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PRC Fighting Pollution In Industrial Cities

Three highly polluted cities in the People's Republic of China's leading coal-producing province of Shanxi are the focus of a huge $183 million clean-up program. The fight against pollution was boosted today with the approval by the Asian Development Bank of a loan for $102 million for the Shanxi Environment Improvement Project.

Burning coal is the number one cause of air pollution in the PRC. It is the primary fuel for industrial production, power generation, and commercial and residential applications, mainly cooking and heating. The project will reduce coal use and bring down energy costs in the Shanxi cities of Taiyuan, Datong and Yangquan, which have a combined population of 6.8 million and are among the country's 52 most polluted cities.

"About 150,000 people a year die prematurely in the PRC because of diseases related to air pollution," says Aminul Huq, a senior ADB official working on the project. Taiyuan is the most polluted city in PRC, and has the third worst air quality in the world. ADB places a high priority on supporting the government's efforts to fight air pollution."

Shanxi is a poor, inland province. It ranks 25 out of 31 provinces in terms of urban income per capita. Its numerous small and large coal-based industries are concentrated in or near the capital and other cities. Much of this industrial base uses obsolete and inefficient technology. Coal-fired plants account for 30 percent of sulfur dioxide emissions and nearly the same proportion of TSP (total suspended particulates) emissions. The number of people in Shanxi suffering from lung cancer and other respiratory diseases has soared as air pollution has increased in the past 20 years.

PRC has severe environmental problems. Estimates of economic losses caused by pollution damage range from 3.5 percent to 8.3 percent of the gross domestic product. The environment will continue to deteriorate unless technology standards and management practices are improved.

The PRC is starting to make the massive investments, together with adoption of the stricter regulatory and monitoring framework needed to address the problems. ADB is providing loans and policy advice to support the fight against pollution in some of PRC's worst affected areas.

The Project will build a new coke-oven gas manufacturing plant in Taiyuan to supply town gas and coke and replace coal for industrial, commercial and residential use. Two boilers and a district heating transmission network will be constructed in Datong to supply heat for residential and commercial use. In Yangquan, a system to recover methane gas from an existing coal mine will be built to supply methane gas to replace coal. In total, the project will reduce coal use by nearly 850,000 tons annually.

In addition, the Project, due to be completed by end 2003, will develop the institutional capacity for sustainable environment management and promote policy reforms, particularly to provide polluters with market-based incentives to encourage environmentally-friendly behavior.

The ADB loan is from the Bank's ordinary capital resources and is repayable over 20 years, including a four-year grace period. The balance of the project cost will be borne by provincial and municipal governments, domestic commercial banks, enterprises and consumers.

The Project will be executed by the Shanxi Provincial Government (SPG). The ADB is also providing a $700,000 technical assistance grant to help the SPG develop an air pollution trading system and modify the pollution levy system to ensure sustainability.

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