Environmental Resources and Economic Growth

This chapter assesses the nature and degree of environmental degradation and resource depletion in China and their relationship to economic activity and environmental policies. We describe regulatory and other policies and consider their political economy determinants. Inasmuch as this objective can only be partially achieved, we hope to contribute to a research agenda for environmental and resource economics in China. Claims have been made that the damage to China’s environment is significant and has had a negative influence on economic growth. Critics argue that uncontrolled waste of resources and environmental degradation have offset much of China’s economic growth over the past twenty-five years. Accordingly, a secondary objective of this chapter is to address whether environmentally augmented accounting substantially reduces the magnitude of China’s economic gains. We begin by reviewing evidence on air and water pollution, including environmental Kuznets curves (EKCs) for three major air pollutants, in the “Pollution” section. The section on “Natural Capital” follows with an overview of the country’s natural resources, and how their quality and quantity have changed over time. In the “Natural Resources Kuznets Curve” section, we develop a theory regarding a country’s natural resource Kuznets curve and apply it to empirical data on the value of China’s natural resource degradation over a thirty-year period. To formally address the question of China’s growth rate, we extend green accounting theory to facilitate a comparison of conventionally measured net national product (NNP) and green NNP (GNNP). The section on “Green Net National Product” provides a discussion of forces that cause GNNP to grow at first more slowly but then faster than NNP. Available estimates of China’s GNNP conform to these predictions. An indicator of sustainability similar to genuine saving, termed genuine capital accumulation (GKA), is shown to be dramatically increasing in the “Genuine Capital Accumulation” section. The section on “Policy Environment” reviews the current