distinguished citizens. It would be interesting for China to create national environmental prizes to be recognized internationally administered by the MEP on best environmental citizen or citizen’s group, and on best technological innovation. These prizes would complement the ones presently awarded and give global recognition. As for public participation in the system of technological innovation, the public should have the right to be informed and even to supervise projects that damage the environment. They should have the right and the channels to obtain information about ecological technology. Public supervisory systems include public announcements, hearing systems, mass reporting systems, police and people joint supervision systems under Environmental Impact Assessment (EIA) as well as public opinion systems for civil society green organizations and public media.
A good example of public impact is the Sudbury area in Canada. This is a case where mining, forestry and smelting over nearly a century had devastated thousands of square kilometers around the city. Active citizens and many local groups started to force change. Eventually the companies, the local government, the provincial government and the federal government joined the effort to rehabilitate this devastated site. Today, this is considered one of the world’s most successful restoration projects and demonstrates that even the most polluted sites can be regreened driven by public participation.
There are increasing examples in China of active public participation. Consider the recent public pressure in Xiamen that caused the relocation of a seriously polluting chemical factory. According to existing laws, the government’s decision to build up the large chemical project in the region cannot be rejected. But public pressure changed the government’s decision. (Xing Jing Bao (Daily), December 8, 2007)
The Ningbo case gives an example of public participation that is particularly effective. The case of Wuhai on the other hand documents the severe pollution from dirty industries in an area where there are few active community organizations, few active NGOs, and little public participation.
6.3 How can the Public Participate?
6.3.1 Public Accessing Information
Before public involvement, the key thing is how the public community can get access to information. The proposed National Environmental Information System can provide a solution to this. The government and companies would have the responsibility to disclose the relevant information.
In the previous section on standards, regulations and enforcement, we made a recommendation that the MEP be empowered to institute a full Centre for Information and Control that could not be manipulated by any local or regional or national interests. Technical independent advisory committees would advise on this system. Such a system would be an essential element in empowering the public to hold governments and enterprises accountable for their actions in the release of pollutants.
In view of the dramatic health impacts on the population, it would be useful to start compiling and making public impacts on health available in the data centre (this could include WHO monitored data). There is concern that by focusing on emission intensity targets rather than total emission; that the government may be creating a false sense of security as total emissions continue to rise rapidly. By presenting authenticated results openly and publicly, and by presenting these together with the relevant standards, the public, community organizations, local NGOs, and international NGOs, can determine if standards both local and international are being met.
6.3.2 Public Hearing and Supervision
At present, the hearing system as defined in environmental legislation, environmental project assessment, environmental science and technology policy exists only to a limited extent. On environmental legislation, the State Environmental Protection Administration held a hearing on “Regulations of Pollutant Discharge License” for the first time on Aug. 6, 2004. This marked the establishment of an environmental legislative hearing system. Since then, consultative activities on environmental legislation have been held.
Public supervision of the environmental technology innovation process is reflected in two types of activities: one is individual reports on enterprises violating the law or regulations. The other is various measures adopted by the relevant environmental protection organizations or non-governmental organizations. As far as individual reports and supervision activity is concerned, the approaches mainly include the constant “complaint mailbox”, “12369” the environmental report hotline of the environmental protection institution or its website. Personal representation to the relevant institution is also available. The modes of environmental technology innovation supervision of relevant environmental protection organizations and non-government organizations include approaches such as public meetings, public protests, establishment of green citizen organizations, citizens voting in political elections, and boycott action[2]. The supervision of these activities on environmental technology innovation not only ensures the actual application of environmental technology, but also makes important contributions to creating a system favorable for public policy input on environment and can assess the effectiveness of these measures including the risks. Public supervision directly highlights the social benefit of environmental protection. Public benefit is managed and assessed by the public, which can then effectively solve the problem as “market failure”, or “government failure” at several levels or both.
The public are also consumers of many products. Where they have a choice, they will choose environmentally-friendly products. Developing green products such as solar water heaters is a strength in China. The city of Rizhao in Shandong province is a city known as sunshine city and is a model for use of solar hot water healing (New Scientist, Nov 10th, 2007). Appliances can be more or less friendly to the environment. There is considerable innovation needed to drive up the environmental standard, while maintaining the price.
6.3.3 Give Full Play to Social Communities, NGOs and Volunteers
As environmental problems are usually very complex, relying on government and business alone cannot resolve the whole issue. Community organizations and non-government organizations need to fill the gap that the government and business leave.
The community organization is a basic unit of society. To construct a resource-efficient and environment-friendly society, it is required to build the community into an environmentally-friendly community. Traditionally, China has laid less emphasis on the concept of the community organization, and on the social supervision function of grassroots communities. Now, the community has become a network for social management, for public service and for social support. In implementation of social welfare, social relief, social charity, occupational support, public security, family planning, health services, judicial correction, environmental protection, grassroots mediation of social disputes, and life services, the community organizations must play an active role.
Throughout the world, non-government organizations (NGOs) play an important role in environmental protection and innovation. Up to 2005, China has only 2,768 non-governmental environmental protection organizations, including 1,382 non-governmental environmental protection organizations initiated by the government. Non-governmental environmental protection organizations have 224 000 members, including 69 000 full-time staff, and 155 000 part-time staff. The average full-time staff of each organization is about 25 people; about 30% of spontaneous non-governmental environmental organizations have only part-time staff, but no full-time staff. Though China’s non-governmental environmental organizations have developed quickly, the number is still limited and the scale is not large. Their role in environmental protection activities is obviously smaller than that of government environmental protection organizations. Environmental Protection NGOs should be given a greater role in the innovation system. They can effectively assess the local needs and the pollution impact already happening, as well as the potential impact of future developments. The need of innovation then is driven by addressing these local needs. NGOs can evaluate the effectiveness if given open and transparent access to all information and can press for the needed improvements.
Volunteers prove to be another important force in driving environmental innovation. They can fill the gap left by governments and NGOs. Many volunteers can pick the best practice and diffuse them into their community. For example, in Beijing, one volunteer proposed to control room temperature using air conditions at 26º as a low cap in order to save energy. This kind of effort later on became the practice of the government.
6.4 Education, Training and Publicity of the Public
China should, through public education, training and publicity, mobilize and empower the public to carry out direct and grassroots-orientated supervision, so as to promote the development of innovation for ecology. It is important for the public to understand and be prepared to accept innovation in science and technology for sustainable development and environmental protection. This means strong outreach to the citizens of China and increased awareness and education.
6.5 Conclusion
The public, through individuals, through community organizations and through more formal NGOs has a major role to play in environmental issues. It is through this channel that the need for innovation can be manifested. In order to play the key role of civil society in the triangle between government, business and civil society there must be full transparency of information. The public needs to be empowered through access to information through the National Environment Information System proposed. The public should be in a position to hold governments and businesses accountable. The creation of community organizations needs to be stimulated. There needs to be widespread education available to ensure there is an informed public.
Chapter 7
Conclusions and Recommendations
This report has reviewed a number of aspects of innovation and the environment friendly society. China has made many major steps towards dealing with emissions of pollutants. Targets have been set to reduce emissions on a per GDP basis and steps have been taken. Significant projects (e.g., Green Gen) are under way, to develop power plants that will have zero emission, including carbon capture and storage (CCS). At the same time, the plan is to continue to increase the GDP at a rate very much faster than the planned emission “reduction”. Given that the pollution levels are already well beyond the ability to support the environmentally-friendly society envisioned, much remains to be done. Reduction targets of pollutants on an absolute level must be established. Given the enormous level of pollution and damage to the ecology of land, rivers, lakes, air, and ocean, there is a massive job of remediation to be done as well.
In this report we have examined the need for innovation in support of environmental protection and sustainable development and what needs to be done to stimulate that innovation.
China has not escaped the pattern of many developed countries: pollution first, and control of pollution later. Environmental protection is sometimes not a precondition for economic development. China favors more direct control by command, than by regulation based on law. There are no effective market signals to stimulate environmental innovation. There is a gap between the work of university and research institutes and companies needs. Applied research institutes that function to test and diffuse new technology are lacking in China. China lacks a national environmental information system providing accurate and reliable information needed to create markets and incentives. Opening this system to the public will send this signal by creating confidence.
Facing the big challenge of heavy pollution and shortage of resources, China is in a position to lead a clean technology revolution. Without a clean technology revolution, the environmentally-friendly society in China will not be possible. In addition to dependable market signals, this will require careful investments.
The development efforts of environmental protection lie in the improvement of existing technologies (things we know), in the development of new technologies (new breakthrough technologies), and in institutional innovation. New materials (NT), biotechnologies (BT), and information and communication technology (ICT) are all seen as basic research platforms. To this must now be added clean technology (CT). It builds on new energy, new materials, BT and IT, focusing on saving energy, clean energy, and clean manufacturing.
China is confronted with a complicated situation in which it is simultaneously suffering from the double pollution of production and of daily life, co-existing pollution from point, line, and area sources; the interaction among old and new pollutants, and the international pollution of water, air, and earth. China must support science and technology for environmental protection. It must move to strengthen its indigenous innovation capacity and to realize that integrated innovation is needed for problem solving. While continuing to import advanced technology is necessary, this will be substantially reduced over time as China moves to become a leader in innovation for an environmentally-friendly society. China must launch a National Environmental Innovation Program. The program will include the following key elements:
7.1 Technology Innovation for Environmental Protection and Sustainable Development
We have described the nature of the innovation process. This can be thought of as a constant flow process in which each element influences every other element, in other words, an innovation ecosystem. Some innovations are ready for adoption and deployment. Others depend on having an innovation culture and mindset that ensures that it is ready to lead and to adopt new innovations as the research and development elements evolve along many fronts. China must be strong in all elements of the innovation process that focus on sustainable development.
Innovation is already an important part of the national science and technology strategy (see China’s scientific and technological actions on climate changes, 2007), the National Innovation Strategy (see OECD Reviews of Innovation Policy China, 2007) and the Medium to Long Term Science and Technology Plan (2006-2020). All elements of the innovation process need to function well to deal with short term needs, as well as being ready to develop and exploit future challenges and opportunities.
7.1.1 Strengthen China’s Basic Research Capacity
The existing foreign technology and integrated incremental innovation are not sufficient for the goal of environmentally-friendly society building. China needs radical and original innovation to deal with the environmental challenge.
China needs to invest more in basic research. China is doing much in this area but must continue this development to be sure it is globally competitive in attracting and retaining the best researchers. There is a need to further strengthen China’s basic research capacity, as it is the base for the next generation of innovation and for China’s move to a more knowledge intensive economy. By funding competitive research, introducing prizes and scholarships, as well as broadening the base support to universities beyond the key universities, China will increase its role in global learning networks.
Another incentive that will increase China’s international R&D capacity is the establishment of a number of competence centers for research focused on innovation with a high international scientific quality. China has already done much through research parks affiliated with universities to build university business partnerships. However, the emphasis here should be to focus more on cooperation between research-intensive companies and renowned research institutions to foster technology transfer. This will increase the effectiveness of technology introduction. Major investment to establish China as a major player in ICT, BT, and NT must continue. China has the opportunity to establish clean tech (CT) as a major research platform and this should be done.
7.1.2 Create Industry Sector Research Institutes
A number of academies have been moved to become for-profit institutions. This means that they are less likely to take on industry sector wide problem solving, as these are less likely to be profitable. Specialized research institutes are needed in specific industry sectors, such as chemical, steel-making, and many others.
Industry sector research institutes serving the needs of industry sectors need to be created and funded. These would serve the need of precommercial research within the innovation process and be the locus for demonstration projects. These would be funded and managed jointly by government (MEP) and industry consortia. These new industry sector research institutes also serve the needs of regional SMEs, and help SMEs to adopt new technologies.
7.1.3 Public Procurement
In China, the public procurement system is expanding to include special support for indigenous innovation. In 2006, the government gave green products some priority in procurement. There has been no special approach to promoting environmental innovation. In European countries, public procurement is about 14% of GDP, of which 19% is for green procurement. In Sweden, it is as high as 50%.
By requiring that a minimum percentage of government funds be invested in clean technology through budget transfers, central governments can create incentives for regional and local governments to invest in green public procurement. Public procurement can help companies to get more market share for their innovative technology and help build competitive capacity within enterprises.
7.1.4 Greatly Upgrading SME’s Innovation Capability
One gap in China’s environmental innovation system is SMEs. The current ways of regulating and supporting the system leave the SMEs untouched. In future, tough measures are needed to help SMEs to get information on clean technology, to implement new technology and acquire knowledge. Secure financial support to introduce the latest technology is required. Where these smaller companies are part of the supply chain to larger corporations, high standards should be required by the large corporations. Regulations and standards should be enforced throughout the supply chain. At the same time, the proposed industrial sector research institutes should help local SMEs to upgrade their innovation capacity.
7.1.5 Innovation Financing must be Available
China needs to improve its venture capital mechanism. Venture capital is increasingly available and must continue to substantially increase if China is to develop and fully exploit “the new industrial revolution”. Good examples exist, in particular where investors see the opportunity for export markets. The long term potential of environmentally-friendly companies and the likelihood of their business success given the right market mechanisms need to be recognized.
7.1.6 International Cooperation/Global Learning Networks
China has a lot to learn from the international society, but there is also a lot that China can teach the world. There are a number of opportunities for international partnerships such as CCS; biorefineries, and clean coal. China is beginning to position itself to be a leader of such consortia, as China seeks to meet its own needs. A number of Chinese institutions and companies have been developing global learning networks. This means sending students and employees abroad to study or work in teams, or inviting international experts to participate in China based centres or clusters. This is already common practice among universities. China is the largest developing country recipient of FDI. Increasingly the focus of FDI is towards investment focusing on less polluting industries and in industries that draw on China’s rapidly increasing pool of skilled talent. A study should be made of the effectiveness of the CDM process in driving innovation. Chinese enterprises are starting to invest in international businesses or in setting up research facilities in selected jurisdictions in order to be part of the global network. Additionally, China cooperates with several international partners in the creation of various eco-cities in China, aiming at creating ecologically healthy cities that balance social, economic and environmental factors to achieve sustainable development. Some portion of the funds in the environmental innovation program needs to be earmarked to support international cooperation. China should continue to actively participate in international environmental cooperation, both through public and private initiatives, as this will strengthen the country as it becomes an environmentally-friendly society.
7.1.7 Intellectual Property Rights and Leapfrogging
China needs to change its viewpoint towards intellectual property rights (IPR). Even though IPR are standardized and regulated by law in China, they are inadequately monitored and enforced, making MNEs reluctant to invest and transfer advanced and green technology to China. In spite of China’s various measures to deal with these challenges, the changes needed in order to attract foreign technology will not happen fast enough to meet China’s goal of becoming an environmentally-friendly society. With a complementary, rapid deployment approach, China can turn these challenges into advantages.
It is quite likely that the cost of restoring the environment by using outdated technology will far exceed the cost of acquiring and investing in new clean technology. We therefore urge China to acquire some of the appropriate technologies owned by foreign companies.
Investments in advanced and clean technology owned by foreign firms are comparable to investments in raw materials in foreign countries. Both are one time investments, both aim at meeting China’s priority demands, and both contribute to future returns.
In addition, this will open China to significant export markets to both developed and developing countries.
Investments in advanced and clean technology will enable China to leapfrog to a more advanced technological base, which in turn will create competitive incentives for further R&D in the invested technologies.
Leapfrogging can and has played a significant role in China. MEP should organize an intensive workshop of national and international active participants in the environmental innovation process to identify leapfrogging opportunities that will directly impact environmental technology and thus be the object of investment. This would be an in depth sequel to the Enterprise Forum of 2008.
7.1.8 Create Experimental Innovation Laboratories
One approach to creating an environmentally-friendly society in China can be done through establishing cross-disciplinary and cross-cultural collaborative projects. These projects would play the role of indigenous think tanks and should encourage and attract Chinese and international scientists, researchers, designers, architects, artists, philosophers, politicians, and business people, to meet, work, and study how to approach sustainable development. The aim of these projects involving government, business, and civil society should be to show how to reduce the use of non-renewable resources, as well as to show the world that it is possible to live with a high standard of living and yet have no waste since everything is utilized. China provides ecological conditions with enormous diversity; hence it would be beneficial to create such projects in different parts of China as global pilot demonstrations.
7.2 Regulations, Standards and Enforcement
In addition to the investments described in the previous section, it is only through firm and fairly enforced standards that China can both bring international innovation to China and further develop China’s own capacity to meet domestic need and to further develop export potential. China has developed a set of standards and laws. Nevertheless, these standards and laws are not adequately enforced. China needs to develop a strong focus on enforcement, and to create a better monitoring system to detect environmental violations. The cost of non-compliance must become greater than the cost of compliance.
7.2.1 Create the Market
Enterprises are the main source of environmental technology. They are thus one of the most important actors in the creation of an environmentally-friendly society. For China to develop and deploy cleaner and more efficient technologies, the market for environmental technologies must be created by a comprehensive system of incentives. These include enforced regulations, real pricing of natural resources (water, energy), tax incentives, subsidies, and procurement. The government gives some subsidies to environmentally-friendly products, but the reward is far below the cost.
7.2.2 Create a National Environment Information System (NEIS)
The MEP should be funded and authorized to develop a nationwide environment information system that has independence from all levels of government and that is demonstrably a source of credible information. This information would be collected nationally and reported directly to MEP. MEP would then have the role of independent third party auditor of data at all levels of government. The information should be openly available and show the information by company and by local region. This data base, openly accessible and with data assurance in place, will then become the basis for widespread and uniform enforcement. NEIS should also have basic analytical resources, e.g., enabling benchmarking of information with emission regulations, suggesting corrective actions, etc. With this in place, innovation can be expected to flourish as it has elsewhere. Enterprises will have the needed incentive and they will have the incentive to force the same standards on their supply chains. This would involve significant funding and a change in institutions. This could be operated by an MEP Control and Information Centre (CIC). The public and local NGOs would have access to the National Environmental Information System so they can assess for themselves, with the help of experts, the impact on health and on quality of life. This centre would be the core of a cluster of innovation, building on the technologies required for implementation and continuing improvements. It might even be analogous to a space centre. Manpower to develop and operate this system needs to be developed through skill training programs.
7.2.3 Improve Policy Coordination between Various Departments and Institutions
In the process of technological innovation and practice, policy makers often focus only on their own departments and units, rather than on the overall needs of nation. We therefore urge that MEP be recognized as a crosscutting agency for environmental innovation holding other agencies to account for their environmental practices. More effective coordination of policies and actions on environmental innovation cutting across all agencies would result.
7.2.4 Give Local Governments Incentives to become Best Performers
We recommend that local governments are given incentives to become best performers in environmental management and leadership. The MEP should evaluate and rate each local government based on data from the proposed National Environment Monitoring System (NEMS),and disclose the results to the public through media channels. Rating can be done, similarly to the GreenWatch program, by giving the local governments colors based on their ranked performance, with two (black, red) denoting inferior performance; one (yellow) denoting compliance with minimum emission regulations, but failure to comply with stricter requirements; and two ratings (blue, green) denoting superior performance. This would give the local governments incentives to compete with each other to improve their environmental management and in addition it gives them a chance to evaluate their own practices. This should also give the public means to demand more from their local authorities and become more involved in environmental conservation and innovation. The ranking of the local governments can be constructed as a system which is based on internal reporting from the local government, benchmarked towards NEMS, and with external evaluations from the MEP, as well as surveys of how the public perceive the performance of their local government.
7.3 Public Participation
We know that involvement of the public has been key to innovation in environmental issues. In the end, it is the citizens that will benefit from a successful model of sustainable development leading to both jobs and prosperity through economic growth, and doing this in a way that increases the quality of life.
A start has been made on empowering citizens and NGOs to be highly active in ensuring that they can increase their quality of life without fear of punishment or environmental disaster. This must be developed much further. These organizations must be kept independent and at arm’s length from government if they are to hold officials accountable in the three-way relationship between government, business, and civil society.
7.3.1 Increase Public Awareness
The public needs to be educated, gain awareness, and receive credible information so that they can develop their own actions. By making full use of local and civil society organizations to actively launch green civilization activities, such as green districts, green communities, green schools, green parks, green cities, and green units, China can gradually encourage all people to participate in green action. To trigger these actions, China could establish local and regional competitions for citizens and citizen groups for best environmental practice, to be covered, for example, by regular television programs. This could also be extended to include businesses on best technological innovation and environmental practices, including international cooperation. We also recommend that the Chinese Government plays a redistributive role of directing funds towards less developed areas of the country in order to empower and create higher public awareness among the citizens in these areas as well. This might be done by creating separate programs in these areas, grass root campaigns, and more funding and human resources to enhance relevant education. Green public actions and awareness will enable Chinese citizens to take pride in helping China to become an environmentally-friendly society.
7.3.2 Public Involvement in Local Environmental Protection
With increased public education and awareness towards building an environmentally-friendly society, the public should be able to inquire and supervise projects that could potentially damage the local environment. By creating public reporting and opinion channels, the public will have the opportunity to actively and directly participate in the protection of their local environment. Additionally, it will increase the effectiveness of the National Environmental Information System.
7.3.3Make Civil Society a Key Actor in the Environmental Innovation System
The public as consumers and users of environmental products can be potential innovation drivers. If the public is involved in the innovation ecosystem, they will help to build the environmentally-friendly society. It is best to have some competition for environmental ideas in the media, such as in CCTV. The ability for informed criticism is one element of the harmonious society.
7.3.4 More Emphasis on Innovation in the Education System
China has been a remarkably creative society in the past. This is rapidly developing again in these transformative times. The Chinese education system needs to focus more on creativity and less on textbook learning. Today’s problems in topics such as sustainable development do not relate well to the traditional single discipline focus that dominates the education system of so many countries. Creativity demands tolerance for failure and repeated effort. In China mistakes can often lead to punishment. The opportunities and challenges that face China know no boundaries. Boundaries between disciplines, between government ministries, and between different levels of government need to be reduced and made more transparent.
China has both the capacity and the need to become a global leader in sustainable development and innovation in environmental technology.
——This report was provided by the Task Force.