i~~~~~~~~~~~~~~~~~ NG. -1 0At Pi I

-sev - - m

Jioj

tbb~ AQN

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Can the Environment Wait?Priorities for East Asia

The World BankWashington, D.C.

Copyright © 1997The International Bank for Reconstructionand Development/THE WORLD BANK1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing November 1997

The findings, interpretations, and conclusions expressed in this paper are entirely those ofthe author(s) and should not be attributed in any manner to the World Bank, to its affiliatedorganizations, or to members of its Board of Executive Directors or the countries they repre-sent. The World Bank does not guarantee the accuracy of the data included in this publicationand accepts no responsibility whatsoever for any consequence of their use. The boundaries,colors, denominations, and other information shown on any map in this volume do not implyon the part of the World Bank Group any judgment on the legal status of any territory or theendorsement or acceptance of such boundaries.

Cover photo: World Bank/Curt Carnemark

ISBN: 0-8213-4158-8

This report was prepared by Gordon Hughes with contributions from Richard Ackermann, MichelleKeene, Kseniya Lvovsky, and Tme Nielsen. Guy Alaerts, Graham Barrett, Carter Brandon, FrancisColaco, Todd Johnson, V. N. Rajagopalan, Jitu Shah, Sudhir Shetty, Heinrich Unger, and MichaelWalton provided valuable comments on earlier drafts.

Contents

Executive summary 1Immediate priorities 1Medium term concerns 2Longer term issues 2

Can the environment wait? 3Pollution decreases as incomes rise 3Some aspects of the environment have never been neglected... 3... But other problems were ignored until their costs became unacceptable 4Does cleaner development have to be expensive? 5When should environmental expenditures be made? 6

Environment in Asia/Pacific-The key issues 7

Immediate priorities for environmental action 10Access to clean water and sanitation, especially in Southeast Asia 10Particulate air pollution in Northeast Asia, especially from small sources 14Phasing out lead from gasoline 20

Medium term priorities for environmental action 22Managing water resources better 22

Longer term priorities for environmental action 25Controlling acid rain 25Limiting exposure to ground-level ozone 25

A core strategy 27Costs and benefits 28From strategy to practice 29What role for government? 31

Implementing the strategy: Who does what? 34Immediate priorities 34Medium term concerns 36Longer term issues 37

Annex Will economic growth be clean or dirty? 39Macroeconomic growth 39What is Business as Usual? 40Medium and High Cost scenarios 41

Notes 42

Acronyms and abbreviations

BOD biological oxygen demandCHP combined heat and powerLPG liquefied petroleum gasPM2 .5 particulates less than 2.5 micrograms in diameterPM10 particulates less than 10 micrograms in diameterTSP total suspended particulatesVOCs volatile organic compoundsWHO World Health Organization

iv

Executive summary

Does paying too much attention to environmental * Leave many households without access to cleanproblems slow economic growth and industrialization? water and decent sanitation.Many people in the Asia/Pacific region are inclined to * Worsen urban air quality in small and medium-sizesay yes-and that the environment should wait until Chinese cities and in cities such as Bangkok, Jakarta,countries are richer. The experience of most industrial and Manila.countries-including Japan and the Republic of * Increase the risks posed by heavy metals and per-Korea-seems to support this view. sistent organic chemicals in rivers and water supplies,

Yet today's rich countries did address some of the but improve other indicators of water quality such asenvironmental problems associated with urbanization suspended solids and dissolved oxygen.and industrial growth. They invested heavily in infra- In Southeast Asia measures requiring an investmentstructure for water supply and sanitation. Within the of less than 1 percent of GDP and with an annualizedlimits of the technologies available they also tried to cost of 1.0-1.5 percent of GDP by 2020 would be suf-mitigate industrial pollution that caused significant ficient to reverse the adverse trends and improve thedamage to human health or property In some respects favorable ones. Most of this money would be used tocountries in the Asia/Pacific region lag behind the achieve universal access to water within 10 years and toachievements of rich countries 80-100 years ago. urban sanitation within 20-25 years. These measures

Moreover, advances in knowledge and technology would yield handsome dividends: their benefits arehave altered the tradeoff between growth and environ- 5-10 times the costs of improving water infrastructuremental quality In many cases the cost of reducing pol- and 2-3 times the costs of reducing air pollution.lution is low or negligible because modern production China's task is larger because of the air pollutiontechniques and equipment are cleaner and more effi- caused by burning coal for household heating and incient than in the past-provided they are properly small boilers. Even so, investing about 1 percent ofoperated and maintained. GDP each year over the next 25 years-divided rough-

The costs of environmental damage to health rise as ly equally between air and water investments-wouldcountries invest more in the education and skills of work- greatly reduce pollution by 2020. The operating anders. Dirty water and poor sanitation cause more than annualized investment costs of such a program would500,000 infant deaths a year in the Asia/Pacific region, as gradually rise to about 2.5 percent of GDP by the endwell as a huge burden of illness and disability. Smoke and of the period. Again, the benefits of these measuressmall particles from burning coal cause more than exceed the costs by large margins.50,000 premature deaths and 400,000 new cases ofchronic bronchitis a year in 11 large Chinese cities. Inthese cities the cost of air pollution exceeds 20 percent of Immediate prioritiesurban income. Such burdens are a direct consequence ofthe failure to address specific environmental problems. The main environmental priority in Southeast Asia is

Continuing current policies for the next 25 years to expand access to clean water and urban sanitation.would: In urban areas it will be necessary to rely on the private

1

2 Can the Environment Wait? Prioritiesfor East Asia

sector to expand and operate water and sewer net- result of untreated industrial discharges. The deterio-works. In rural areas the key is to strengthen coopera- ration in the quality of raw water may force municipaltive institutions and form partnerships with the private utilities to invest large sums in developing alternativesector to invest in low-cost technologies that can meet water supplies. Thus environmental regulators shouldthe needs of low-income households. oblige all firms in certain industries to pre-treat their

Trends in urban air quality in Southeast Asia will wastewater before discharging it.largely depend on measures to control pollution from Discharges of mass water pollutants (organicmotor vehicles. The two most effective measures would wastes, solids, and nutrients) should be addressedbe to phase out the use of two-stroke motorcycles and using discharge fees similar to those in Europe. Theto reduce emissions from diesel trucks and buses by a fees should be designed to give priority to sewage col-combination of strict inspection programs, tighter emis- lection before investments are made in sewage treat-sion standards for new vehicles, and switching to alter- ment, since the benefits of sewers greatly exceedsnative fuels such as compressed natural gas or LPG. those of sewage treatment. In most cases advanced pri-

In China the main task must be to phase out the use mary treatment of sewage should be adequate for theof coal except in power generation and in large indus- next 20-25 years.trial plants with high-efficiency dust controls. The infra-structure to supply alternative fuels-natural gas, coalgas, and district heat-must be developed. Economic Longer term issuesand tax incentives could accelerate this transition.

The use of lead in gasoline damages the health of Problems such as acid rain and ground-level ozone arechildren and can easily be eliminated at a very low cost. dominatecL by more urgent priorities in the immediatePrograms to phase out leaded gasoline within 4-5 years future. Economic incentives should be used to encour-should be implemented immediately. age the use of low-sulfur coal and the adoption of low-

cost measures to reduce emissions of sulfur dioxideand nitrogen oxides. Larger expenditures, including

Medium term concerns the installation of more expensive controls on powerplants and vehicles, should wait except where there is

Heavy metals and persistent organic chemicals are clear evidence of substantial economic losses caused byaccumulating in some of the region's river basins as a acid rain cr ozone.

Can the environment wait?

Pollution decreases as incomes rise al decades, reinforced by education and changes insocial attitudes, were a crucial element in the story. Thus

To ask the question, "Can the environment wait?" the most simplistic versions of the view that "environ-invites the answer, "No, of course environmental con- ment can wait" do not stand up to closer scrutiny.cerns cannot and should not be neglected." But thisanswer flies in the face of conventional wisdom aboutthe priority given to the environment during the indus- Some aspects of the environment have never beentrial development of today's rich industrial countries. neglected...

Political and business leaders have pointed out thatpollution increased dramatically during the peak peri- People have always cared about how their quality of lifeods of industrial growth in Britain, Germany, Japan, is affected by the environment in which they live.and the United States. Only when average income per Ancient Rome had a system of sewers that discharged incapita reached $5,000-$8,000 in current terms did the River Tiber-better indeed than the system in placethese countries start to make serious efforts to reduce 150 years ago. By-laws in medieval London prohibit-pollution and protect environmental resources. ed-on pain of death-the buming of sea coal, which

The implication is that economic growth should was especially dirty The Alkali Inspectorate in Britaincontinue unfettered until countries become rich (the first national environmental agency) was formed inenough to set aside the money required to make envi- 1863 in response to widespread public concems aboutronmental improvements. In the meantime, even well- the impact of pollution from chlor-alkali plants (box 1).intentioned efforts by individuals and organizations The sanitary reform movement of the late nineteenthfrom richer countries to promote environmental goals century dramatically reduced the heavy toll of infant andmay be interpreted as serving the interests of protec- adult mortality associated with water-borne diseases.1tionist groups in these countries. Life expectancy in French cities, for example, increased

This view appears to be supported by the experience from about 32 years in 1850 to about 45 years in 1900,of the richer Asia/Pacific economies. Japan, the with the timing of changes corresponding closely toRepublic of Korea, and Taiwan (China) appear to have improvements in water supply and wastewater dispos-made few efforts to address the environmental conse- al. Today infants and young children in households withquences of rapid industrial growth until quite late in access to clean water and sanitation are about 60 percenttheir transformation from agricultural to industrial less likely to die from diarrhea and similar diseases thaneconomies. Indeed, the gains from rapid growth in those in households without such facilities.incomes have been remarkable, with infant mortality Equally, the popular response to the smog caused byrates in Korea, for example, falling from 35 per 1,000 the recent forest fires in Indonesia-or to otherlive births in 1975 (already low by comparison with episodes of severe air pollution in the past-indicatemost countries in region) to 8 per 1,000 in 1995. that urban residents in the region are very concerned

Such a large drop in infant mortality was no accident. about the impact of pollution on the health and well-Investments in water supply and sanitation over sever- being of themselves and their families. The sharp

3

4 Can the Environment Wait? Priorities for East Asia

Box 1. Cleaner production and environmental regulation in nineteenth century Britain

The alkali trade started in the early 1820s, marking the and comnmercial bleach for the textile industry. Smithbeginning of Britain's heavy chemical industry Alkali works already had introduced technology that reduced emis-generated clouds of hydrochloric acid that defoliated trees sions well below the legal requirements.and blighted nearby farms, as well as hydrogen sulfide that Despite Smith's achievements, the average reduction inproduced an unpleasant smell of rotten eggs. This pollution pollution per ton of output was barely enough to keep upled people to complain of choking, coughing, nausea, and with the growth in alkali production. Public complaintsimpaired breathing, but it was the pollution's effect on pri- did not stop. Thus later Acts established more stringentvate property that provided the principal motive for reforrn. emission regulations and applied them to other industrialFarmers and landowners became increasingly concemed plants. By 1876 most alkali works employed chemists toabout loss of agricultural output and falling land values. The advise how best to comply with environmental legislationpassage of the Alkali Act in 1863 represented a clear victo- and to suggest ways of tuming waste products into profits.ry for these interests. The Act set standards for emissions Why did environmental protection fare better in thefrom alkali plants, imposed fines for non-compliance, and alkali industry than elsewhere? The industry may haveestablished a factory inspectorate. been something of a special case. Largely out of the pub-

Robert Smith, perhaps Britain's best-known sanitary lic eye, its regulation was handled by scientific expertschemist, was appointed Chief Inspector. Smith, who was such as Smrith. Acid emissions were subject to accurateboth tactful and scientifically knowledgeable, endeavored chemical analysis and measurement, which allowed sci-to show alkali manufacturers how reducing pollution entific data to form the basis of more precise regulation.could be in their own interests, since condensed Technological innovations profitably transformed wastehydrochloric acid could be transformed into hypochlorite products into inputs for other industrial processes.

increase in cases of asthma and other respiratory ill- widespread that the Japanese-and later the Korean-nesses underpins these concerns and highlights the siz- government and industries were obliged to act.

able economic costs associated with such episodes. Between -L966 and 1970 the number of pollution-relat-

ed complaints submitted by Japanese citizens to theirlocal governments more than tripled, from 20,000 to

... But other problems were ignored until their 63,000. Mlajor political protests and massive press cov-costs became unacceptable erage of pollution issues occurred on a national scale

in 1970. This agitation led to the convening of the

Still, many of the environmental consequences of rapid "Pollution Diet," which enacted numerous environ-growth were ignored in the richer Asia/Pacific coun- mental regulations. In 1973 a survey in Japan report-

tries, often for decades. Discharges of heavy metals ed that 59 percent of the population opposed contin-from the Ashio copper mine created controversy in ued economic growth at the expense of quality of life

Japan from the late nineteenth century onward. as in the past, while only 22 percent supported such

Starting in the late 1950s, episodes of serious health growth. 2

problems linked to the careless disposal of heavy met- In the largest urban areas the environmental costs ofals and toxic chemicals-for example, mercury poi- exuberant industrial growth may become so great thatsoning from contaminated fish in Minamata, asthma growth becomes self-limiting. This has happened indue to air pollution in Yokkaichi, and Itai-Itai disease Mexico City and Sao Paulo, and a similar prospect faces(which affects the central nervous system) caused by many large Asia/Pacific cities such as Bangkok, Jakarta,

cadmium discharges in the Jinzu River basin-high- and Sharnghai. The immediate cause is the failure of

lighted the costs of this neglect. Korea has suffered sim- investment in infrastructure to keep pace with the

ilar tragedies in the form of Onsan disease and the more demand for infrastructure services. But in the broaderrecent Naktong River incident (box 2). context of urban development, past a certain point the

Public concerns about environmental issues, environmental and other costs of scale outweigh anyprompted by such incidents, eventually became so economies of agglomeration.

Can the environment wait? 5

Box 2. The Legacy of the Naktong River

In March 1991 the Republic of Korea's Prosecutor's Office effectively boycotted all of Doosan's corporate enterprises,arrested eight officials of the Doosan Electro-Materials including popular beer and whiskey brands as well asCompany as well as several environmental officials after it franchises for Coca Cola, Kentucky Fried Chicken, andwas discovered that some 300 tons of untreated phenol other foreign consumer goods. The boycott caused enor-waste had been dumped into the Naktong River. Phenols, mous losses for Doosan. In addition, the company wasused in the production of printed circuit boards, cause fined $30 million. Within days of the protest in Taegu,cancer and damage the nervous system. protests in Taej on led to the closure of three food factories

The Naktong River is downstream from Taegu, where charged with polluting the Kum River.the plant was located, and supplies drinking water to The Naktong River incident provides two importantnearly 10 million people. The river is also the main source lessons to other rapidly industrializing countries:of water for Pusan, Korea's second largest city, in the far * Power of public opinion. Serious pollution incidents maysouth. People living in southern Korea stopped drinking crystallize public opposition to growth policies that aretap water and were forced to drink imported bottled seen as sacrificing environmental quality for private inter-water. In addition, the water purification plants along the ests. As in Japan 20 years earlier, growing affluence, high-river were ordered to stop adding chlorine to the water in er education levels, a free press, and greater political free-order to prevent the formation of chlorphenol. dom meant that Korea's government could no longer

In an unprecedented reaction to industrial pollution, ignore such concems.the incident sparked widespread public fury directed at * Economic losses. Major industrial groups realized that aboth the company and the govemment's environmental "minor" spill could become a disaster for business, result-policies. Residents of Taegu took to the streets in protest, ing in high costs that could have been avoided with bet-forcing the environment minister to resign. Protesters ter management.

As the costs of environmental neglect become already been through the process. For example, evenmore apparent and public concerns become more though Korea and Taiwan (China) developed theirvocal, even the strongest adherents of the "environ- chemical and heavy industries at a faster pace thanment can wait" school will acknowledge that some Japan, their relative frequency of serious environmen-changes in course may be required. Even now, tal incidents appears to have been lower.whether prompted by rising incomes or by imbal- Newer, more efficient technologies generate lessances between infrastructure and economic activity, waste, avoiding the need for expensive (and oftengovernments are starting to think about better ways poorly operated) end-of-pipe technologies. Thus tech-of managing their environmental and natural nical progress-stimulated by the experience of theresources. Initial attention may focus on constraints rich industrial countries-has opened up many oppor-to continued growth-for example, the prospect that tunities for reducing the environmental damage asso-limited supplies of water for irrigation or industry ciated with industrial activities without imposing sub-will restrict food production or cause foreign stantial additional costs on producers.investors to locate new plants elsewhere. But such Further, the loss of output and efficiency due toconcerns inevitably lead to broader debate about the (chronic) ill health and premature deaths caused bypriorities and policies that shape the management of some kinds of pollution may be very large. Even theenvironmental quality. most profit-oriented of factory managers have long rec-

ognized that it makes economic sense to reduce occu-pational exposure to smoke, dust, and noxious chem-

Does cleaner development have icals. The return to such measures increases as levels ofto be expensive? education, skills, and income grow. What is true for

companies is equally true for communities where envi-Economies undergoing rapid industrialization today ronmental rather than occupational exposures are atcan benefit from the experience of countries that have issue.

6 Can the Environment Wait? Prioritiesfor East Asia

When should environmental expenditures more time. Thus countries that wish to catch up withbe made? the environmental performance of rich countries will

find it more effective and less expensive to make the

Japan implemented an ambitious and expensive pro- transition over a longer period-starting sooner rathergram of environmental improvement during a period than later.when its economic growth rate had already begun to Recent analysis carried out inJapan sheds some lightslow as a result of the narrowing income gap between on whether its pollution program was appropriatelyit and the United States (box 3). More recently, Korea timed. The study focused on measures to reduce expo-and Taiwan (China) have faced the prospect of large sure to sulfur dioxide, which is less damaging to healthexpenditures to remedy the effects of environmental and more expensive to control than some other typesneglect during a period when economic growth is of air pollution. A comparison of the costs of investingslowing. Seeing these examples, some commentators in and operating pollution controls and the costs ofconclude that a commitment to reducing pollution health da-mages caused by higher levels of air pollutionwill divert investment resources from other produc- suggests Japan would have been better off had it takentive uses, reducing current and future economic action 5-10 years earlier than it did.3

growth. But the real lesson-reinforced by the experi- This conclusion is very conservative. Exposure toence of Germany and the United States-is that it is smoke and small particles suspended in the air-col-very expensive to undertake a rapid transition from lectively referred to as particulates-is responsible forneglecting environmental goals to giving them high most of the health damage caused by air pollution inpriority Asia/Pacific countries. Detailed studies in a range of

In Japan poor policies led to inefficient solutions, countries have shown that measures to reduce averagecausing investment in pollution controls to peak at exposure produce large net benefits even when realmore than 2.5 percent of GDP. Efforts focused on income per capita is one-fifth or one-tenth Japan's levelinstalling expensive end-of-pipe controls rather than in 1970. Thus action to tackle the worst types of airimproving operational practices and minimizing pollution is likely to be justified from the earliest stageswastes-approaches that are much less costly but take of industrial growth.

Box 3. Can Japan's environmental management be a model for developing countries?

During 1970-90 Japan had the highest rate of economic pollution abatement and control (3.4 percent of gross fixedgrowth among the G-7 group of industrial countries. At capital fonnation in 1990). The public sector accounts forthe same time, it substantially reduced or stabilized emis- nearly 80 percent of this investment because of high pub-sions of many pollutants. While GDP increased by 122 lic investment in water infrastructure-an area where realpercent during this period, sulfur dioxide emissions environmental improvements have been mixed.decreased by 82 percent and nitrogen oxide emissions by While successful,Japan's technology-driven approach-21 percent. Moreover, the competitiveness of Japanese which requires abundant capital, technical skills, and goodindustry does not seem to have been significantly affect- management-cannot easily be replicated in other coun-ed by the country's environmental policies. tries in the region. In fact, countries at earlier stages of

Japan's progress was driven mainly by the adoption of industrial growth have often had worse environmental per-strict emission standards and the use of best available tech- formance waith sophisticated, capital-intensive technologiesnologies. This approach was not cheap: pollution-related than with less advanced but more robust options. Aroundinvestment in the private sector was 21 percent of total the world, many pollution controls have been switched off,investment in 1975. By 1995 this had dropped to 2.5 per- by-passed. or simply do not work properly because of a lackcent, but it doubled again between 1987 and 1990. Japan of supplies and spare parts as well as the skills and man-ranks among the OECD countries that invest the most in agement commitment required to maintain them.

Environment in Asia/Pacific-The key issues

In countries where more than a third of the population tion often exceed 20 percent of urban income (table 1).lives in urban areas or where industry accounts for Similarly, the health costs due to exposure to dust andmore than a third of GDP, estimates of environmental lead in the air in Bangkok, Jakarta, and Kuala Lumpurcosts are dominated by damage to human health result- in the early 1990s were around 10 percent of urbaning from dirty water and exposure to particulates and income in these cities.lead in the air. It is too early to make reasonable estimates of the

In China the overall costs of damage to health, agri- cost of the 1997 smog in Southeast Asia. Still, severecultural production, and natural resources caused by smog episodes in London, Pittsburgh (Pennsylvania),air and water pollution may be 8 percent of GDP or and the Ruhr (Germany) increased short-term mortal-more. Air quality in some Chinese cities is extremely ity by as much as 50 percent and resulted in a largebad, with the result that the health costs of air pollu- increase in hospital admissions for asthma, bronchitis,

Table 1. Health benefits of reducing air pollution in large Asian/Pacific cities

Health benefitsfrom better air quality

Chronic Respiratory as a share ofPopulation Premature deaths bronchitis cases symptoms urban income

Country City (millions) (thousands) (thousands) (millions) (percent)a

China Beijing 7.0 10.3 81 270 28Chengdu 3.0 3.5 29 92 22

Chongqing 4.0 6.3 44 172 30Guangzhou 3.8 2.0 16 51 10Harbin 3.1 4.0 34 102 24Jinan 2.5 5.0 38 135 38

Shanghai 9.0 3.8 28 105 8Shenyang 4.0 4.9 38 129 23Tianjin 5.0 5.7 43 151 21Wuhan 4.0 2.0 17 51 9Xi'an 3.0 4.1 35 106 26

Indonesia Jakarta 9.7 6.3 47 142 12Korea, Rep. of Seoul 11.3 2.4 24 72 4Malaysia Kuala Lumpur 1.5 0.3 4 11 4Philippines Manila 9.7 3.8 33 98 7Thailand Bangkok 7.5 2.8 28 82 7

Subtotals China 48.9 51.5 404 1,364 20Other countries 39.7 15.6 136 405 7

Total 88.1 81.5 539 1,769

a. Based on conventional estimates of people's willingness to pay to reduce risks of premature death or illness. Calculations assume that average urban

income is equal to GNP per capita, but because the absolute value of benefits is expressed as a share of urban income the figures are independent of theassumption about average urban incomes.

Source: World Bank, World Development Indicators 1997; World Bank data.

7

8 Can the Environment Wait? Priorities for East Asia

and heart conditions. Peak levels of particulates in soil erosion due to loss of watershed protection-canKuala Lumpur, Singapore, and many Indonesian cities reach 5 percent of GDP or more. Little in the way ofduring September-October 1997 approached the concrete evidence is available for Cambodia, Lao PDR,highest levels-more than 6,000 micrograms per cubic or Myanrmar, but the current loss of forest cover maymeter-experienced during these past episodes or lead to significant agricultural costs in these countriesconditions in China's most polluted cities. Thus, given in the future. Depletion of fish stocks and the cumula-the extent and duration of the smog, it would not be tive effects of environmental damage to coastal andsurprising if the net cost of lost output, health care marine ecosystems are less important in absolute termsexpenditures, and excess mortality turns out to exceed but have had major effects on coastal communities in2 percent of GDP for the worst-affected countries. This many countries. For example, disease and pollutionis a heavy price to pay for the careless management of have dranmatically reduced the output of the shrimpland clearance in Kalimantan and Sumatra (Indonesia). farming industry in Thailand.

The nature and effects of air pollution tend to be Several of the region's larger countries already haveboth visible and difficult to avoid. In contrast, the toll more than 50 percent of their populations living inof dirty water is more concentrated on the young and urban areas. Of the countries with projected popula-vulnerable. Many residents of large cities are able to tions of more than 10 million in 2020, only Cambodia,protect themselves by ensuring that they have access to Myanmar, and Vietnam will have urbanization rates ofclean water and that sewage is transported out of the less than 50 percent.4 Value-added from industryareas where they live. However, such options may be already exceeds value-added from agriculture (as atoo expensive or infeasible for poorer households and share of GDP) for all these countries except Cambodiafor those living in medium-size and small urban areas. and Myanmar.The result is high levels of infant and child mortality Given rapid rates of urbanization, the large eco-due to diarrheal illnesses together with the loss of out- nomic contribution of cities and towns, and the dom-put caused by parasitic and infectious diseases such as inant role of health costs in the overall costs of envi-lymphatic filiariasis, ascariasis, and trichuriasis. ronmental degradation, this book focuses on urban

In fact, the costs of dirty water are much greater and and industrial air pollution and access to clean watermore insidious than the raw figures suggest. It is well and sanitation in urban and rural areas. Other issuesestablished that the total fertility rate is closely corre- are addressed to the extent that solutions appear closelated with the probability that a baby will survive to at hand and have not been discussed elsewhere.5

adulthood. Thus high infant mortality rates associated The criLical questions are:with lack of clean water and sanitation slow down the * How large are the costs of environmental damage,demographic transition, making the future burden of and how would these change if current trends and poli-dependency and underemployment associated with cies were -o continue until 2020?rapid population growth larger than it otherwise would * What would be the costs and benefits of movinghave been. The World Bank has highlighted the large toward stricter environmental standards by relying pri-social returns to investing in girls' education-literate marily on pollution prevention techniques and well-mothers have fewer children who are more likely to established pollution controls?survive to become productive adults. Providing clean * What would be the implications of adopting thewater ancd sanitation is another facet of the same story: environmental goals and standards of the rich indus-the social returns to investments in water infrastruc- trial economies?ture in underserved communities are usually much * What policies, institutions, and investments are bestlarger than individual willingness to pay for these suited to achieving environmental improvements atservices. lowest cost?

For some predominantly agricultural economies, Econornic development is difficult and often messy.losses of agricultural production due to soil degrada- Countries that have trouble ensuring that all childrention-whether because of poor land management or are educated or protecting poor households from the

Environment in Asia/Pacific-The key issues 9

burdens and vagaries of misfortune, ill health, and lackof opportunities cannot be expected to give the same Box 4. Environmental scenariosweight to environmental concerns as richer countries Business as Usual scenariothat have largely solved those problems. * Gradual adoption of most efficient technologies.

Nonetheless, some environmental problems in the * Decline in energy and material inputs per unit ofAsia/Pacific region have large direct effects on stan- output.

* Lower emissions due to zero- or low-cost measures.dards of living and quality of life. The precise charac- * Unier accss to urba on wit mary- Universal access to urban sanitation with primaryter of these problems varies from country to country, treatment within 25 years.but two issues dominate:* Lack of clean water and sanitation in both urban and Medium Cost scenariorural areas-especially in Southeast Asia. * Emissions meet early 1980s US/EU standards by* Exposure to particulate air pollution in urban 2010.

* Universal access to urban sanitation within 15 years.areas-especially in Northeast Asia (China, Korea,

Mongolia, and Taiwan, China). High Cost scenarioThe next sections examine environmental priorities * Best available technology.

in the Asia/Pacific region drawing on detailed scenario * Secondary treatment for all municipal wastewater.

analyses. These focus, in particular, on three broadpaths-Business as Usual, Medium Cost controls, andHigh Cost controls-whose main assumptions are more complete definitions of the different scenarios,summarized in box 4. Details of the analysis, including are provided in the annex.

Immediate priorities forenvironmental action

Access to clean water and sanitation, especially in The current situation: infant mortality andSoutheast Asia water-borne diseases

Many epidemiological studies have demonstrated thatLack of access to water and sanitation is the most press- improvements in water supply and sanitation reduce theing environmental problem in Southeast Asia, notwith- incidence of water-borne diseases in individual com-standing the fact that air quality in several Southeast munities (box 5). More recent work demonstrates thatAsian cities is very poor compared with Europe or the there are eqjually strong relationships between access toUnited States. The one exception to this pattern is clean wate:r and sanitation and rates of infant monalityMalaysia, which has a low level of infant mortality and for urban and rural populations. Table 2 draws on thesegood access to water and sanitation for most of its pop- results to estimate the reduction in infant mortality thatulation. Air quality in Kuala Lumpur and other might result from achieving universal access to cleanMalaysian cities is somewhat better than in Bangkok, water and sanitation, holding other factors constant.Jakarta, and Manila, but is the country's most pressing More broadly, infant mortality can be used to estimateenvironmental problem. the overall burden of water-borne diseases in the coun-

Table 2. Health benefits of expanding access to water and sanitation in Asia/Pacific

Access to Access toInfant mortality Urban population safe water sanitation

(per 1,000 (percentage (percentage (percentageCountry live births) of total) of population) of population)

Cambodia 108 21 13 30China 34 30 71 83Indonesia 51 34 34 41Korea, Rep. of 10 81 90 100Lao PDR 90 22 28 11Malaysia 12 54 90 94Mongolia 55 60 66 75Myanmar 83 27 36 22Papua New Guinea 64 16 33 26Philippines 39 53 81 72Thailand 35 36 81 84Vietnam 41 21 36 22

Total

Note: Data on access to clean water and sanitation are inconsistent and in some cases unavailable. Thus various sources and, if necessary, interpolationshave been used to estimate the benefits of achieving universal access to clean water and sanitatLon in urban and rural areas.

10

Immediate prioritiesfor environmental action 11

tries examined. Various kinds of ill health differ in their per capita in each country Even this would be a veryduration and in the degree of disability that they cause. low estimate compared with the figures implied byMoreover, surveys show that people care more about the studies in rich industrial countries. On this basis, theeffects of ill health when it occurs during the prime years economic cost of these diseases would total about $30of life. To allow for these differences, health analysts have billion a year. Two-thirds of this total is accounted fordeveloped the concept of a disability-adjusted life-year by the lack of clean water supplies in rural areas, and(DALY) to calculate the overall burden caused by differ- most of the rest by the lack of urban sanitation.ent diseases and injuries of different duration and sever-ity.6 Estimates of the DALYs lost because people do not Thefuture: investment in water and sanitationhave access to clean water and sanitation are provided in infrastructuretable 2 along with the associated levels of infant deaths. Investment in water and sanitation infrastructure

In total, more than 500,000 infants die each year in between 1980 and 1995 was sufficient to keep up withthe Asia/Pacific region as a result of water-borne dis- population growth and urbanization, so overall levelseases linked to dirty water. About 60 percent of these of access increased. But in many countries a continua-deaths are a consequence of the deficit in rural water tion of past rates of investment would mean that itsupplies, while another 30 percent are due to the lack would take more than 20 years to achieve universalof sanitation in urban areas. The number of DALYs lost access to clean water and sanitation. In the case of cleanas a result of these diseases is more than 46 million a water, this group includes all the low-income countriesyear. This may not seem large when spread over a pop- in the region other than China, as well as Indonesia.ulation of more than 1.7 billion people, but it is equiv- For sanitation, only China, Korea, Malaysia, andalent to shortening the average life expectancy of every- Thailand are likely to achieve universal coverage. Inone in the region by nearly two years. China this assumes the continuation of arrangements

At a minimum, the average willingness to pay to for collecting nightsoil, which will create problems assave one DALY should be at least equal to average GDP the country gets richer and more urbanized.

Health benefits of achieving universal access to clean water and sanitation

Infant deaths avoided DALYs saved(thousands per year) (millions peryear)

Water Sanitation Water SanitationTotal Rural Total Urban Total Rural Total Urban

19 18 9 6 1.3 1.2 0.6 0.4127 122 59 50 17.6 17.0 8.2 6.983 75 46 29 5.6 5.0 3.1 1.9

O O 0 0 0.0 0.0 0.0 0.07 7 5 5 0.5 0.5 0.4 0.30 0 0 0 0.0 0.0 0.0 0.01 1 0 0 0.0 0.0 0.0 0.0

37 36 27 27 2.4 2.4 1.8 1.83 3 2 1 0.2 0.2 0.1 0.19 9 14 14 0.6 0.5 0.7 0.74 4 3 3 0.2 0.2 0.2 0.2

28 27 20 16 1.5 1.5 1.1 0.9

320 302 183 152 30.1 28.6 16.1 13.5

Source: World Bank, World Development Report 1994: Infrastructurefor Development and World Development Indicators 1997; World Resources Institute,

United Nations Environment Programme, United Nations Development Programme, and World Bank, World Resources 1996-97: The Urban Environment.

12 Can the Environment Wait? Prioritiesfor East Asia

Box 5. Dirty water, sewage, and disease

People contract water-borne diseases primarily through tis) or nematode parasites that are transmitted by con-direct contact with fecal material-either because sources tact with larvae, by eating food containing eggs, or byof water for drinking or cooking (wells, streams, even mosquito bites. Because these conditions tend to bepiped supplies) are contaminated with sewage or because chronic rather than life-threatening, their costs take thethey come into contact with the pathogens, viruses, and form of disability or loss of productivity resulting fromparasites transmitted via fecal material when washing, malnourishment, fever, or other physical effects of theworking, or playing in areas where sewage is discharged. diseases.Once it has been removed from the areas where people Providing access to clean water supplies and adequatelive, the risks posed by sewage are greatly diminished, sanitation can generate large benefits by reducing infantthough transmission of certain diseases through contam- and child mortality as well as adult morbidity associatedinated food can still be a problem. with diarrhea and other water-bome diseases.

Young children, especially infants, are at the greatest Chlorination of water supplies not only kills bacteria andrisk from diarrheal diseases-including cholera and some parasites but also reduces the risk of cross-contam-typhoid fever-that are caused by bacteria usually trans- ination as a result of leaks within distribution networks.mitted in drinking water. Babies with diarrhea can be On the other hand, conventional sewage treatment doestreated inexpensively using oral rehydration. But with- not affect the microbiological quality of wastewater unlessout such treatment they may die very quickly, either the effluent is specially treated. Thus, once sewage hasfrom diarrhea or from other problems that are exacer- been collected, the additional benefits from treatmentbated by it. Adults typically are more resistant to bacte- before it is discharged are much smaller and are linked torial diseases but are at risk from viruses (such as hepati- productive or amenity uses of rivers or lakes.

No one would question the utmost importance of munities be financed? What role should the public andensuring that as many people as possible have access private sectors play in financing and operating ser-to clean water. Further, this goal need not cost a lot to vices? Wlhat tradeoffs should be made between costsachieve. Providing everyone in the region with access and technical standards, especially for rural water sup-to clean water within 10 years would cost about plies? These are important questions, but different$65-70 billion, of which $40-42 billion would be in views about such matters should not become an excuseChina and $12-15 billion in Indonesia. These sums for failing to ensure that every household has access tomay seem large in absolute terms, but they represent a reliable supply of reasonable quality water, either atan annual investment of just 0.4 percent of GDP over home or at least nearby.the period for China and 0.55 percent for Indonesia. In urban areas sanitation rather than water suppliesCountries with savings and investment levels of 30-35 will have the biggest impact-both because most coun-percent of GDP should have little trouble finding the tries have already achieved relatively high levels ofnecessary resources if the will is there. urban access to clean water and because greater urban

The challenge will be much greater in poorer coun- access to clean water has less of an impact on infanttries such as Lao PDR, Myanmar, and Vietnam, which mortality than an equivalent increase in rural access towould have to invest 1.0-1.4 percent of GDP each year clean water. High levels of urbanization tend to be asso-to achieve the target. Still, lack of access to clean water ciated with high rates of infant mortality (holding otheris by far the most important environmental problem variables constant). As a result, urban water and sanita-these countries face. It would be reasonable to make a tion utilities have to run in order to stand still, becauseclear commitment to meeting the 10-year target, even of the rapid growth of urban populations.at the expense of diverting resources from other wor- However, it is also significantly more expensive tothy but less urgent goals. extend sewer networks than to provide new water con-

The issues that remain are institutional and practi- nections. Typically the investment cost per person or percal. How should services for poor households or com- householcl of providing sewers (without any allowance

Immediate prioritiesfor environmental action 13

for sewage treatment) is about 50 percent more than that region and elsewhere consistently show that mostof providing piped water. Achieving universal access to households without piped water in their house or near-sanitation in urban areas over 10 years would require an by are already paying more than the cost of providinginvestment of $90-100 billion, of which $60-65 billion this service to buy clean water or to boil contaminatedwould be in China, $12-15 billion in Indonesia (box 6), water from wells or other sources. For example, it hasand $6 billion in the Philippines. The additional cost of been estimated that the cost per cubic meter of cleanproviding adequate sanitation in rural areas would be a water to households without piped supplies in Jakarta islittle more than $10 billion. 10-50 times the cost of piped water. The poorest house-

The combined cost of ensuring access to clean water holds may be paying 10 percent or more of their incomefor all households and to sanitation for urban house- for this purpose in Jakarta, Manila, and similar cities.holds would imply an investment of 1 percent of GDP Thus the barriers to achieving universal urban access toor less over 10 years for China and all the middle- clean water are institutional rather than financial-evenincome countries in the region. Meeting the urban san- in the poorest countries in the region. The privatizationsitation target would not be realistic for countries whose of water and sanitation concessions in Manila andper capita income is less than $400. For these coun- Jakarta within the past year should serve as a model for

tries the time required would have to be 20-25 years all medium-size and large cities in the region.if the investment commitment is kept within the range It is often assumed that rural households cannotof 1.0-1.5 percent of GDP each year. In such cases afford the full cost of improved water supplies. Studiesthere are strong arguments for concentrating on access of rural water demand contradict this assumption for

to clean water initially. many communities provided that:

The water supply is reliable and convenient-mostPayingfor improvements in water infrastructure people strongly prefer yard taps to public standpipes.

Even the poorest urban dwellers and rural peasants are * Systems are designed to meet realistic and cost-willing to pay a significant fraction of their income to effective technical standards that can be maintainedhave access to clean drinking water, or to ensure that and operated at low cost.

excreta and garbage are removed from their immediate Surveys suggest that urban residents are willing tovicinity Often they are already paying for such services pay up to 3 percent of their income for decent sanita-but in ways that fail to generate the economies of scale tion, which may take the form of septic tanks (when thethat can be achieved from the efficient provision and necessary land is available) rather than sewer connec-operation of infrastructure. tions (box 7). For example, in Jakarta more than

For access to clean water, studies of household bud- 800,000 households-nearly 40 percent of the total-gets and water markets in urban areas in the Asia/Pacific have installed their own septic tanks. Assuming a dis-

Box 6. Sanitation in Indonesia

About 34 percent of Indonesia's population lives in urban Offsetting the effect increased urbanization will haveareas. This share is expected to increase to 55 percent by on infant mortality would require increasing from 81 per-2020, with the urban population doubling from 70 mil- cent to 94 percent the share of the urban population withlion to 145 million. Maintaining the share of urban resi- access to sanitation-implying the need to build sewersdents with access to sanitation at 81 percent will require for nearly 80 million people. This may seem a formidablethat sewers or other forms of sanitation be provided for an task, but Indonesia's rapid economic growth would easeadditional 61 million people. If that happens, total infant the burden. The economy is expected to grow by moremortality will increase only slightly, from 51 to 55 per than 6 percent a year through 2020, so this target could1,000 live births (with other variables held constant). But be achieved by investingjust 0.15 percent of GDP a year-if no new sewers are built, infant mortality will rise to 75 starting at about $300 million a year today and rising toper 1,000 live births. $1,250 million a year by 2020.

14 Can the Environment Wait? Prioritiesfor East Asia

count rate of 12 percent in real terns, the average cost allows private or municipal companies to finance,of an efficiently operated sewer system is $35-40 per build, and operate water and sanitation systems. Thereperson per year. The cost of a septic tank is slightly is also the broader problem of assisting the poorestlower. This means that average willingness to pay for householcds, but this is not unique to the water sector.urban sanitation already exceeds or by 2000 will exceed Indeed, by relying on low-cost intermediate solutionsthe average cost of providing the service in all the mid- for sanitation plus limited cross-subsidies between cat-dle-income countries of the region. China currently egories of users via "lifeline" tariffs, it is easier to ensurerelies on alternative methods of collecting excreta, but that poor households have access to water and sanita-most of its urban population will be able to afford the tion than t-o deal with other problems they face.costs of installing and operating sewers within 10 years.

Thus there should be no need for government sub-sidies to meet the target of universal access to sanita- Particulate air pollution in Northeast Asia,

tion for urban households. Realizing the large public especially from small sourcesbenefits from improved sanitation services does notrequire a commitment of government money Instead, The Asia/Pacific region contains many cities that rankthe public sector must establish a framework that among those with the world's worst air quality Recent

Box 7. Should investments in urban sanitation go toward sewers or septic tanks?

A range of options for the disposal of excreta provide borhoods. H-louseholds that have already invested in indi-acceptable results, especially in reducing the incidence of vidual solutions may put a low value on the benefits ofwater-bome diseases. Various types of improved latrines upgrading Lo a conventional sewer system. For example,may represent a reasonable compromise between health, a willingness to pay study in the Philippines suggestedamenity, and cost considerations in low-density urban that households were not willing to pay much more thanareas with many low-income households who do not have 1 percent of their income to upgrade from septic tanks (orhousehold water connections. But such low-cost options the equivalent) to a sewer system. The cost of providing aare less satisfactory as the volume of wastewater generat- sewer network (without treatment), meanwhile, wased per square kilometer increases-whether as a result of much higher. The best solution in such cases may be tohigher population density rising income, or expanding focus on wastewater management rather than excreta byhousehold water connections. The problem is particular- developing small bore sewers-or using stormwaterly severe in areas where the water table is close to the sur- drains-to transport the runoff from septic tanks.face or that are prone to flooding during the rainy season. In contrast, it may make more sense to develop sewer

The conventional response to this problem is to devel- networks in low-income neighborhoods, which oftenop sewer systems, with or without some form of sewage have high population densities. Ability to pay may be lim-treatment. However, the capital and recurrent costs of this ited, but few households will have invested heavily inpackage-a cistern-flush toilet, large bore sewers, and individual sanitation. Moreover, the effects of uncon-sewage treatment-may exceed $150 per person per year trolled discharges of sewage will be all too obvious-espe-(including the cost of water). Households that have cially if many households have individual water connec-already invested in lower-cost alternatives may be under- tions. The health benefits of providing sewers will also bestandably reluctant to connect to sewers when they are much higher in such areas.built. Thus more thought should be given to the sequen- Efforts 11o develop sewer networks in low-incometial development of sanitation systems. neighborhcods will often not meet financial criteria,

Given the large fixed costs of developing basic sewer though the economic benefits easily exceed the costs. Anynetworks, the goal should be to achieve a connection rate cross-subsidies or public subsidies should be carefullyas close to 100 percent as possible. This should be no considered in order to achieve the intended effects. Forproblem in high-density neighborhoods because the envi- instance, ati implicit levy on water consumption may beronmental problems associated with septic tanks and used to lower the fixed element of the sewage tariff in low-alternative forms of individual sanitation are obvious and income areas. Since the goal is to expedite the develop-can be used to justify mandatory connections. It will be ment of the sewer network, such arrangements should beharder in middle-income medium- or low-density neigh- gradually phased out.

Immediate prioritiesfor environmental action 15

epidemiological studies have shown that smoke and chosen-premature mortality, new cases of chronicdust particles-especially smaller particles below 10 in bronchitis, and the number of person-days of respira-size (referred to as PM10) or, even more, the finest par- tory symptoms (breathing difficulties and the like)-ticles below 2.5 (PM2 5 )-are primarily responsible for consistently account for the bulk of the health costs ofthe impact air pollution has on human health. While air pollution in studies of cities around the world.levels of sulfur dioxide and other air pollutants may A combination of climate, patterns of fuel use, pastattract considerable attention, they do not have a large investment in infrastructure, and cultural factors meandirect impact on health, micrograms and matter pri- that exposure to harmful airborne particles is high ormarily because they can be important indirect contrib- very high in China and Mongolia. Air quality is improv-utors to exposure to PM2 5. Further, measures of total ing in Korea and Taiwan (China) but is still significant-suspended particulates (TSP) of all sizes may be an ly worse than the WHO guidelines. Comparisons withunreliable guide to the threat posed by air pollution other forms of environmental degradation show that airbecause some cities with high measured levels of pollution causes the greatest damage to health and lossTSP-including Beijing, Kuwait, and Teheran-have of welfare from environmental causes in thesehigh levels of natural background dust that is economies. Infant mortality rates and water-borne dis-comprised almost entirely of particles larger than 10 eases are somewhat less of a threat in these economies-micrograms. in contrast to Southeast Asian countries, where they

represent the top priority.The current situation: premature mortality, Air quality is extremely poor in most large Chinesesickness, and air quality cities, though it is even worse in many smaller citiesEstimates of the premature mortality and respiratory because coal is the main fuel for heating, cooking, anddisease caused by poor air quality for 16 large metro- industrial activities, and because there has been lesspolitan centers in the region are shown in table 1. emphasis on environmental cleanup (box 8). As aThere are well-established epidemiological relation- result the total benefit from reducing air pollution inships between exposure to PM10 and sulfur dioxide the cities examined amounts to 20 percent of urbanand premature mortality or the incidence of other dis- income. This is more than four times the benefits thateases. 7 These have been used to compute the reduction would be generated by achieving universal access toin the burden of ill health that would be expected if air water and sanitation for urban residents.pollution levels were to fall to meet the guideline val- For cities in Southeast Asia the benefits from betterues for exposure to PMIO and sulfur dioxide recom- air quality are large but do not dominate the environ-mended by the World Health Organization (WHO)- mental picture. Only in Kuala Lumpur do the benefitsboth 50 micrograms per cubic meter. The indicators of better air quality outweigh sanitation, because

Box 8. Air pollution in China: The costs of inaction

Rapid urbanization and heavy reliance on coal for industri- bustion emissions (mainly PM10) caused 218,000 prema-al and residential use have left China's cities with very poor ture deaths (equivalent to 2.9 million life-years lost), 2air quality. Ambient levels of TSP and sulfur dioxide are million new cases of chronic bronchitis, 1.9 billion addi-among the highest in the world. Concentrations in residen- tional restricted activity days, and nearly 6 billion addi-tial and commercial areas are often nearly as high as in indus- tional cases of respiratory symptoms.tral areas-and sometimes even higher, especially for sulfur If policies to tackle urban air pollution are not imple-dioxide (for example, in Beijing and Shanghai). Stoves and mented, premature deaths will increase to more thansmall boilers used by households and small businesses 850,000 (11 million life-years lost), new cases of chronicaccount for most human exposure to these pollutants. bronchitis will be nearly 7.4 million, additional restricted

Estimates of the effect air pollution has on health have activity days will reach 7 billion, and excess cases of res-been made for people living in urban areas. In 1995 com- piratory symptoms wilt reach 22 billion a year.

16 Can the Environment Wait? Prioritiesfor East Asia

Malaysia has already achieved almost universal urban expected reduction in emissions per unit of fuel con-access to safe water and sanitation. sumption. Manila is likely to experience a more grad-

ual worsening in air quality, while air quality in SeoulThefuture: industrial growth, traffic, and heating remains broadly constant.

For all the countries examined, particulate emis-Business as Usual scenario. Figure 1 shows average sions frorn large industrial sources and power plants

PMIO levels in four major cities outside China as well are either stable or decreasing. Thus the deteriorationas averages for 30 large Chinese cities (populations in air quality is caused entirely by emissions from smallgreater than 1 million) and smaller Chinese cities. The sources. In China these emissions result mainly fromstory for China reflects an important aspect of the the use of coal by households-for heating and cook-Business as Usual scenario. Chinese authorities-at the ing-and :.n numerous small boilers. This is why thenational and provincial levels-are concerned about development of gas supplies and district heating net-air pollution in large cities and are taking steps to con- works to provide alternative sources of fuel and heat istrol emissions. In particular, efforts are being made to so critical to the improvement of air quality in largebuild gas pipelines to serve these cities and to construct cities. Outside China growth in emissions from motordistrict heating networks. Despite growth in traffic vol- vehicles-especially diesel trucks and buses and two-umes, these measures should bring substantial stroke mctorcycles-is mainly responsible for theimprovements in air quality in the largest cities over the increase in average levels of PM 0.next 25 years. However, similar efforts are not yet being The health costs of urban air pollution-or, equiv-made in smaller cities, where much of the growth in alently, the benefits of improving air quality to meeturban population will occur. Thus average air quality WHO guiclelines-are shown in figures 2 and 3. Forin smaller cities will get much worse over the same China the costs are broken down to show the contri-period. As result the average exposure to PM1O of all butions of premature mortality, chronic bronchitis, andurban residents will increase, other illnesses. Total costs rise from about $34 billion

Outside China, Jakarta and Bangkok are likely to in 1995 tc $104 billion in 2020. (No allowance hasexperience the most rapid deterioration in air quality been made for the increase in average per capitaunder the Business as Usual scenario. A combination income over this period.) Of course, part of thisof economic growth and continued growth in urban increase is a consequence of the growth in urban pop-populations will lead to substantial growth in emis- ulations, but the cost per urban resident also rises, fromsions from traffic and small industries, despite the $140 in 1995 to $210 in 2020. These are high costs

Figure 1. Urban air quality under the Business Figure 2. China: Costs of urban air pollution underas Usual scenario the Business as Usual scenarioPM,, (micrograms per cubic meter) (billions of 1995 U.S. dollars)

400 China, 120other cities

350 - 100 Other

30080

250 China,

200 larg cities Bangkok 60akartai

.1 ~~~~~ .. -~ro chti

150 .j Manila bocii

- -- - - - - ----- … --- - -- -Seoul 20

50

0 01995 2000 2005 2010 2015 2020 1995 2000 2010 2020

Immediate priorities for environmental action 17

indeed considering that average GDP per capita was the growth in particulate emissions from small sources,$620 in 1995. If allowance is made for the increase in urban air pollution will be the dominant environmen-per capita income over the period, the health cost of tal problem in middle-income countries in the regionurban air pollution in China under the Business as as well as in China within 10-15 years.Usual scenario rises from 6 percent of GDP in 1995 to There are a number of ways to reduce emissions14 percent in 2020. from small sources. In practice, however, only a few

Rather than show absolute numbers, figure 3 com- measures significantly lower total loads:pares the four non-Chinese cities by examining the * Emissions from diesel-fueled trucks and buses canhealth costs of air pollution as a share of urban residents' be reduced by implementing much stricter inspectionaverage income. The rise in average exposure to PMIO and maintenance programs, fitting more efficient andunder this scenario implies that the burden of ill health less polluting engines, lowering the sulfur content ofcaused by air pollution in Bangkok increases from 8 diesel, requiring the installation of particulate traps,percent of urban income to 20 percent over 25 years. In and using engines that burn clean fuels such as com-Jakarta the cost in 2020 reaches 23 percent of urban pressed natural gas or LPG.income, but this is from a base level of 12 percent in * The sale of two-stroke motorcycles can be prohibited,1995. In Seoul, however, the cost of air pollution since the overall economics and emissions performanceremains steady, at about 5 percent of urban income. of four-stroke motorcycles are much better (box 9).

The implication of this analysis is clear if stark. In * The quality of coal burned by households and inChina urban air pollution is already the country's main small boilers can be improved by cleaning coal and byenvironmental problem. Despite efforts to improve the selectively selling low-ash and low-sulfur coalssituation in large cities, its costs are likely to grow, with through retail channels. A more expensive option is toa severe deterioration in average air quality in medium- require the use of smokeless solid fuel (eithersize and smaller urban areas. In Southeast Asia-as anthracite or specially treated steam coal).described below-lack of clean water and sanitation is * The use of coal by households and in small boilersthe main environmental problem. Even under the can be displaced by developing gas or district heatingBusiness as Usual scenario it is assumed that countries networks, though district heating networks will usual-like Indonesia, the Philippines, and Thailand will ly only make economic sense in the colder regions ofachieve almost universal access to water for both urban China. Small industrial plants can be required to installand rural populations, though progress in providing or upgrade their pollution controls, though this willurban sanitation may be more limited. Still, the results require a considerable effort on the part of the envi-suggest that unless measures are taken to slow or stop ronmental authorities to ensure that such controls are

Figure 3. Costs of air pollution for four cities under operated properlythe Business as Usual scenario(percentage of urban income) Medium and High Cost scenarios. The Medium Cost25 scenario assumes that all of the relatively low-cost

options are implemented, such as cleaning coal and20 . extending gas conversion programs in China together

Bangkok.. - -~ - - with banning two-stroke motorcycles and requiring15 ... - better emissions performance from diesel-fueled vehi-

/ ,'Manila cles in all countries. The High Cost scenario goes10 __----beyond this by assuming that China will implement a

- … -~ - - - -program that will displace all use of coal (other than

5 smokeless fuel) by households and small boilers overSeoul 20-25 years, and that all countries will implement strict

0 fuel quality and emission standards for diesel-fueled1995 2000 2005 2010 2015 2020 vehicles. Further, the High Cost scenario assumes that

18 Can the Environment Wait? Prioritiesfor East Asia

Box 9. Encouraging four-stroke motorcycles in Bangkok

Motorcycles and three-wheelers (tuk-tuks) are important higher capital cost, justifying the shift on economicmodes of transportation in Thailand. In 1993 there were grounds.about 6.3 million motorcycles-an increase of more than Air qualNty and health benefits. Conservative calculations270 percent since 1984-and motorcycles and three- suggest that motorcycle emissions account for at least halfwheelers accounted for more than two-thirds of vehicle of ambient particulates at street level in Bangkok.registrations. Almost all Thai motorcycles are equipped Particulate emissions from two-stroke motorcycles couldwith cheap two-stroke engines, which emit much larger be reduced by more than 80 percent by switching to four-amounts of smoke and particulates than four-stroke stroke engines with reasonable emission controls. Theengines of similar size and power. Of 20 motorcycle mod- benefits of the resulting 40 percent drop in exposure toels manufactured in Thailand, only 2-produced pn- particulates would be on the order of $1 billion a year.manly for export-are equipped with four-stroke Operating and investment costs. Four-stroke motorcyclesengines. consume less fuel and lubricants and require less mainte-

Smoke from two-stroke mnotorcycles and three-wheel nance and engine overhauls than two-stroke engines.vehicles is an important contributor to high ambient con- Converting the current fleet of motorcycles to four-strokescentrations of particulates in many Asia/Pacific cities, would save $80-100 million a year in operating costs.including Bangkok. The Thai government has adopted Allowing for the additional costs of materials, parts, andmeasures to reduce emissions from new passenger auto- emissions certification, the average cost of a motorcyclemobiles as well as from diesel-fueled trucks and buses. But would increase by no more than $60-80-less than 5without controls on particulate emissions from motorcy- percent.cles there may be little improvement in air quality, since Overall economic gains. The capital cost of prohibitingincreasing emissions from two-strokes will offset lower the sale of tvo-stroke motorcycles in favor of four-strokesemissions from other vehicles. should be less than $70 million a year. In the long run this

It is possible to substantially reduce particulate and cost would be almost entirely offset by the benefits ofhydrocarbon emissions from two-stroke engines. But lower fuel consumption and maintenance, though theseshifting from two-stroke to four-stroke engines is almost benefits would be fully realized only after the current fleetalways a more cost-effective way to reduce pollution. of two-strokes was replaced. Thus the large health bene-Indeed, the lower maintenance costs and fuel con- fits of phasing out two-stroke motorcycles can be achievedsumption of four-stroke engines more than offset their at little or no economic cost.

Source: L.M. Chan and C-S. Weaver, 'Motorcycle Emission Standards and Emission Control Technology,' World Bank, Asia TechnicalDepartment Paper 7, Washington, D.C., 1994.

a serious effort will be made to slow the growth in the Once this level of PMIO has been achieved, any fur-number of cars, with greater investments in public ther efforts to control particulate emissions should

transport. Note, however, that poorly maintained buses focus on exposure to fine particulates (PM2 .5), thoughmay have higher emissions per passenger than modern this will typically decline in line with PM1 0. By 2020 the

cars, so the success of a transport strategy focusing on health costs of urban air pollution will have fallen to

public transport depends on ensuring that emissions about 10 percent of urban income under the Mediumfrom buses are carefully controlled. Cost scenario (from 23 percent in 1995), while the High

As figure 4 shows, adopting even the Medium Cost Cost scenario implies a zero cost because an averagestrategy would transform the prospects for urban air level of PM, 0 of 50 micrograms per cubic meter is takenquality in China. The figure focuses on average air as the threshold for calculating health costs.quality in smaller cities, but the strategy also results in The Medium Cost scenario also offers the prospect ofsignificant improvements in air quality in large cities large improvements in air quality in Bangkok, Jakarta,relative to the Business as Usual scenario. Under the Manila, and Seoul relative to the Business as Usual sce-High Cost strategy average air quality for China's urban nario. Figure 5 shows the trends of average air quality inareas would begin to approach current levels in urban Bangkok and Jakarta under the two scenarios. Forareas in North America and Western Europe. Bangkok the Medium Cost scenario offers the possibili-

Immediate prioritiesfor environmental action 19

Figure 4. China: Urban air quality in small cities Figure 5. Air quality in Bangkok and Jakartaunder alternative scenarios under alternative scenariosPM,, (micrograms per cubic meter) PM,, (micrograms per cubic meter)

400 Business as 250Usual scenario

350

300 / 200 Bangkok,

250 Jakarta, ~~~~~~~~~~~~~~~~~~~Business as--250 / Jakarta, Usual scenario -Business as

200 _ _ …__-Medium Cost 150 Usual scenario

150 X - - scenario\ ~--__ g_-~ ~~~Jakarta, Bangkok,

100 100 Medium Cost Medium Cost

50 High Cost scenario scenario50 ~~~~scenario .\t

0 501995 2000 2010 2020 1995 2000 2005 2010 2015 2020

ty of a rapid decline in air pollution by 2005, with a policies to address urban air pollution are inextricably

slight further decline through 2020. Jakarta follows a linked to energy policies, especially with respect tosimilar path until 2015 but thereafter the average level prices and strategic choices about the use of different

of PM10 starts to rise again as the effects of continued fuels. Box 10 summarizes the results of a study of theeconomic growth begin to outweigh the contribution of environmental costs of fuel use in Bangkok, Manila, andstricter pollution controls and better technology. Shanghai. Tt shows that the damage to the community

It is harder to estimate the impact the High Cost sce- of using particular fuels varies greatly by city and by

nario would have on air quality in individual cities fuel, but in almost all cases is much greater than the

because this will heavily depend on the nature and effec- direct price paid by users. Despite the attention beingtiveness of policies to control urban growth. For exam- paid to risks of climate change, in most cases it repre-ple, the authorities in SaoPaulo-one of the world's sents a small fraction of the social costs of fuel use.

largest cities-forbid new industrial plants that generatesignificant pollution from locating in the metropolitan Taxes. A market response to these findings would be

region and are pressuring those that remain to move out. to impose heavy taxes on certain fuels to "internalize"They have been somewhat less successful in controlling the social costs of their use. But calculating such taxespollution from traffic, but even so the situation is better is not as easy as it might seem. The main objective is to

than it is likely to be in Jakarta after 2015 under the reduce pollution, not to discourage the use of certainMedium Cost scenario. Thus an appropriate combina- fuels or to raise revenue. A heavy tax on diesel oil is only

tion of higher cost controls-for example, setting tough appropriate if the vehicles or boilers that burn it do notemission standards for all (not just new) buses and have controls to reduce or eliminate damaging emis-

trucks-and policies on the structure of urban growth sions. Thus, in principle, the tax should be partly orcould stabilize PM10 levels inJakarta after 2015 at a level fully rebated to users who have taken steps to reduce orclose to 50 micrograms per cubic meter. eliminate these emissions. The complexity of imple-

menting and monitoring such rebates has discouragedEnergy policies and the environment: governments from relying heaAily on pollution taxes ontaxes or standards? fuels, though the Netherlands and several ScandinavianWhile there are many sources of particulates, more than countries have recently implemented them.

90 percent of the fine particulates that are most direct-ly linked to health damage come either directly or indi- Emission standards. An alternative is to rely on emis-

rectly from the burning of fuels. Thus environmental sion standards for power plants, boilers, vehicles, and

20 Can the Environment Wait? Priorities for East Asia

Box 10. The environmental costs of fuel use in Bangkok, Manila and Shanghai

Fuel combustion is the main source of air pollution in three cities, followed by gasoline in Bangkok and ManilaAsia/Pacific cities. The effects of different fuels vary sub- and by coal in Shanghai. In almost all cases local exter-stantially, however, implying the need for different poli- nalities from fuel combustion substantially exceed globalcies and priority actions. The table below provides esti- externalities.mates of the relative magnitude of the damage caused by Imposing levies that reflect the social costs of pollutionthe use of the main fossil fuels in Bangkok, Manila, and resulting from the use of coal and diesel oil, for example,Shanghai. would increase their economic cost by at least 80 percent

Where coal is used by households and small industry, of their world market prices. Reducing the use of coal inas in Shanghai, it accounts for most of the damage. In the residenmial and industrial sectors is a clear priority forBangkok and Manila diesel is the main source of damage. Shanghai, while the transport sector should be the mainDiesel has the highest social costs per ton of fuel in all focus of efforts in Bangkok and Manila.

Social costs of different fuels in selected cities(millions of U.S. dollars unless otherwise noted)

City Damages Coal Fuel oil Diesel Gasoline Total

Bangkok Health costs - 170 392 71 633Nonhealth costs - 25 39 4 78Total costs - 195 431 85 712Total local costs per ton offuel (U.S. dollars) - 33 718 102 -

Manila Health costs - 143 316 33 492Nonheatth costs - 16 36 11 63Total costs - 159 352 44 555Total local costs per ton of fuel (U.S. dollars) - 31 392 62 -

Shanghai Health costs 892 39 57 9 998Nonhealth costs 46 3 6 2 57Total costs 938 42 63 11 1055Total local costs per ton offuel (U.S. dollars) 33 10 138 13 -

All three cities Cost of contribution to global climate change at 15 18 18 18$20 per ton of carbon (U.S. dollars per ton offuel)

World market price, 1995 (U.S. dollars per ton) 44 118-135 148 158

Source: K. Lvovsky, D. Maddison, and others, "Air Pollution and the Social Costs of Fuels," WVorld Bank, Environment Department Working Paper,Washington, D.C., forthcoming.

other installations. These amount to a hidden tax on However, this should not be taken as implying an accep-fuel use, but many governments believe-perhaps cor- tance of emission standards or technology requirementsrectly-that people and businesses are less sensitive to as the best route for environmental policy. Rather, thistaxes that operate through mandated costs than taxes approach sets an upper bound on the probable cost ofthat directly affect fuel prices. When the range of tech- meeting particular environmental objectives. Thenological options is limited, there is little practical dif- greater is the reliance on market mechanisms, the lowerference between relying on emission standards and on will be the costs and, thus, the greater will be the neta rebateable fuel tax. When the range of pollution con- benefits from improving the quality of the environment.trol options is larger, it is more cost-effective to take themarket approach, though careful use of standards cansimplify the problem of managing rebates. Phasing out lead from gasoline

In calculating the cost of addressing the environmen-tal concerns highlighted above it is necessary to focus on Exposure to lead-from nonferrous metal plants and,specific industries, types of fuel use, and controls. especially, the use of leaded gasoline-is a major prob-

Immediate priorities for environmental action 21

lem throughout the region. The most damaging effect specifications are not adopted, there is no reason thisof lead exposure is on the neurological development of should be a barrier to a rapid phase-out of leaded gaso-young children. High levels of lead in the blood are line, as Thailand's experience shows.8

closely correlated with learning and behavioral diffi- The costs involved are so low that it is hardly appro-culties and with a (usually) permanent loss in mea- priate to characterize the alternative scenarios assured intelligence. Studies in Bangkok, Jakarta, and Medium Cost and High Cost. Any costs should fall onKuala Lumpur have concluded that the benefits from car owners and operators, who are certainly able toreducing lead exposure by 90 percent are typically absorb them. Under the Business as Usual scenario dis-30-50 percent of the benefits of reducing particulate charges of lead from small sources increase in all coun-levels to 50 micrograms per cubic meter. tries that do not have a clear lead phase-out program,

Most governments in the region have already intro- despite decreases in the average lead content of gasoline.duced or are designing programs to phase out the use A slow phase-out that concentrates only on new vehi-of lead in gasoline, so exposure to lead should not be cles-through, for example, a requirement to install cat-a serious problem in the medium-term future. The alytic converters-stabilizes emissions within a fewmain exception is the Philippines, whose proposed years but does not substantially lower emissions untilprogram for phasing out lead from gasoline lags far the majority of cars currently in the fleet have beenbehind the achievements and goals of similar programs scrapped, perhaps 15 years from now. Thus an effectivein Malaysia and Thailand. The reason seems to lie in effort to reduce lead exposure requires that the use ofmisplaced concerns about the impact of using unlead- unleaded gasoline be promoted for all vehicles. This willed gasoline in cars that were designed to use leaded stabilize emissions more quickly and advance the dategasoline. While problems can arise if appropriate fuel at which there is a substantial decline by 5-10 years.

Medium term prioritiesfor environmental action

Managing water resources better luted in urban areas during the dry season becauseupstream abstractions for irrigation or other uses have

While the region's immediate environmental concerns greatly diminished water flows. As a result these riversshould be the primary focus of attention, the manage- cannot provide any significant services of waste dilu-ment of water resources will become an increasingly tion, even where downstream urban areas existed longimportant issue. Countries that are heavily dependent before upstream agricultural development. Such con-on irrigated agriculture are understandably concemed flicts are common in river basins around the world, butabout the impact of water pollution on the productive it is wrong to conclude that the problem is simply oneuses of scarce water supplies. Where water resources are of pollution. Rather, poor water quality may be a symp-scarce, discharges of a range of water pollutants-organ- tom of mismanagement rather than the direct cause ofic wastes (measured in terms of biological oxygen economic and other losses further downstream. Fordemand, or BOD), suspended solids, metals, and toxic example, in the industrial heartland of China aroundchemicals-may render raw water unfit for use in agri- Beijing and Tianjin, 65 percent of water is used rela-culture or for drinking water. Heavy metals and toxic tively inefficiently for low-value irrigation, and hugechemicals have the most serious effects because of the expenditures are being contemplated to bring waterdirect hazard they pose to human health. By contrast, from othe,- river basins to the cities. (China's Statewater from rivers with high levels of BOD and suspend- Science and Technology Commission found that theed solids can be used for many purposes, and the self- economic value of a cubic meter of water used for agri-purifying capacity of rivers means that water quality can culture was less than 10 percent of its value to munic-recover quite quickly as it travels downstream from large ipal and industrial users.)sources of effluents containing organic wastes. Discharges of metals and toxic chemicals can

impose serious costs if water is rendered unfit for otherCosts and consequences of water pollution uses or if fisheries and other resources are lost as a con-Again, the biggest problem is in China, because its sequence. However, it is much harder to evaluate theproblems with water quality exacerbate increasingly damage caused by discharges of untreated or partiallysevere conflicts over water quantity-especially in the treated sewage or of industrial effluents containingNorth China plain. Chinese estimates of the direct loss- BOD and suspended solids. Dramatic reductions ines of agricultural and fishery output caused by poor such disclharges within the metropolitan region ofwater quality amount to $1.2 billion a year plus a fur- Bangkok may be a cost-effective solution to some of thether $0.8 billion for the effects of water shortages that problems caused by the poor state of the Chao Phrayaare exacerbated by water pollution. While large in River. But it may be no more than an expensive andabsolute terms, this is no more than 5 percent of the temporary response to problems whose real solutioncosts of urban air pollution. lies in reorienting priorities for water use and systems

Throughout the region, the effects of water pollution of manageinent much further upstream.must be assessed in the context of the poor use of water There are important links between different waterresources in a broader sense. Rivers may be heavily pol- problems in several large cities in Southeast Asia,

22

Medium term prioritiesfor environmental action 23

including Bangkok, Jakarta, Kuala Lumpur and the years and that all collected sewage will receive prima-Klang Valley, and Manila. The poor quality of most sur- ry treatment (including low cost removal of nutrients).face water and limited supplies of piped water have The Medium Cost scenario brings forward the dead-prompted households and industries to rely on shal- line for universal access to urban sewers to 2010 andlow or deeper wells for their water supplies. Over- assumes that at least 90 percent of the population willabstraction of groundwater resources has led to the have access to sewers or some alternative form of san-intrusion of salt water, whose impact on groundwater itation by 2020. The High Cost scenario assumes thatquality has been worsened by open or septic tank dis- all sewage that is collected receives secondary (biolog-charges of sewage and industrial effluents where peo- ical) treatment (including low cost removal of nutri-ple do not have access to sewers. As urban populations ents).have outstripped the provision of infrastructure, this Even under the Business as Usual scenario there is aprocess has set off a cycle of environmental degrada- gradual decline in BOD emissions from small sourcestion that has pushed up the costs of obtaining and in Indonesia and a more rapid one in Thailand. Trendstreating water for many poor households. in the Philippines are similar to those in Indonesia,

while Korea and Taiwan (China) will have even moreMunicipal wastewater treatment-how much rapid decreases than Thailand. This reflects the differ-is necessary? ential development of sewer systems and sewage treat-Figure 6 shows BOD emissions from small sources- ment in each countryhouseholds and small industries-in Indonesia (the Improvements in water quality from going beyondresults are similar for Thailand) under alternative sce- the Business as Usual scenario are likely to be modest.narios. BOD serves as a general indicator of water qual- Universal access to urban sanitation in middle-incomeity and is often correlated with levels of coliforms (that countries is a crucial goal, but it can and should beis, microbiological indicators of water quality), espe- achieved within 25 years under the Business as Usualcially where untreated sewage is the main source of dis- scenario. An important merit of the Medium Cost sce-charges. Where lakes and rivers are used for irrigation, nario is that it roughly halves the time required to meetfish farming, or industrial processes, excessive levels of that goal-2010 rather than 2020. But the reductionBOD-which imply a low level of oxygen dissolved in in the BOD load discharged from small sources is onlythe water-may impose heavy costs on users. significant after 2010, and improvements in water

The Business as Usual scenario assumes that all quality will be even smaller because of the likely pat-urban households will have access to sewers within 25 tern of loads and the response of river systems to

changes in pollution loads. In Korea and Taiwan

Figure 6. Indonesia: BOD from small sources (China) the differences between the three scenarios areunder alternative scenarios no more than 5-6 percent of the initial load even afterIndex (1995 = 100) 25 years. The results for the High Cost scenario sug-100 gest that there is no urgent reason to go beyond

advanced primary treatment of sewage before 2020,80 Business as except where sensitive ecosystems are being affected or

Usual scenario there are other special circumstances.60 There is an obvious question. How can the claim

Medium Cost that the Business as Usual scenario will produce a rea-40 -scenario sonable environmental outcome be reconciled with the

High - observation that water quality is so poor in most of

20 Korea and Taiwan (China), which followed this pathearlier? Industrial emissions are the missing link.

0 Modern, well-managed plants in all industries can be1995 2000 2005 2010 2015 2020 extremely competitive while discharging a small frac-

24 Can the Environment Wait? Priorities for East Asia

tion of the water pollution created by older, less effi- Prospects for China are somewhat different becausecient plants. In the past most Korean and Taiwanese households account for an even larger share of BOD.plants did not take advantage of these cleaner tech- loads, the collection of sewage instead of current night-nologies, nor did they pay much attention to the soil systems will increase the average amount of BOD perimpact of operational practices on their discharges. person that is discharged to water, and the country willThis is no longer the case, which explains the rapid experience rapid growth in industries that generate a lotdecline in BOD emissions under the Business as Usual of BOD. UJnder the Business as Usual scenario, whichscenario for these countries, assumes 90 percent urban access to sewers by 2010, BOD

There is a crucial point here. Choosing to follow the emissions rise initially and then fall to just below theBusiness as Usual scenario does not imply that there is 1995 level by 2020. The Medium Cost scenario elimi-no need for environmental regulation. Rather, the role nates the early increase but still leaves emissions in 2020of environmental regulation will be to ensure that sim- at more than 80 percent of the 1995 level, in part becauseple environmental measures are properly implement- it assumes a lower level of rural access to sewers than fored. Insisting on ambitious and expensive pollution the other countries because of the larger share of popu-controls is much less important than ensuring that lation that has to be covered. Only under the High Costexisting controls and cleaner technologies are used to scenario do discharges of BOD fall substantially, to justtheir best effect. over 50 percent of the 1995 level by 2020.

Longer term prioritiesfor environmental action

While the effects of dirty water, smoke, and heavy met- cent of the costs associated with local urban air pollu-als are usually immediate, severe, and universally tion. Outside China the problems of acid depositionacknowledged, the effects of other environmental are even smaller, both because sulfur dioxide emissionsproblems may be more localized, longer term in char- are much smaller and because most soils have a largeacter, and subject to much more uncertainty In these capacity to buffer acid depositions.cases a sensible approach is to implement low cost pre-cautionary measures now in combination with the col-lection of data and the development of models Limiting exposure to ground-level ozonedesigned to identify the most cost-effective interven-tions should further action be justified. For the Rapid growth in the volume of traffic in all the mainAsia/Pacific region the two most important problems cities in the region gives rise to concerns that poor airin this category are acid rain and ground-level ozone. quality due to particulates will be exacerbated by

increasingly severe photochemical smogs, as in LosAngeles and Mexico City. Ground-level ozone-the

Controlling acid rain primary component of photochemical smog-is anoxidant that has been associated with a range of respi-

China and some other countries are concerned that ratory symptoms in clinical experiments. Evidenceacidic depositions linked to emissions of sulfur diox- from epidemiological studies of actual exposure toide and nitrogen oxides may have serious effects on soil ozone is more limited but peak ozone levels arefertility, forests, and some lake fisheries. There is no believed to be correlated with respiratory symptoms,doubt that sulfate depositions have affected agricultur- restrictions on activity, and asthma attacks. Quite apartal output in some parts of China-notably in Sichuan from its impact on human health, excessive concen-province around Chongqing, which has extraordinari- trations of ground-level ozone have a well-establishedly high levels of sulfur dioxide. However, there is sub- impact on crop yields and trees. Indeed, it is now gen-stantial controversy about the extent and nature of the erally believed that ozone is responsible for most of theproblem, just as it has been difficult to resolve the sci- agricultural and forestry losses from air pollution in theentific uncertainties about the effects of acid rain in United States.Europe and North America. The formation of ground-level ozone is a compli-

Localized problems are unavoidable in areas whose cated process that depends on the ratio of volatilesoils lack the capacity to buffer sulfate and nitrate organic compounds (VOCs)-hydrocarbons such asdepositions. However, the soil chemistry of the main the fumes from gasoline or dry cleaning fluids-toagricultural zones of lowland China is complex, so that nitrogen oxides in the atmosphere. The formation ofsulfate and/or nitrate depositions may even increase ozone is usually highest when the ratio of VOCs toagricultural yields up to some point. Even on fairly pes- nitrogen oxides lies in the range of 5-20. In estimatingsimistic assumptions, the costs of acid depositions in this ratio it is important to take into account VOC emis-China probably amount to no more than 10-15 per- sions from non-human sources-animals and plants-

25

26 Can the Environment Wait? Prioritiesfor East Asia

which may be 2-3 times the emissions resulting from that the ratio of VOCs to nitrogen oxides falls even fur-

human activities. Climatic conditions and traffic vol- ther relative to 1995 than under the Business as Usual

umes suggest that ozone is most likely to be a problem scenario. As a result peak ozone levels are lower in all

in the main cities of Southeast Asia, Taipei, and coastal cities and, indeed, that for Bangkok is only slightly

cities in Southeast China (such as Guangzhou or above the U.S. standard. On the other hand, the High

Shanghai). There is little monitoring data on either Cost measures have a much bigger effect on emissions

average or peak levels of ozone, so it is difficult to assess of nitrogen oxides, so that the ratio of VOCs to nitro-

whether this is currently a significant problem. gen oxides actually rises relative to the Business asSubject to significant uncertainties of the analysis, Usual scenario. Despite a substantial reduction in

the results in figure 7 suggest that Bangkok may have emissions of both VOCs and nitrogen oxides, the peak

a significant ozone problem that will get worse under ozone level for Bangkok is no better than that underthe Business as Usual scenario. The situation in Jakarta Business as Usual, while the improvements in Jakartaand Manila may be somewhat better now but, again, and Manila are less than would be achieved under thewill deteriorate without specific action. The increase in Medium Cost scenario.peak ozone levels will be particularly large in Jakarta. There is an important lesson here for environmen-For each of the cities the ratio of VOCs to nitrogen tal management in the region. Too often, simplisticoxides may be less than 5, and emission trends tend to assumpticns are made about the benefits of adoptinglower this ratio over time. Thus the formation of ozone controls and other technologies that form the basis ofis more likely to be constrained by the level of VOCs environmental policies in rich industrial countries. Butthan of nitrogen oxides, so it would be inappropriate environmental systems are complex, so the effects ofto implement measures that focus primarily on nitro- such measures may vary substantially from one set ofgen oxides. circumstances to another. The High Cost scenario

The dangers of poorly designed policies can be seen incorporates the full package of U.S./European con-by comparing the outcomes for 2020 under the trols on emissions from vehicles, including catalyticMedium Cost and High Cost scenarios shown in the converters, reductions in nitrogen oxide emissionssame figure. The measures incorporated in the from power plants and boilers, and other measures. YetMedium Cost scenario tenc[ to reduce emissions of the outcomne may be worse than had much less costlyVOCs by more than emissions of nitrogen oxides, so and simpler measures been adopted.

Adopting low cost measures to control emissions of

Figure 7. Peak ozone concentrations in three cities nitrogen oxides-for example, low-nitrogen oxideunder alternative scenarios burners-has other benefits, including the reductionPM, (micrograms per cubic meter) of acid depositions. However, the benefits of fitting

400 - 1995 catalytic converters to all cars should be evaluated

350 2020, Business as Usual scenario carefully before expensive commitments of this kindH 2020. Medium Cost scenario are made, since the resources might be better spent on

300 - 2020, High Cost scenario other measures or more urgent problems. Since it is

250 very uncertain whether emissions of VOCs and the

200 resulting -photochemical generation of ground-leveli50 g . ||ozone sho-uld be a matter of significant concern, it may

150 * | 0 $ l l B ii be appropriate to adopt a "wait and see" approach.100 Note that this would involve a real commitment to

50 " * g ll l | * 4 1 1 L monitoring levels of VOCs, nitrogen oxides, and

0 ozone in order to get an early warning of potentialBangkok Jakarta Manila problems.

A core strategy

In most cases the Medium Cost scenario produces an Medium Cost scenario, taking into account operatingacceptable environmental outcome, though it may costs as well as initial investments, for China andinvolve spending to control pollutants that do not Thailand. In China the power sector (including districthave a significant impact on health or economic activ- heat plants) will have to bear the largest share of theseity. The cost estimates prepared as part of the scenar- costs. This is, of course, a consequence of relying onios show that investments in pollution control as a coal as the primary fuel for power generation and isshare of GDP peak during 2000-2005 and fall slowly implicitly reflected in the price paid for coal-eitherthereafter. Thus, the expenditures on air and water domestically or on the world market-relative to thepollution as a percentage of GDP in 2000 shown in fig- prices of other, cleaner fuels. In other countries the costure 8 represent peak or near-peak values. Water of controls is dominated by municipal utilities which,investments-largely sewers-account for more than in practice, means sewers and sewage treatment. Byhalf of pollution investments in all economies. Only 2020 this item will represent about 0.5 percent of GDPChina has a large share devoted to air pollution con- in Thailand (assuming that 90 percent of householdstrols, as might be expected given the scale of its air pol- will have access to sewers and all sewage will receivelution problems. The share of GDP devoted to invest- advanced primary treatment). This is much less thanments in pollution controls is lower for the richer the typical estimates of willingness to pay for sanitationcountries and is well below 1 percent for all countries services noted above.other than China. For most economies the total annualized cost of pol-

Figures 9 and 10 provide a sectoral breakdown of lution controls in 2020 under the Medium Cost sce-the annualized cost of pollution controls under the nario amounts to 1.0-1.6 percent of GDP (figure 11).

Figure 8. Cost of pollution controls under Figure 9. China: Annualized cost of pollution controlsthe Medium Cost scenario, 2000 under the Medium Cost scenario(percentage of GDP) (billions of 1995 U.S. dollars)

0.6 M Air pollution 100MWater pollution Households

0.5 80

0.4 Trans60

0.3

0.2

0.1

China Indonesia Philippines Thailandl Korea, Taiwan 1995 2000 2005 2010 2015 2020Rep. of (China)

27

28 Can the Environment Wait? Prioritiesfor East Asia

Figure 10. Thailand: Annualized cost of pollution Figure 11. Cost of pollution controls undercontrols under the Medium Cost scenario the Medium Cost scenario, 2020(billions of 1995 U.S. dollars) (percentage of GDP)

5 2.0 m Air pollution

P2 Water pollution

4 4Power Transport , 1.5plants

3 -

. d ~~~~~~~~~~~~~~~~~~1..0

2

0~~~~~~~~~~~~~~~~~~.

1995 2000 2005 2010 2015 2020 China Indonesia Philippines Thailand Korea, TaiwanRep. of (China)

For China the costs will be higher relative to GDP,largely because its income level is lower and the cost advanced primary treatment (primary treatment withestimates do not vary relative to each economy's chemical precipitation) for all the collected sewage.income. IL might be expected that the costs as a share * No additional efforts for other pollutants beyondof GDP would be lower in Korea and Taiwan (China) those that come at zero or low cost as part of thethan in Thailand or the Philippines. However, the Business as Usual scenario or are by-products of par-Medium Cost scenario reflects differences in the cur- ticulate controls or sewage treatment.rent level of environmental performance in the differ- Adopting this strategy would bring large improve-ent economies, so that emission standards and costs in ments in environmental quality at a modest cost.the two richer economies are similar to those in Japan Average exposure to particulates should fall close to ortoday This illustrates how the cost of pollution con- below 50 micrograms per cubic meter in most cities,trols rises sharply as tighter emission standards are with many Chinese cities and Jakarta being the mainadopted. exceptions. The gradual decline in infant and child

Thus it is possible to define a core environmental mortality rates that will occur in any case would bestrategy for most of the region. This would consist of: acceleratecd by better provision of water and sanitation* Pursuing measures incorporated in the Medium Cost services, while the damage to children caused by expo-scenario-including emission standards equivalent to sure to lead would be greatly reduced.those in force in the early 1980s in Europe and theUnited States-that would reduce particulate emissionsfrom all sources but with a special emphasis on small Costs and benefitssources-households, small industries, and trans-port-that have the biggest impact on urban air quali- The costs of implementing this strategy are far lowerty These are particularly important in the economies of than the health benefits that it would generate. Indeed,Northeast Asia-China, Korea, Mongolia, and Taiwan this is a very conservative comparison because it(China). neglects other benefits from improvements in environ-* Ensuring universal access Lo clean water. mental quality including reduced economic losses and* Phasing out the use of lead in gasoline as rapidly as higher levels of amenity. Nor do the estimates takepossible. account of growth in real incomes, which will push up* Investing in urban sewers to ensure universal access the benefits in later years. For China the present valuefor urban households by 2020, combined with of the benefits-calculated using a discount rate of 12

A core strategy 29

percent-is much greater than the present value of the three Southeast Asian countries. Thus, to the extentcosts involved for both air and water measures (figure that priorities have to be set within the core strategy,12). these countries should do everything they can to

Air quality is so bad in China, and the adverse trends achieve universal access to urban sanitation as soon asso strong, that the core strategy is likely to leave aver- possible.age PM,, levels in many Chinese cities considerablyhigher than the goal of 50 micrograms per cubic meter.Thus an alternative High Cost strategy has been exam- From strategy to practiceined that is designed to meet this goal. The critical fea-ture of this strategy is the substitution of cleaner fuels Identifying the measures implied by the core strategyfor coal by all household and small industrial users. is just a starting point. It is seductively easy to think inThe costs and benefits of this strategy are also shown terms of specific physical controls and investments.in figure 12. Again, the benefits substantially outweigh Indeed, the definition of the alternative scenarios is,the costs. However, at the margin the incremental ben- inevitably, based in part on the adoption of specificefits of the measures in the High Cost strategy relative technologies-types of wastewater treatment, particu-to the core strategy are lower than the additional costs late or sulfur dioxide emissions if electrostatic precip-involved. As China gets richer, there is no doubt that itators or scrubbers are used, or vehicle emissionsthe High Cost strategy will generate benefits that when catalytic converters are fitted.exceed the costs involved, but there may be a case for The inference that environmental policies can bemaking a gradual transition from the core strategy to implemented by specifying emission standards or con-the High Cost strategy over, say, 10 years. trol technologies might appear straightforward. But

Figure 13 shows that the benefits of the core strate- more than thirty years of experience in rich industrialgy exceed its costs by large margins for both water and economies has shown that the results of this engineer-air pollution control measures in Indonesia, ing approach-relying on "command and control"Philippines, and Thailand as well as for air measures in instruments-are mixed at best and poor in manyKorea (which has already achieved the main targets of cases. The problem lies in the difficulty of ensuring thatthe core water strategy). Confirming previous conclu- emission standards are met consistently over manysions about the relative importance of water and air years of operation. No matter whether the technologygoals, the net benefits of the water expenditures sub- is simple or complex, this is fundamentally a manage-stantially exceed those for air pollution controls in the ment issue rather than a technical one.

Even where there is a strong social and politicalFigure 12. China: Costs and benefits of pollution commitment to improving environmental quality,controls managers will tend to neglect environmental measures(billions of 1997 U.S. dollars)mages tn nglc

unless there are direct incentives for consistently good250 performance. Such incentives may take a variety of

200 forms, but they can be categorized in three groups.T Threats of penalties. Firms may be threatened with

150 iBenefi * the imposition of heavy penalties for failing to comply150 Benefits ~~~~~~with environmental norms and emission standards.

| | * 0 Within companies, the evaluation and promotion ofmiddle and junior managers may depend on their per-

Ccosts formance in meeting the environmental goals laid50 down by senior management.

-* Direct economic incentives. A regular system of pollu-Air pollution Air pollution Water pollution tion charges, either applied to all pollution or to emis-Air pollution Air pollution Water pollution

(High Cost strategy) sions above some threshold, can ensure that compa-

30 Can the Environment Wait? Priorities for East Asia

Figure 13. Costs and benefits of pollution controls in four countries(billions of 1997 U.S. dollars)

100

80

60

40 Benefits

20

Indonesia, Indonesia, Indonesia, Philippines, Philippines, Thailand, Thailand, Korea,air air water air water air water Rep. of,

pollution pollution pollution pollution pollution pollution pollution air(High Cost pollutionstrategy)

nies perceive a direct benefit to their profitability from The command and control approach to pollutioncontrolling pollution. A variant is to adopt a system of policy has been almost entirely associated with atradable pollution permits, so that firms can buy or sell reliance orn penalties as the main incentive for compli-permits according to their circumstances and the mar- ance. In practice this is not credible-neither in theket price of the permits. This mechanism provides a context of- the relationship between environmentalstrong incentive to reduce the aggregate level of emis- agencies and the industries they regulate nor withinsions of some pollutant in the most cost-effective companies. Governments, environmental regulators,manner. and senior managers have many objectives that may* Cleaner production and pollution prevention. For some sometimes, or often conflict. Thus the threat of impos-production processes the discharge of pollution may be ing stringent penalties is largely a bluff that the regula-seen as an indicator of waste and inefficiency because tor or senior managers hope will not be called tooit represents a loss of valuable inputs of energy or mate- often. Occasionally, a severe penalty will be imposed torials. The cleaner production approach emphasizes the set an example-a factory closed for a period, a heavyadoption of technologies that minimize the generation fine levied, or a plant manager sacked. But what if thatof waste products and emphasize, where appropriate, factory employs 20,000 people or the manager is con-the recycling of heat, water, and material inputs. In sistently the most successful plant manager in the com-such cases managers have a strong incentive to moni- pany? Polit-ical and business considerations dictate thattor and control pollution because it is directly linked compromises must be found. These, in turn, lessen theto the overall efficiency of a plant's operations. likelihood that stringent penalties will be imposed and

These should not be seen as mutually exclusive thus the effectiveness of policies that rely primarily onoptions. Implementing a system of pollution charges such sanctions.or tradable permits may accelerate the adoption of The recognition that effective pollution policies mustcleaner production technologies. Similarly, it may be build on the cooperation of those who will be affectednecessary to adopt emission standards backed by strin- is gradually changing how measures are introduced andgent penalties for pollutants whose impact may be implemented in the rich industrial economies. At itshighly localized, so that economic incentives can best, the new approach involves a series of steps thatreflect differences in the damage caused by pollution define the basis for developing programs to implementin different locations. the broad strategies outlined above.9

A core strategy 31

- Focus on environmental quality rather than pollution Yet the key observation underpinning more market-

loads. The objective of all environmental policies oriented approaches is that the costs of controlling pol-should be to improve the quality of life of those who lution are far from uniform, even for similar plants. Soare affected by pollution. Thus the starting point of any long as there are differences in the marginal cost ofpolicy exercise should be the effect that alternative reducing discharges of a pollutant across sources, themeasures will have on relevant indicators of environ- total cost of controlling pollution can be reduced eithermental quality by setting different targets for different sources or by* Evaluate the cost-effectiveness of alternative measures allowing offset or trading arrangements under whichcarefully. What matters is the cost per life (or DALY) firms with high control costs "buy" reductions in emis-saved or, if this is too difficult, the cost per unit reduc- sions from firms with lower control costs. For pollu-tion in average exposure to fine particulates, sulfur tants that are difficult to monitor as well as those whosedioxide, or fecal coliforms. effect on the environment is poorly understood or that* Negotiate, revise, and negotiate. It is essential to build tend to bioaccumulate-for example, heavy metalssome kind of consensus-even if this may involve and persistent toxic chemicals-the costs of definingsome degree of reluctant acquiescence-before pro- and implementing non-uniform emission targets orceeding with the implementation of a program. As trading schemes maybe disproportionate to the poten-noted above, such a consensus will almost always be a tial savings. As a result the use of classic economicnecessary condition for effective compliance with and incentives for pollution control-including pollutionenforcement of the goals and measures that are adopt- charges and tradable permits-is most appropriate fored. Equally, important information and considerations mass pollutants discharged by many sources (particu-may only emerge during negotiations, which can lead lates, suspended solids, BOD, sulfur dioxide, nitrogento rethinking certain aspects of the initial proposals. oxides).i Design measures that incorporate and reinforce market * Monitor and revise goals progressively. Common senseincentives. This does not mean that there is no role for suggests that measures and policies should be revisedcommand and control regulations. However, these in light of their impact on environmental qualityshould not be the mainstay of any program and should However, this has often proved very difficult for regu-be designed to complement other measures that rely lators, industries, and environmental groups to accept.on economic and business instruments. Under an adversarial approach to pollution control,o Translate environmental goals into concrete perfor- environmental policies tend to be adjusted through amance targets. Plant managers, engineering consul- series of sharp changes rather than through the pro-tants, and financial intermediaries do not have any gressive and less costly upgrading of targets and per-direct control over environmental quality What they formance. The latter approach depends on establishingcan affect-and others can monitor-is the amount of some core elements of trust and consensus throughpollution discharged from a plant or a process. It is the negotiations about the objectives as well as the struc-core responsibility of the environmental authorities to ture of environmental policies.translate environmental quality goals into targets thatcan provide the basis for action. Such targets need notbe emission standards of the usual type. They could VWhat role for government?include total pollution loads such as the daily quanti-ty of BOD, phosphorus, or nitrogen discharged from a The "environment can wait" view implies a minimalistmunicipal wastewater system or the maximum daily approach to the role of governments in environmentalvolume of certain air pollutants emitted from all units policies. In part this may be a reaction to the excessesof a large power plant. and inefficiencies of environmental policies in* Combine uniformity and diversity. There is a strong Germany and the United States, as these are the mostintuitive appeal to the idea of requiring that industries prominent proponents of strict environmental policiesand other polluters meet identical emission standards. both domestically and in developing countries. Yet

32 Can the Environment Wait? Prioritiesfor East Asia

there are alternatives to the regulatory approach that * PromoLe and provide support for the developmenthas been taken by various rich industrial countries. of an agreed set of environmental priorities.

Many of the worst aspects of the U.S. system are a * Establish the basic strategy and framework for mea-consequence of detailed legislative interference and an sures to address these priorities, ensuring that theseadversarial structure of decision-making rather than of incorporate appropriate economic incentives wherethe use of command and control instruments. possible.Emission standards have been designed and imple- * Help negotiate agreements to tackle pollution ormented more flexibly in other countries, and the prac- other environmental probLems in critical sectors ortical outcomes are closer to what might be expected localities.under an incentive-based system than simple compar- * Monitor trends in environmental quality and, if nec-isons of regulatory rules might imply essary, take steps to enforce the implementation of the

Ironically, simple adherence to an "environment can core strategy and associated agreements.wait" policy can lead to higher regulatory costs and less An agency undertaking these responsibilities canefficient pollution policies. Pressures for some kind of operate with a small number of competent staff withenvironmental rules lead to the creation of weak envi- appropriate analytical and technical skills. Theseronmental agencies. Lacking resources and political should be supplemented by personnel seconded fromsupport, such agencies tend to enact regulations that sectoral ministries or businesses to work on specificare largely copied from the United States without problems for a limited time. A regular interchange ofincorporating any of the checks and balances that lead people between the agency and the sectors or busi-to more reasonable outcomes when the regulations are nesses that it monitors will help forge a broader con-applied. Even worse, ambient and even emission stan- sensus on environmental goals and measures, evendards may be established as declarations of lofty goals where the weight given to environmental concerns israther than practical instruments of policy low.

The result is huge regulatory uncertainty Most firms This approach to environmental policy-making hasrealize that the rules will probably not be enforced as been developed in relatively small countries with awritten. Still, new foreign investors may feel particu- strong tradition of commitment to social objectives-larly uncomfortable about routinely violating unrealis- for example, Chile, the Netherlands, and Sweden. Cantic regulations. If cleaner production techniques can be it work equally well in more populous and diverseapplied or the costs of pollution control are relatively countries with larger conflicts of interest between dif-low, these investors are likely to adhere to company- ferent interest groups?wide emission standards. In some cases, however, they Certainly, it is more difficult to reach national agree-may choose to locate elsewhere or to follow prevailing ments on priorities and policies in China or Indonesia(rather than regulatory) standards, so that the poten- than in Chlile or Sweden. But in most cases there is notial benefits of learning from foreign investors will be urgent need to develop national environmental policieslost. in large countries. In China it may be sufficient to con-

What most countries in the Asia/Pacific region need centrate on what is to be done in the province ofis small but effective environmental agencies. This is Sichuan or even the district of Chongqing. The role oftrue whether environmental concerns are given low or the national environmental agency might initially bemedium weight relative to other objectives of eco- restricted to setting the broad rules of the game andnomic development and industrial growth. The task of coordinating the process where problems spill oversuch agencies should be to discharge those functions provincial or local boundaries.that can only be undertaken by government, while After clue consideration, it may be agreed thatleaving most of the responsibility for implementation national standards are required for certain types ofto sectoral agencies, local authorities, and businesses. sources and emissions, which would imply an expan-

The core role of an effective environmental agency sion in the role of the national agency. However, the caseis to act as a coordinator and a referee. It should: for national standards is less obvious than is frequently

A core strategy 33

assumed. Consider the example of car emissions. Both 15-20 percent of each country's population, while theBrazil and Mexico recently adopted requirements to fit case for action elsewhere is much less clear. Nationalcatalytic converters to all new cars. This move was emission standards for cars may be convenient for vehi-prompted by concerns about poor and deteriorating air cle manufacturers, but the cost borne by consumers isquality in SaoPaulo and Mexico City, where the nation- large. Thus non-uniform policies and standards may beal or most powerful state environmental agencies are an appropriate response to local or regional differencesbased. But these metropolitan areas account for just in circumstances and priorities.

Implementing the strategyf:Who does what?

Once the role and mode of operation for an effective access to water and sanitation. Priority should be

environmental agency have been defined, it is possible given to rural water supplies in the short and medi-to indicate how the core strategy outlined earlier might um term, since individual arrangements for sanita-be implemented. tion are mostly adequate in rural communities. The

basic problem that has to be tackled is institutional

and financial rather than technical. What arrange-Immediate priorities ments will allow cooperatives or rural water compa-

nies supplying many low-income customers to be

As noted, the region's most pressing environmental viable?concerns are access to clean water and sanitation, par- Countries have responded to this challenge in dif-

ticulate pollution in urban areas, and the use of lead in ferent ways. Some rely on subsidized access to capi-gasoline. tal; others reduce investment costs through self-help

efforts. In. almost all cases the key is to get away fromAccess to clean water and sanitation the high overhead costs and often inappropriate tech-Improving access to clean water and sanitation is large- nologies of centralized water utilities. This may

ly a matter of investing in infrastructure. In urban areas involve developing water systems that are "goodmost of this investment will eventually be provided by enough" in terms of water quality and reliability

municipal utilities, since individual solutions are often (given the resources available) rather than meeting

unsatisfactory and even self-defeating in densely pop- the technical standards that might be applied to larg-

ulated urban areas. er, urban systems.In principle, publicly owned municipal utilities

should be able to generate the resources to undertake Particulate levels in urban areas

the necessary infrastructure investments. In practice, Measures to reduce urban exposure to excessive levelstheir performance almost everywhere has been of particulates fall into two groups. First are those thatdeplorable. Thus the best way to achieve rapid are appropriate for countries that depend on coal as aimprovements in urban access to water and sanitation primary source of energy for residential and small-scaleis to privatize these services under a regime that com- heating, industrial activities, and power generation.mits the new operators to meet specific targets for Second are measures that are directed at other sourcesexpanding the coverage of services. Since investments of particulates, notably emissions from motor vehicles

in sewage treatment will inevitably reduce the and the combustion of petroleum products.

resources available for network development, privati- Air quality in China, Mongolia, and (to a lesserzation arrangements and concession contracts should extent) Korea is largely determined by emissions fromrecognize that sewage treatment will lag behind sewage the use of' coal, so the first group of measures is morecollection for 10-20 years. important. for them (though other sources of particu-

Privatization combined with decentralization may lates should not be entirely neglected). Most other

also be an element of strategies to expand rural countries must deal with traffic- and transport-related

34

Implementing the strategy: Who does what? 35

emissions, so that they should focus on the second dioxide emitted per ton of coal used. Efforts to improvegroup of measures. the technical characteristics and efficiency of small boil-

ers and stoves would yield similar benefits.Changing the role of coal. Phasing out the burning of - The prices of different grades of coal must be adjust-

coal except in power plants and large boilers equipped ed to reflect the social costs of the air pollution theywith high-efficiency precipitators or filters is the only cause. This will provide an incentive to upgrade theeffective way to reduce the air pollution associated with quality of coal used or to switch to cleaner fuels.the use of coal. Germany, the United Kingdom, and the Objections on the grounds that coal is heavily used byeastern United States demonstrate this crucial point. low-income families should be rejected, since holdingAll other alternatives are merely palliatives that reduce down the price of certain fuels is an inefficient way tothe amount of pollution that is generated or distribute alleviate poverty or correct the distribution of income.it over a larger area. Thus a central question for China The alternative to relying on price incentives is toand similar countries is how to manage the transition penalize the use of coal in more indirect ways-forfrom coal to cleaner fuels. example, by requiring the use of smokeless fuel-or to

Note that this does not mean that China should spend more to bribe people to switch to cleaner fuels.neglect its only abundant energy resource. The United Thus coal prices should be raised progressively over aStates burns almost as much coal as China does, but period of five years by imposing an air pollution levyalmost exclusively in the power sector. The future of that is linked to the quality of the coal sold. Such a levyChinese coal lies in supplying vast quantities for power could be designed as a charge that is rebated to indus-plants, including combined heat and power (CHP) units tries and other larger users who remove most of thethat provide heat for industrial and domestic use as well particulates (and other air pollutants) from exhaustas power. Instead of burning coal, Chinese households gases before they are discharged into the atmosphere.and businesses will rely on gas, petroleum products, and Because many industrial plants will continue to usedistrict heat for cooking, heating, and process energy. coal as their primary fuel, they should be required to

Investment in the infrastructure required to replace install and maintain particulate controls-cyclones, bag-coal with cleaner fuels will be the main constraint on house filters, or precipitators. However, a significant por-the speed of the transition. Drawing on the skills and tion of the dust emitted by industrial plants is due to fugi-capital resources of private utilities would smooth and tive emissions resulting from inefficient equipment, pooraccelerate the process. China's natural gas reserves are maintenance, and wasteful operating practices. Uniformrelatively small, underdeveloped, and poorly located enforcement of existing pollution penalties combinedfor serving the main future demand in the northern with the use of better production technologies could dra-half of the country Ultimately, China will have to reach matically reduce the volume of dust discharged by indus-an agreement to buy large volumes of gas from Russia trial plants. The goal should be to reduce average emis-and build pipelines to connect to the main Russian sions per unit of output from most medium-size andtransmission system. Until then local gas networks large plants to no more than 20 percent of current levels.based on coal gasification can be developed.

The pricing of coal relative to alternative fuels may Controlling vehicle emissions. In countries where coal isbecome a barrier to phasing out coal from small-scale not a significant problem, the main issue is how best touses. Two parallel sets of measures will be required to deal with the smoke and other pollutants emitted byreduce pollution during the transition and to acceler- motor vehicles. Charcoal stoves or wood-burning appli-ate the rate of conversions. ances may have a substantial local impact, but their sig-* The quality of coal used by households and other nificance will decline rapidly as incomes increase andsmall-scale users must be improved by ensuring that wood fuels are displaced by more convenient alterna-only the highest grades of coal-priced appropriately- tives. Emissions from industrial plants and large boilersare supplied to retail and smaller wholesale customers. burning heavy fuel oil should be addressed using theThis would lower the amount of particulates and sulfur regulations and pollution levies described above.

36 Can the Environment Wait? Prioritiesfor East Asia

Inevitably, the main focus of measures to reduce par- Public sympathy for trucks and buses that emit a lot ofticulates in cities like Bangkok,Jakarta, and Manila will smoke will be limited, so it should be straightforward tobe vehicle emission standards linked to efforts to orchestrate a public relations campaign that puts pres-encourage the use of alternative fuels such as com- sure on o-perators to comply with emission standards.pressed natural gas or LPG, especially in buses andlight trucks. These measures should: Lead in gasoline* Phase out two-stroke motorcycles, perhaps with an Several countries in the region have already taken stepsincentive program for certain categories of high-usage to reduce urban exposure to lead by banning or rapid-owners who are prepared to scrap their existing vehi- ly phasing out the use of lead in gasoline. Comparablecles and replace them with four-stroke motorcycles, measures in the rest of the region would ensure that the* Adopt compressed natural gas-or LPG where com- impact of lead on children is dramatically reduced bypressed natural gas is not readily available-as the stan- 2010. There will be little resistance from oil companies,dard fuel for urban buses and, in due course, for light provided they are permitted to recover the small addi-trucks used primarily in urban areas. tional costs of supplying unleaded rather than leaded* Implement much stricter vehicle inspection and gasoline--typically about $0.02-0.03 per liter.maintenance programs for diesel-fueled vehicles, with All that is required is a decision by national govern-random street inspections of any commercial vehicle ments on how fast the phase-out should occur andthat is seen emitting smoke. what standards should be met by unleaded gasoline-* Gradually adopt emission standards for diesel- for example, the allowable percentage of benzene andfueled vehicles corresponding to those recently intro- other aromatics. Where there are concerns about theduced in Europe, which effectively require the use of durability of the existing car fleet when fueled withadvanced "lean burn" engines and particulate traps. unleaded gasoline, it is possible to specify the use of

Environmental authorities usually find it easy to additives that act as lubricants in place of lead.develop emission standards for new vehicles. Theenforcement of limits on emissions from the existingvehicle fleet, however, will make the most difference to Medium iterm concernsair quality over the next 5-10 years. The quality andregularity of maintenance is probably the main factor Implementing policies to manage water resources bet-determining the amount of smoke emitted by diesel- ter-especially by reducing industrial discharges offueled trucks and buses (the main sources of particu- heavy metals and organic chemicals and by achievinglate emissions). Frequent, random testing is the only appropriate targets for the treatment of municipalway to ensure that vehicles comply with emission stan- wastewater-will involve efforts phased over the nextdards while operating. Failure to pass these tests two decades. Priority should be given to areas where theshould result in a fine, and the owner should be oblig- damage caused by poor management is already havinged to take the vehicle off the road until it can pass the a sizable impact on health or economic activity.test (after maintenance).

An inspection program that is designed to take Industrial discharges of heavy metalssmoke-emitting vehicles off the road will have an imme- and organic chemicalsdiate effect and will signal the commitment of the There are increasing concerns in China and some otherauthorities to deal seriously with urban air pollution. countries in the region about the accumulation ofAlthough operators of commercial vehicles will strong- heavy metals and persistent organic chemicals in riversly oppose such programs, their claims of heavy costs are and groundwater. This is a particular problem when-generally exaggerated. Proper maintenance typically ever water flows are very low during the dry season,pays for itself in lower operating costs and fuel con- either as a result of upstream water abstractions orsumption, and it is not difficult for an efficient operator management regimes or because of climatic and water-to ensure that all vehicles undergo regular maintenance. shed characteristics. In such cases the quality of water

Implementing the strategy: Who does what? 37

available for urban drinking water may be severely cal contamination of groundwater or water that is usedcompromised by current discharges of industrial efflu- for irrigation or fisheries can lead to serious outbreaksents or by metals and persistent chemicals in river sed- of cholera and typhoid.iments. Examples include industrial development There are few ways to address this issue other thanupstream of major cities in the Huai basin in China, to treat sewage to remove suspended solids, BOD,along the Chao Phraya River in Thailand, along the nutrients, and microbiological organisms. TreatmentBrantas River upstream of Surabaya, and in Jabotabek technologies are similar for industrial and domesticupstream of Jakarta. wastewater, though the concentration of different pol-

While cleaner production technologies may reduce lutants may vary greatly Simple modifications of con-discharges of these pollutants from some industries, ventional primary treatment that involve dosing thethe primary response must be to rely on the pre-treat- effluent with chemicals can improve the operating per-ment of industrial wastewater before it is discharged to formance and removal efficiency at a very low cost. Ifsewers or rivers. Pre-treatment is relatively cheap such plants are properly designed, their effluent can bebecause it relies primarily on sedimentation or the disinfected using chlorination or ultra-violet treatmentaddition of chemicals to remove pollutants. Properly if microbiological contamination is a serious concem.operated pre-treatment systems may enable firms to Effluent discharge fees that reflect pollutant concen-recover valuable materials-for example, in the tan- trations should be applied to all sources-industrialning and metal finishing industries-or to recycle plants as well as municipal wastewater utilities. However,process water, thus reducing costs and sometimes the effects of domestic sewage are similar whether it isimproving the quality of output. However, such sys- collected by sewer networks or discharged in the open.tems place increased demands on managers and work- It would not make sense to create a disincentive for theers, so they may be difficult to operate consistently in development of sewer networks by collecting dischargesmall and medium-size enterprises. fees-directly or indirectly-only from those connected

Simple regulations requiring all firms in certain to sewer systems. There are two options:industries to pre-treat their wastewater before dis- * Incorporate discharge fees in the price paid for watercharging it are likely to be the most effective way to deal as a form of presumptive levy, which can be rebated bywith this problem. Incentive-based regulations are dif- lowering sewage charges if sewage is treated before itficult to design and implement, and the range of pos- is discharged.sible controls is quite limited. The main problem will * Waive the payment of discharge fees while sewerbe enforcement. Checking whether pre-treatment networks are being developed, so that they are gradu-plants have been installed is easy, but ensuring that ally applied once the share of the households connect-they are operated properly and consistently is much ed to sewers exceeds some appropriate threshold-say,more difficult. Encouraging and pursuing complaints 60 percent or 80 percent.from the public or competitors about discharges The second option is simpler and will encourageshould be one avenue for enforcement. Random spot water utilities to begin treating the sewage that they col-checks with severe penalties for repeated failures to lect as their sewer networks near completion. In bothcomply with the regulations are another. Ultimately, cases special provisions will be needed to deal with dis-however, the issue is one of education and persuasion, charges of industrial wastewater to sewers, but it is nor-because all enforcement mechanisms will break down mal to impose special sewer discharge fees based on theunless most firms comply voluntarily concentration and composition of such discharges.

Treatment of municipal wastewaterThe effects of poor water quality resulting from exces- Longer term issuessive levels of organic materials and nutrients are usu-ally less serious than those posed by heavy metals and The pollutants that cause acid rain-sulfur dioxide andpersistent organic chemicals. However, microbiologi- nitrogen oxides-are mass pollutants that are dispersed

38 Can the Environment Wait? Prioritiesfor East Asia

over large areas and whose emissions are fairly easy to levels. Also, they should be fully applied to power andmonitor. Thus they are ideal candidates for incentive- heat plartts as well as other major non-industrialbased regulation. China, where acid rain causes the sources. Smaller sources using coal and petroleummost concern, already applies pollution levies to indus- products can be dealt with by imposing a tax on the sul-trial discharges. The levies on sulfur dioxide and nitro- fur content of fuels. This tax may be treated as a pre-gen oxides could be substantially increased and applied sumptive pollution levy that is rebated to firms whoto total emissions rather than those above permitted monitor their emissions and have paid levies on them.

Annex Will economic growthbe clean or dirty?

The effect continued rapid economic growth will have presented in chapter 2 of the Asian Developmenton environmental quality in the industrializing Bank's Emerging Asia study For China the assumptionseconomies of the Asia/Pacific region depends on the were taken from a macro general equilibrium modelanswer to three questions: developed to analyze China's economy in the early part* How will total pollution loads change? of the twenty-first century Average annual growth rates* How will changes in pollution loads translate into of real GDP for 1995-2020 are projected to be 6.5 per-higher or lower ambient exposures to different pollu- cent for China, 6.0 percent for Indonesia, 4.4 percenttants in different cities and regions? for Korea, 6.5 percent for the Philippines, 4.1 percent* What effects will alternative policy regimes have for Taiwan (China), and 5.5 percent for Thailand.pollution loads? The macroeconomic assumptions provide the basisThe scenarios outlined in this book are based on a core for projections of demand for the output produced byset of economic and technological assumptions. Broad each sector. The analysis starts from the current input-conclusions about trends in loads and exposures are output table for each economy and assumes that aver-robust, but it would be wrong to rely on specific num- age input-output coefficients will change in the futurebers, since any attempt to look 25 years into the future under the influence of two sets of factors:is subject to massive uncertainty. * The capital stock accumulated as a result of new

The key assumption is that without specific environ- investment has the characteristics of technology avail-mental policies beyond those already in place, average able elsewhere in the world. The relevant input-coeffi-emissions per unit of economic activity will decline as a cients are represented by the 1990 input-output table forresult of replacing old, dirty capital stock with newer, Japan. Further, it is assumed that there is secular tech-cleaner, and more efficient technologies. This is basical- nical progress that is manifested as a reduction in aver-ly a "catch-up" phenomenon in that new capital equip- age inputs of materials, energy, labor, and capital per unitment in richer countries incorporates a variety of envi- of output for all new capital in the industrial sector.ronmental improvements as standard features at little or These trends may reflect an increase, for example, in theno additional cost. Going beyond such zero or low-cost average quality of products rather than in the averagemeasures would require more specific and effective envi- inputs required per unit weight or volume of output.ronmental policies. These are already being followed in * There are limited opportunities to change averageparts of the region-for example, in Korea, Malaysia, input-output coefficients for the existing capital stockand Taiwan (China)-but countries like China, in response to domestic price changes (including pol-Indonesia, and the Philippines are much further behind. lution charges that alter the effective prices of energy

and materials) in accordance with short-run labor-energy-materials production functions. However, in

Macroeconomic growth rapidly growing economies the contribution of the cur-rent capital stock to filling future demands is quite

The key assumptions about economic growth for small after 2005. For total pollution loads it may beeconomies other than China are based the projections more important because average emission coefficients

39

40 Can the Environment Wait? Prioritiesfor East Asia

for new capital are usually much lower than those for converge to those that are achievable through zero- orcurrent plant and equipment as a result of technical low-cost environmental improvements. Typically, theprogress and stricter environmental controls in the rest emission coefficients for capital that incorporates zero-of the world. Stricter environmental policies may lead or low-cost environmental improvements are 25-50to earlier scrapping of capital that has become techni- percent of those for the existing capital stock. Theycally and environmentally obsolescent, with corre- reflect the kind of emissions performance that wassponding reductions in emissions in the middle years required for new investments implemented in the richof the period examined. industrial countries in the early 1980s. This falls con-

Energy conservation within the industrial sector, siderably short of what is required under, for example,changes in patterns of economic activity and house- current IJ.S. New Source Performance Standards orhold spending, and adjustments in response to relative what is achievable with best available technology.price changes all play a role in determining the growth However, compliance with current U.S. or Germanand composition of final demand for energy. As in emissions standards is certainly not costless and, in anyother industrializing economies, the combination of case, a whole infrastructure of expertise and monitor-rising incomes and technical change will result in rapid ing is required to ensure that these standards are metgrowth in the consumption of electricity over the next in practice.25 years. Thus total demand for energy will depend on The central idea of the Business as Usual scenario isinvestments in power generation. The specific assump- that it allows for those improvements in environmen-tions for China were based on a detailed study of tal performance that accompany other changes that areoptions for the power sector, while in other economies in the interest of individuals or enterprises. The adventit was assumed that recent trends toward greater of cleaner production techniques, the redesign of exist-reliance on natural gas would continue together with ing technologies to use less materials and energy, theimprovements in overall efficiency of new thermal gradual shift toward higher value-added products andpower plants. activities, and other such changes mean that emission

coefficients will decline as the economies grow even inthe absence of any concerted effort to address envi-

What is Business as Usual? ronmental problems.There are many common misperceptions about the

The simplest basis for constructing a set of Business as appropriate nature and role of environmental regula-Usual projections would be to assume that average tion in industrializing countries, most of them basedemission coefficients per unit of output will remain on unhelpful comparisons with arrangements in cer-constant-or, perhaps, would follow some secular tain rich countries. In modeling the impact of newdownward trend-over the period. However, this investment and better technology on emissions underwould clearly overstate future emissions. the Business as Usual scenario it is assumed that theseImprovements in technology and shifts in the compo- are operated so as to realize the full benefits ofsition of output within and between sectors are likely improved efficiency and less pollution. Good perfor-to mean that emissions will grow less rapidly than mance is not a matter of waving a magic technologicalindustrial output, even in the absence of any explicit wand. It requires continuous attention to detail, train-or effective environmental policies. The analysis here ing, and managerial commitment. Open markets andemphasizes the role of new capital investment in the competit:ion will encourage firms to avoid the mostgrowth of total factor productivity. By extension, new obvious kinds of waste and inefficiency, but externalinvestment will be a major route by which improve- environrnental oversight will usually be necessary toments in environmental performance occur. ensure that good practices are implemented consis-

To allow for such changes, each of the scenarios tently and effectively Since it will take years to devel-assumes that average emission coefficients for the post- op the systems required to utilize and monitor the per-1995 component of the capital stock in each sector formance of new capital and technologies, the analysis

Annex Will economic growth be clean or dirty? 41

assumes that the full environmental benefits of * High Cost scenario. In many settings the marginal costexpanding and replacing the capital stock will be real- of pollution abatement rises sharply once emissionized only gradually This is likely to be particularly reductions of 60-80 percent have been achieved. This isimportant in China, where resistance to the rapid because it is necessary to go beyond standard and well-adoption of imported capital equipment and tech- proven technologies to much more expensive optionsnologies is often strong. that may require substantial capital investment as well

as a highly trained workforce. The High Cost scenariogoes beyond the Medium Cost scenario in assuming that

Medium and High Cost scenarios emission standards correspond to the concept of bestavailable techniques that has been adopted by the

Many specific options might be adopted by govern- European Union as the basis for its environmental poli-ments wishing to address the implications of the cies. EU legislation defines the goal of such policies asBusiness as Usual scenario. The scenarios examined the attainment of a "high overall level of protection forhere have been designed to examine the improvements the environment." The concept of best available tech-that would result if one of two alternative strategies niques is defined and used in the EU's Directive onwere to be followed. These are characterized as: Integrated Pollution Prevention and Control, which was- Medium Cost scenario. In addition to the environ- formally adopted in September 1996. Note that the con-mental improvements that would flow under the eco- cept of best available techniques is not identical to thenomic reform scenario, the Medium Cost scenario concept of "best available control technology" because itassumes that new environmental regulations and places much greater emphasis on waste prevention,incentives are adopted to ensure that industrial plants operational practices, and maintenance, and relies lessachieve emission standards broadly equivalent to those on end-of-pipe control options. As such, it is much morein force in the United States and Europe in the early relevant to industrializing countries, which may face1990s. Pollution is reduced by implementing other severe constraints on capital resources and which needlow- and medium-cost measures such as the gradual to invest in training and cleaner production technologiesdevelopment of sewer networks with primary treat- in developing cost-effective approaches to pollutionment of wastewater and the expansion of gas and dis- management. In addition, the scenario assumes thattrict heating networks as an alternative to the use of other, more expensive measures that deal with emissionscoal for household heating. from dispersed sources will be implemented.

Notes

1. See Gordon Hughes, "Environmental Management or 5. See J. Hammer and S. Shetty, East Asia's Environment:Pollution Control?" (World Bank, Environment Department Principles and Prioritiesfor Action (Washington, D.C.: World

Working Paper, Washington, D.C., 1997). Bank, Discussion Paper 287, 1995); and Asian Development

2. Committee onJapan's Experience in the Battle against Bank, Emerging Asia (Manila: ADB, 1997).

Air Pollution, Japan's Experience in the Battle against Air 6. See Cj. Murray and A.D. Lopez, eds., The Global

Pollution (Tokyo: The Pollution-Related Health Damage Burden of' Disease (Cambridge, Mass: Harvard UniversityCompensation and Prevention Association, 1997). Press, 1996).

3. Committee onJapan's Experience in the Battle against 7. See, for example, the survey and analysis for SantiagoAir Pollution, ibid. in Bart Ostro, A Methodology for Estimating Air Pollution

4. Different sources quote very different estimates of the Health Effects (Geneva: WHO, Office of Global and

share of Thailand's population living in urban areas-from Integrated Environmental Health, 1996).

20 percent to 38 percent for 1994-95. The lowest estimates 8. For more information on the technical and economic

reflect a much narrower definition of urban areas than is issues involving in phasing out the use of lead in gasoline see

used in other countries. For comparability with other coun- Magda Lovei, "Phasing out Lead from Gasoline: World-Wide

tries the high estimate of 38 percent was used in this analy- Experience and Policy Implications," (World Bank,sis because it corresponds most closely with what would be Environment Department Working Paper 40, Washington,expected given Thailand's employment composition and D.C., 1996).

GDP per capita. 9. See Gordon Hughes, ibid.

42

THE WORLD BANK

lXshigSI I 1).(. 21433 I .S\

I clcplhoic: 2012-477-1234

IFicsinillc: 20)2-4771-6391

I1ccx: \ICI 64145 WORJI)I&\NK

\ICI 248423 WORLI)I; NK

W\orldl \\ildc \\.h:htp \\\0,-Ih.,l,,g

F-im.til: hooks(u xvmjdhami.oi-

ISBN 0-8213-4158-8

COVER DESIGN BY JEFFREY KIBLER THE MAGAZINE GROUP