Reducing China’s air pollution

Mason Richey

This is the second part of a two-part column.

In the first part of this column, I presented facts about the migration of air pollution from China to its Northeast Asian neighbors and explained how significantly mitigating the problem will require multilateral cooperation. I concluded that Korea and Japan will need to help China pay for the measures necessary to cut its air pollution levels. This column explores this option.

A two-phase mitigation plan makes sense. The short-/mid-term solutions include (a) retrofitting major power and industrial plants in northeastern China with flue gas desulfurization units (scrubbers) and (b) refining more Chinese fuel and gasoline to the higher China V standard. In the long term, northeast China should significantly reduce reliance on coal-fired power plants, replacing them with nuclear energy. All of these objectives cost serious money. China’s government already plans to spend $277 billion to fight air pollution over the 2013-17 period, but it is not enough and there is no guarantee that China’s government will follow through on its commitment.

My proposal envisions Korea and Japan collectively spending one-tenth ($28 billion) of that amount between 2015 and 2020. In the first three years, Korea and Japan would each spend $7 billion to help China finance the installation of scrubber units. The cost for these is about $100 million apiece, so altogether China’s neighbors could pay for 140 of the units at high polluting sites. During the next three years, Korea and Japan would each spend another $7 billion to construct nuclear power facilities. This is enough to build five nuclear power stations each with 1400 MWe. This is obviously not nearly enough to replace the coal-fired energy produced in northeast China, but it is a start, and hopefully China will pay for others.

Of course, financing these projects will be complicated economically and politically. On the economic side, however, the money is smaller than it seems. For Korea and Japan, the annual cost would be less than $2.5 billion per year over six years. Korea has a government budget of $330 billion, so $2.5 billion is only seven-tenths of one percent of the budget. And even that limited impact could be blunted by a funding mixture of cash and loan guarantees that reduce direct payments. Moreover, if the Korean government’s mitigation contribution were conditioned on Korean nuclear power constructors building the facilities in China, then the money spent would essentially be recycled into Korea. This money would also give extra financial cushion to the nuclear construction companies, helping them finance exports to other countries. Indeed the project itself would serve as a global showcase for Korean nuclear reactor prowess.

The real obstacle to cooperation is political, especially considering the current tension between China, Japan and Korea. Koreans and Japanese will ask: “Why should we pay to help clean China’s pollution?” There are four good reasons. First, this air pollution problem is a cross-border problem, which means that fixing it inherently requires multinational collaboration. In fact, this is well known. Korea already cooperates with China to plant trees near the Gobi desert in order to reduce desertification and the resulting dust storms that affect China and Korea. Japan has also done its part, contributing $125 million to a Chinese province to help pay for scrubbers. It is also worth noting that much of the dirty Chinese industry has been outsourced from advanced economies, so some of this air pollution is actually originating in demand from Korea and Japan. In any event, the need for international cooperation is recognized - the question is one of scale.

Second, although the scale of the mitigation plan is large, and the cost accordingly high, Korea and Japan are both rich countries and can afford it. To those who object that China also has huge financial resources, I remind you that Korea’s annual per capita GDP is $33,000, while Japan’s is $37,000, good for places 22nd and 27th in the world. China, on the other hand, has an annual per capita GDP of less than $10,000, good for 93rd place and on par with such states as Turkmenistan and Albania.

Third, even if the first two arguments do not convince you, it will actually be cheaper to simply pay China to clean its air rather than pay the costs - health problems, lost workdays due to illness, building corrosion - that its pollution causes domestically in Korea. The cost of air pollution in China is estimated at 2.5 to 10 percent of economic output. If we generously take the low estimate and assume that the effect in Korea is only 1/20th of that in China, then the annual pollution cost to Korea is $1.25 billion. At this cost, and assuming that my proposed measures cut air pollution in Korea by half, a $14 billion investment in clean air now pays for itself in about 20 years. In fact it will even be faster than that, as the $1.25 billion figure does not include the cost of negative publicity and accompanying lost tourism revenue that comes with overseas media coverage of the effects of China’s air pollution. Measures taken now may or may not improve the air in Pyeongchang for the 2018 Winter Olympics, but, even if they do not, at least Korea can publicize the fact that it is taking the danger seriously.

Lastly, the fact that trilateral cooperation against Chinese air pollution is politically treacherous is not a bug - it’s a feature! This is precisely the type of feel-good, low-stakes, win-win situation in which neighboring Northeast Asian countries should collaborate. The worst case scenario is that a negligible amount of money is wasted on a plan that gets Korea and Japan good international press coverage; the likely scenario is that the air pollution problem is noticeably improved. In the best case scenario, not only is the air pollution problem improved, but this type of cooperation spills over into other cooperative endeavors and opens up possibilities for constructive solutions to territorial and historical issues.

*The author is associate professor of politics in the Graduate School of International and Area Studies, Hankuk University of Foreign Studies.

By Mason Richey