China wrestles with stubborn air polluters


A resident picks vegetables at a vegetable patch next to one of Wuhan Iron and Steel’s active chimneys, in China’s Hubei province. (Darley Shen/Reuters)

Early on in Beijing’s winter of pollution-wracked discontent, one of China’s biggest power companies, Huadian, turned off the coal scrubbers at its Datong plants and let emissions of sulfur dioxide, a leading cause of acid rain and respiratory illness, soar to more than four times government standards.

Huadian saved money by turning off the scrubbers, which suck up power. What’s more, Huadian falsified paperwork and sold its electricity at a premium rate that the government offers to power plants with low emissions. Regulators caught the company. Twice.

Beijing is downwind of Datong, and coal-fired power plants like Huadian’s are just one of the culprits for the extreme bout of air pollution here over the winter, when the city’s air-quality index went off the charts that regulators use elsewhere. At a level of 755, U.S. Embassy readings in mid-January were more than twice what the Environmental Protection Agency says is so “hazardous” that people should avoid going outdoors.

The severity of the pollution — extreme even by Chinese standards — has rattled Chinese leaders. While they have, on occasion, closed factories and restricted traffic to clear the air for special events such as the 2008 Olympics, so far they have lacked the will or the capacity to reduce air pollution on a sustained basis.

But as people rushed to buy air filters and flooded China’s Web sites with complaints, the state-run People’s Daily said in a Jan. 14 front page editorial, “the fog and haze obscured our line of sight, but it made us see the urgency of controlling environmental pollution.”

Chinese officials recently told World Bank President Jim Yong Kim that Beijing’s winter air crisis had “really changed the public discussion” about climate change and pollution.

“In China, I sat down and not five minutes into my conversation with Premier Li Keqiang, he said, ‘We want to work with you on urbanization,’ ” Kim said in an interview. “We are working day and night with a huge team to come up with a plan to come up with clean, livable cities. The Chinese want to do it. . . . This is a huge issue with them.”

But while the government has vowed to step up enforcement of existing regulations, clamping down on polluters is a difficult task. Maximum fines are minimal, and evasion is rampant. In this respect, China’s command-and-control economy has more commands than control.

A side effect of a booming economy

The war on air pollution is being waged on three fronts: policing big coal and industrial plants like Huadian’s, enforcing standards on thousands of small boilers and dealing with the rapidly growing fleet of cars and trucks, which emit the small particles most harmful to human health.

As China’s economy booms, so do electricity needs. Zhou Xizhou, director of the energy consulting firm IHS CERA in China, estimates that the rate of coal plant construction has slowed from about two a week to a still-daunting one a week — and will keep that pace for five or six more years. That’s roughly equal to adding the coal-fired capacity of Texas and West Virginia combined every year. Coal’s share of China’s new power generation has dropped, but it still generates about three-quarters of the country’s electricity.

Some experts say China’s pollution problems could be reduced with regulations and equipment already in place. “Eighty percent of the coal-fired units in the country have sulfur scrubbers,” Zhou said. “Whether people run them is another question.”

An episode last year illustrates Zhou’s point. Like the Huadian example, this one is on the Web site of the Institute of Public and Environmental Affairs, which has compiled data on more than 4,000 firms, including 800 of the country’s biggest polluters.

In February 2012, a big electric power generator, Huaneng, switched off coal scrubbers at its Pingliang power complex in Gansu, and let emissions soar past permitted levels on at least two days. Because Huaneng was a repeat offender, irritated regulators imposed an especially severe fine of about $13,000. Given the energy saved by not running the scrubbers, Huaneng was probably saving more money than that every day. In November, the same plant was caught violating emissions standards again and was fined once more.

Compounding the problem

Small boilers used to power or heat urban buildings pose similar problems, but are harder to monitor.

The pollution spike last winter galvanized many government agencies. Starting Jan. 28, Beijing’s Environmental Protection Bureau fined a property developer three times in less than a month to force it to put antipollution equipment on boilers being used to heat 80,000 homes.

The developer, Beijing Dalong, is owned by the city’s Shunyi district government, which has $1.6 billion in assets. But the company had failed to install or use equipment to capture potent pollutants that were spewing from its coal-fired boiler.

There are thousands of boilers in Beijing like the Shunyi boilers, according to Zhou, and monitoring them all is nearly impossible. And, as the Shunyi case shows, government regulators are facing a host of recalcitrant companies, many of them owned by or in cahoots with local governments.

The proliferation of cars is also fouling China’s cities. Yale Zhang, managing director of consulting firm Automotive Foresight, predicts that the number of vehicles per thousand people could quadruple over the next two decades.

Fuel efficiency could be higher, but so could the quality of gasoline. China’s refineries have not invested enough to meet government standards for cleaner fuels. On April 25, a government inspection board released the results of a spot check: Fifteen of 120 gasoline samples and five out of 60 diesel samples in 13 provinces failed to meet standards for sulfur, benzene or other contaminants. By some estimates, China’s gasoline contains around 20 times the U.S. limits on air pollutants.

Standards, and lack thereof

China’s refineries have complained that they don’t have the money to invest because they have been importing crude oil at world prices and selling refined products at state-controlled prices. Sinopec, the world’s second-largest refiner, recently reported $1.8 billion in operating losses from its refining division in 2012.

Recently, the government raised retail gasoline prices and ordered refiners to make upgrades. But for years, says Fred Zuliu Hu, chairman of the investment firm Primavera Capital Group, “the government took a lax attitude and turned a blind eye because its own policy made reform fundamentally unprofitable.”

Even now, China’s government is entwined with state-owned behemoths that it has trouble regulating or punishing. Chinese oil industry officials dominate the boards that set fuel standards. A key standard-setting technical committee on petroleum products falls under the research institute of Sinopec, which owns nearly half of China’s refineries. Of the committee’s 37 members, only two have backgrounds in environmental protection. According to China Chemical Industry News, 90 percent are from the oil industry.

Not surprisingly, the national boards have not set a strict nationwide standard. Beijing has adopted the most stringent European standard, limiting sulfur emissions to 10 parts per million. Shanghai, the Pearl River Delta and Jiangsu limit emissions to 50 parts per million. But the most common standard in the rest of China limits sulfur emissions to 150 parts per million — five times the U.S. limit.

Ma Jun, director of the Institute of Public and Environmental Affairs in Beijing, says the only way to bring about change in the highly polluting energy and industrial sector is for groups such as his to publish violations and galvanize customers, neighbors and others to bring pressure for change.

“We need stakeholders to come together,” he said. “We cannot rely simply on the government agencies.”

Liu Liu, Zhang Jie and Howard Schneider contributed to this report.

Steven Mufson covers energy and other financial news.
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