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Enviro-economic Carrot
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Environmental protection authorities are planning to spread Shanxi's new pollution control method nationwide.


The coal-rich north China province, the country's energy base but also a victim to pollution, has seen its environmental protection bureau and banking regulators combine to control polluting enterprises through the leverage of lending.


In the cooperation mechanism, banks will tighten lending to enterprises that fail to pass the environmental impact assessment.


Shanxi took action in May and about 50 enterprises were boycotted by local banks. Similar practice has been adopted in some other places.


In Jiangyin, Jiangsu Province, a "stick and carrot" policy is put in place, in which enterprises that strictly abide by environmental rules enjoy advantage in obtaining bank loans, if they meet other necessary lending criteria. Those that fail to do so will suffer a lending block.


Jiangyin's method may be more effective as it introduces an incentive mechanism as part of the environmental-banking cooperative drive. So far, these new innovations reportedly have worked well. The preliminary results show the country is capable of figuring out something new and effective in its uphill battle against environmental pollution.


The new trend brings hope that we may rein in pollution in the years to come.


Pollution has proved a thorny problem that is hard to tame as our economy steams ahead.


Economic growth has often been put on top of local development agenda, with environment relegated to a much lower place, if not completely ignored.


Working well in the pilot regions, however, does not mean the initiative will continue to work as expected after it is spread to the whole nation.


The situation will become much more complicated when more enterprises, local governments, banks and environmental protection bureaux are involved.


In the first place, the local governments in the successful examples so far have obviously played a constructive role. They are willing to support the move to clean the environment even if local economic growth may suffer temporary setback.


It is justifiable to doubt whether more local governments would follow suit and put environmental protection ahead of economic expansion, which seems a more accountable factor for their political career.


Banks, on the other hand, play no less of a role. If the environmental drive is to be implemented nationwide, the banks may not choose to lend to a good number of unruly enterprises, which means they must cut their lending targets. This may affect their lending plan.


(China Daily November 6, 2006)

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