I. INTRODUCTION

　　1.The China Council for International Cooperation on Environment and Development ("the Council") was established by the State Council of the Chinese Government in April 1991 to facilitate cooperation between China and the international community in the fields of environment and development.

　　2.The Council is a high-level advisory body that makes proposa1s for consideration by the Chinese Government on the integration of environment and development. It has so far held five annua1 meetings in the First Phase and five annual meetings in the Second Phase. A Third Phase of the Council has been approved, hence the Council will meet again in the fall of 2002. The Council assists in developing an integrated, coherent approach to environment and development and encourages systematic cooperation between China and other countries. The Council also seeks to demonstrate its recommendations through pi1ot projects.

　　3.The Council is a non-governmental body but with strong government involvement. Currently the Council comprises 21 Chinese Members and 30 International Members, all chosen for their expert knowledge and their experience.

　　4. The Members of the Council attended the 5th Meeting of the 2nd phase at the invitation of Wen Jiabao, Vice-Premier of China's State Council.

　　5.The host institution was the State Environmental Protection Administration (SEPA). SEPA has been made responsib1e for inter-ministerial coordination and for supporting the activities of the Council. It has established a Secretariat to maintain and develop international and domestic contacts and to ensure follow-up within China to the suggestions made by the Council, as well as to deal with the routine work of the Council when it is not in session. The Secretariat is assisted by the International Secretariat which is directed by Prof. Earl Drake, is located at Simon Fraser University in Vancouver and is funded by the Canadian International Development Agency (CIDA).

　　6. This Summary Record of the 5th Meeting of the 2nd Phase of the Council was prepared for the International Secretariat by Ms Lucie McNeill on the basis of more detailed notes recorded during the Meeting. The Summary Record represents the International Secretariat's interpretation of the discussions and not necessarily the views of all the participants. To ensure frank and direct exchanges, it has been agreed that the Summary Record of the Meeting should present an overview of the discussions without attribution to individual speakers. 

　　II. AGENDA ITEMS

　　ITEM 1. APPROVAL OF NEW COUNCIL MEMBERS AND WG CO-CHAIRS

　　7. A number of new Chinese and international Council members and Working Group

　　(WG) Co-Chairs were acclaimed. The April 2001 launch of the Task Force on Enterprise Development and Environment was announced.

　　ITEM 2. ADOPTION OF THE AGENDA

　　8. With Chairman Wen Jiabao presiding, the agenda for the 5th Meeting of the 2nd phase was accepted as presented.

　　ITEM 3. OPENING CEREMONY

　　9. With Chairman Wen Jiabao presiding, the following participants made statements to mark the opening of the Meeting: 

　　1) Council Chair Wen Jiabao, Vice Premier of China's State Council

　　2) Vice-Chair Len Good, President, CIDA

　　3) Vice-Chair Xie Zhenhua, Minister, SEPA

　　4) Council Member Joseph Eichenberger, Vice-President of the Asian Development Bank (ADB)

　　10. In the course of these remarks, the following points were made: 

　　11. China has achieved great progress in environment and development during the past five years of the 20th century. The Chinese government is determined to continue on the path of economic growth through sustainable development. In the 10th Five Year Plan (FYP), targets are set for reducing ecological degradation, reforestation, curtailing pollution and other goals. The CCICED's Second Phase drawing to a close, it is time to summarize the lessons learned. China has approved a Third Phase for the Council and hopes it can play an even greater role in the future.

　　12. By the end of the Meeting, the Council needs to review and discuss WG and task force reports, agree on recommendations to the government of China (GOC) and hold discussions on the Third Phase of the CCICED. The Council also needs to mark its past achievements as Phase Two concludes. The Council has tackled a broad array of complex problems. The CCICED Self-Assessment Report demonstrated that China's decision-makers take Council advice into account- a tribute to the quality of the work done. There is an increasing interdependence among countries; environmental problems are often global in scope and require global solutions. Mutual understanding becomes critical to success and the Council contributes to this.

　　13. The Council is now ten years old - it has seen China go through major economic growth and structural reforms while increasingly emphasizing environmental protection and sustainable development. China now pays attention to pollution control and conservation. It has shifted from "end-of-pipe" and point source pollution control measures to more holistic approaches including cleaner production, industrial restructuring, regional and watershed environment planning. China makes greater use of legal, economic, technical and administrative measures to protect the environment. A new environmental industry is emerging to supply the necessary goods and services for protection, prevention, clean up and restoration. Many of these changes reflect the past contributions of the Council.

　　14. There is a common understanding among Council members of the environment and development challenges and opportunities facing China. Charting a Sound path to wider prosperity and a healthy environment is difficult and urgent, in China as elsewhere. But lessons learned over the past twenty years provide decision-makers with better insights, knowledge, tools and public policy instruments. High economic growth in China has been achieved often at the expense of the environment, burdening future generations. Accession to the World Trade Organization (WTO) adds to the present challenges, but will bring new opportunities for environmentally sustainable growth. The GOC has made significant commitments to address environmental concerns. Improved environmental management is a key objective of the 10th FYP. China is also working on developing a strategic partnership with the Global Environment Facility (GEF), policy environmental impact assessments (EIA) and market-based instruments.

　　15. In its Third Phase, the Council should make full use of its access to decision-makers by exploring more systematically the interface between scientific knowledge and the formulation of public policy. There should be greater efforts to link up with other multilateral and bilateral donors supporting the GOC's efforts in the area of environmental protection.

　　ITEM 4. PRESENTATIONS BY INTERNATIONAL ORGANIZATIONS AND KEY MINISTRIES

　　16. Council Chair Wen Jiabao, followed by Vice-Chair Len Good, presided over the presentations made by the following speakers:

　　1) Shafqat Kakakhel, deputy executive director of the United Nations Environment

　　Program (UNEP)

　　2) Kerstin Leitner, Resident Representative of the United Nations Development Program (UNDP)

　　3) Gao Guangsheng, Deputy Director General, State Development Planning Commission

　　(SDPC)

　　4) Yi Xiaozhun, Director General of International Cooperation, Ministry of Foreign Trade and Economic Cooperation (MOFTEC)

　　5) Wang Guangtao, Vice Mayor, Beijing Municipal Government

　　6) Chen Yiyu, Chinese Academy of Sciences (CAS)

　　17. During the presentations, the following key issues were underlined:

　　18. Preparations are being made for the World Summit on Sustainable Development (WSSD) to be held next year in Johannesburg, South Africa. The state of the global environment is deteriorating in all major areas: climate change, fresh water depletion, the threat to biodiversity, deforestation, the spread of chemical pollutants and others. Globalization is irreversible but could be made to work to broader advantage. Poverty and environmental degradation are linked and mutually reinforcing. Policy options have to be found to address this nexus. But the economic slowdown, exacerbated by the events of September 11th 2001, will pose an additional challenge to the world community.

　　19. The Council is a successful model which should be studied at the WSSD and put in practice in other countries. Findings from the Council's Self-Assessment Report should be highlighted: The Council functions as a multi-dimensional communication channel; the Council is responsive to China's needs; the Council provides China with a forum to explore new approaches; China is increasingly linking economic development with the environment. The UNDP can trace to the Councils Jilin Province Biomass project, Wind Resource Concession study and the Fuel Cell Bus Demonstration project. The future challenge for the Council is to take into consideration the nexus of poverty and environmental degradation, as well as the nexus of environmental governance and sustainable development.

　　20. The 10th FYP was approved on 15 March 2001. Key environmental highlights include: the creation of "green food" production bases, energy conservation and pollution prevention in industry, water conservancy and interbasin water transfers, the pursuit of the Western Development Strategy (WDS), improved urban environments, the adoption of environmental technologies and funneling foreign capital to environmental projects. Specific targets have been set for population, forest cover, emission volumes and resource conservation. The GOC will pursue policies of family planning, sustainable resource use, environmental protection, conservation and restoration. Major investments have been planned in key areas of "ecological construction". The legal and administrative systems underpinning the GOC's abilities to achieve its goals will be strengthened and streamlined.

　　21. China will accede to the WTO at the Fourth Ministerial Conference to be held in Doha, Qatar in November. WTO membership will enhance trade and investment flows to and from China by reducing tariffs and removing trade barriers. China's system of laws and regulations is being updated to conform to WTO rules. China is committed to WTO compliance. Despite the present global economic slowdown, accession to the WTO represents an important opportunity for China.

　　22. Beijing has promoted the idea of "Green" Olympics in order to combine the goals of hosting the summer Olympics in 2008 and the need to improve the urban environment for city residents. Improvements include road building, sewage and waste treatment, the "greening" of the cityscape through landscaping and heritage conservation. The government is designing an Ecological Environment Plan as part of its Olympic Action Plan, which includes prevention of water and air pollution, population control in the city core, development of satellite towns, promotion of cleaner production. Increasingly, environmental considerations will be included in government decision-making in all areas.

　　23. A proposal for a new Task Force has been put forward for Phase Three. The Task Force would focus on agricultural non-point pollution. Agriculture is increasingly a source of pollution through the widespread and sometimes excessive use of fertilizers. There is a need to better study the sources of this non-point pollution, its environmental impacts and the policies needed to control it.

　　24. At the conclusion of the presentations, Vice Chair Xie Zhenhua thanked members of the Council and WG Co-Chairs for their contribution to the cause of environment and sustainable development in China during the Second Phase of the Council. Members and Co-chairs were presented with commemorative plaques and a group photograph was taken.

　　ITEM 5. REPORT ON THE WGs COORDINATION MEETING

　　

　　25. With vice chair Len Good presiding, Council member Arthur Hanson summarized the coordination meeting of the WG Co-Chairs held on October 12th. His presentation highlighted the following issues:

　　26. The WG Co-Chairs welcome the Third Phase of the CCICED and wish to present to Council four key messages: The CCICED provides China with work of high value and unique quality; it is important to recognize, maintain and strengthen the WGs' assets; WGs respond to the needs of China's leaders through rigorous scientific work; there is a need to improve the funding arrangements of the WGs'. 

　　27. WGs have achieved the following results over the past ten years: WGs have been catalysts for integrated action, promoting horizontal communication among government ministries and agencies; WGs have helped scout pathways to meet multiple objectives: WGs have addressed new topics such as WTO accession and the Clean Development Mechanism (CDM): WGs have introduced to China new analytical techniques.

　　28. The WGs are of value to China because: top world experts have signed on as WG members: WG advice goes to the highest decision-making levels; WG activities involve local decision-makers; transformative thinking and action are introduced.

　　

　　29. In the Third Phase of the CCICED, China must make the best use of the best people. The WG formula is useful because: it provides continuity, which is essential in attracting the best people and in building quality working relationships; it balances high priority policy needs with the necessary freedom to explore basic issues; it uses expertise across themes.

　　30. In shaping the Third Phase of the Council, the following issues need to be taken into account: the "one size fits all" approach does not work well - some key areas need long-term commitment while the Council needs the flexibility to respond rapidly to certain requests; each topic area should be considered on a case by case basis; a diversity of approaches in terms of pilot projects and scientific inputs should be explored.

　　31. The WGs co-chairs commend to the Council the following recommendations for

　　Phase Three:

　　1) The capacity of the Secretariat to extract key research lessons, provide an overview and synthesis of the work, to coordinate activities, to communicate and disseminate results and to support WGs and Task Forces should be strengthened.2) Council members should be more involved with specific WGs and Task Forces.3) Council communications with senior leadership should be better shaped, distilled and targeted. Information about the Council and its results should be more broadly disseminated.

　　4) WG and Task Force funding should be adequate, more equitably and rationally distributed, expended efficiently; donor support should not drive work priorities.

　　ITEM 6: COUNCIL GENERAL DEBATE

　　32. Council vice-chair Len Good presided over the members' general debate. The following views were expressed by Council members:

　　33. Members of the Council were invited this year by Gansu Province and Lanzhou to tour the area, learn about its challenges and witness the Western Development Strategy in action, particularly in the area of "ecological construction". The three members that responded to the invitation were briefed on relevant issues and visited reforestation programs in Dingxi County, a desert environment institute and the Lanzhou air quality improvement project. The members express their gratitude for Gansu's hospitality and its preparation of an informative program.

　　34. It is key for the Council to spend sufficient time to discuss its future, determine the issues that have yet to be addressed and how best to tackle them. Two examples of important issues are as follows: the development of the environmental industry in China very much depends on the existence of an enabling environment terms of international trade; and responsibilities for key areas such as transport are shared among many departments and agencies in China. Clear messages must be sent to the government, but SEPA may not have the heft to bear this message.

　　35. Solving environmental problems in China requires a pragmatic approach linking government agencies and local people. To promote biogas energy, the Guangxi government provided peasants with biogas pits, but there is not enough organic material in the area to generate biogas. People in urban areas are now contracting peasants to raise pigs, which then provide material for the pits. In counties near Beijing, peasants have been resettled in new villages which also include tourist facilities, providing the resettled peasants with a source of income.

　　36. The Council has been set up to provide assistance to the GOC. It is admirable that the GOC would agree to create, support, listen to and allow top access to this organization. The Council must continue to be guided by what the GOC considers priorities. Therefore it is up to the GOC to determine whether or not there will be WGs and/or Task Forces. Perhaps in future meetings Council members could have a session together, without advisors or stand-ins so what has been done by the WGs can be reviewed and to verify whether or not the hierarchy of recommendations is correct.

　　37. The Third Phase of the Council's work could perhaps take a different shape.

　　The Council could have a board of sponsors or patrons-with a Chinese majority and without executive powers-that could meet once per year to oversee its operations. The Council under this Board of Sponsors would be smaller, have executive powers, meet twice a year and for a shorter period of time. This smaller Council would meet on its own, set priorities and appoint WGs or Task Forces for set terms and with clear terms of reference (TORs). A small executive committee or a strengthened Secretariat would prepare the meetings and sort out the reports. Reports shou1d be kept short and be policy oriented. These changes would make the Council more effective and restore its original role.

　　38. The interaction between economic, social and environmental issues must be recognized. Integrated planning and cross-sectoral approaches are called for, requiring horizontal relationships between ministries and disciplines. Integrated planning for sustainable development can be coordinated by a high-level government body and supported by policy instruments such as taxation and public infrastructure; economic mechanisms such as models and indicators can be used.

　　39. There are two main outcomes from the next Phase of the Council: recommendations to deal with short term issues, and more strategic proposals for long-term change. It is key to develop a financial mechanism to support environmental work in China. As economic growth and urbanization continue apace in China, the demand for funding for environmental work will grow. It is important that China's budgetary expenditures on the environment also grow and that the funds be invested as efficiently as possible. Foreign funds will also need to be raised for this work and a mechanism will need to be found to facilitate this. Japan has experience in this area and is prepared to help China through a task force to study the issue.

　　40. Changes in China's approach to the environment demonstrate the government is taking a more integrated sectoral approach. Because there is a greater array of legal instruments, there is now a basis for policy-making. Therefore, future Council activities should focus on crosscutting rather than sectoral issues. These could comprise reduction of resource use, climate change, administrative mechanisms to promote the adoption of integrated approaches. The work on scenarios done by some of the Council's WGs represents a new level of achievement. Enforcement of environmental regulations will be important for China in the future and sharing experience on different enforcement approaches would be productive.

　　41. The Council needs to determine where its niche is, instead of replicating what existing Chinese institutions are already doing. The WGs' research should be more inclusive of social dimensions; social scientists and representatives of civil society should be included in the WGs. The regiona1 dimension, China's impact on neighboring countries, also needs to be emphasized more.

　　42. Industrializing countries all go through phases of deteriorating air and water quality, transportation problems and urbanization. The quality of urban administration, or governance, is key in dealing with these common problems. This could be an area for the Council to focus on in the next Phase.

　　43. China is facing a unique challenge. The Max Planck Institute has demonstrated that because of increases in carbon dioxide in the atmosphere, the risk of 50-year floods along the Yangtze River is increasing very rapidly. Climate change will have dramatic impacts on China. Specifics such as these are key for the Council to address when dealing with general themes of sustainable development and environment.

　　44. Four possible criteria are put forward for the Third Phase of the Council: readiness of synthesized information on themes anticipated to be of priority; relevance of Council's work-the work needs to be more demand driven by involving line ministries and provincial governments; timeliness of studies and analysis in order to fit in with the GOC's planning cycles; user friendly recommendations which will be easy to pick up by GOC decision-makers.

　　45. For WGs that will be ending their work, it may be advisable to have members develop a virtual network so scientists can continue to exchange ideas. In fact, a greater use of information technologies (IT) might allow the Phase Three Council members, WGs and Task Forces to conduct business more efficiently.

　　46. The pace of change in China is impressive and past success can be largely attributed to the decision to reform and open up to the world. The Council was made possible by visionary commitment of the Ford Foundation, the Rockefeller Foundation and CIDA. The perspectives for China over the next ten to twenty years are startling, with unsustainable use of key resources, impacts on neighboring countries and with the hardest economic reforms still to be realized. China recognizes the difficu1ties it has in integrated policy formulation particularly in the energy sector; this issue is made more difficult by the recent radical government downsizing. There is also incoherence and lack of coordination between ministries and institutions. One of the main reasons for the Council's creation was to bring people together to deal with these problems.

　　47. A practical suggestion for future meetings would be for the Secretariat to provide full name lists of WG members with professional affiliation in order to remind Council members of the expertise embodied in the reports and recommendations.

　　48. During Phase Three, the Council should make greater use of the international networks to which foreign members have access. Further, the Council's experience should be shared with a greater number of countries which could stand to gain from this approach. This experience should be showcased, possibly at next year's WSSD and replicated.

　　49. China's accession to the WTO presents the Council with an important opportunity during this next phase: building up the technology base of the country. Emphasis should be put on capacity building-the formation of a technological human infrastructure-which will help China leapfrog over intermediate solutions and adopt advanced solutions.

　　50. China still faces daunting problems despite the great achievements of the past twenty years; problems such as air pollution and biodiversity conservation are getting worse. Economic development is rapid and policies such as the WDS will accelerate growth, further challenging sustainable development. In some circles in China, growth is more important than the environment. In the Council's Third Phase, it will be important to create partnerships with provincial governments. Also key is to work on public perception and pub1ic information. In addition, overlap between WGs should be avoided through improved communication.

　　ITEM 7. REPORT ON THE WORK AND FINANCES OF THE SECRETARIAT

　　51. With vice-chair Len Good presiding, the Secretary General of the Council

　　Zhang Kunmin reported on the work of the Secretariat since the 4th Meeting of the 2nd

　　Phase. During his report, he outlined the following issues:

　　52. Reports from WGs and Council recommendations from the 4th Meeting of the 2nd phase have been presented to relevant authorities, more particularly those which are responsible for economic and resource management; correspondence has been received from 14 departments under the administration of the State Council and 7 provinces (included as an Annex to the Secretariat report). It is noted that the responses reveal the Council's input is relevant to these authorities' work and fits in with GOC priorities.

　　53. WG and Task Force activities are the foundation of the Council and represent effective ways to achieve CCICED objectives. Communication between the Secretariat and the WG and Task Forces has been strengthened; two liaison meetings were convened between the Secretariat and staff of WGs and Task Forces. This year's reports include a summary of the past five years' achievements.

　　54. A new Task Force on Enterprise Development and the Environment has been set up. This Task Force had been requested by the Chinese Federation of Enterprises; representatives made a presentation to Council on the need for such a Task Force at the 4th Meeting of the 2nd phase. The Bureau approved the Task Force in April 2001; co-chairs are Zhang Yanning of the Chinese Federation of Enterprises and Bjorn Stigson of the World Business Council for Sustainable Development. Funding for the Task Force has also been secured.

　　55. The Secretariat prepared for the 5th Meeting of the 2nct Phase. The theme for the Meeting is "Summarizing Phase Two and Preparing for Phase Three". Keynote speakers were invited. A draft of Council recommendations was prepared and circulated for member comments. WGs were assisted in summarizing their experience; a CD-ROM on research achievements entitled "Ten Years of CCICED" was published; close communication was maintained with the Canadian Secretariat in Vancouver, as well as responding to reporting needs of the Bureau.

　　56. The Council has ten years of accumulated experience, playing an active role in promoting sustainable development in China. The UNDP is supporting a summation of the Council's experience, which will be presented to the WSSD in Johannesburg in 2002.

　　57. The Secretariat has been exploring funding sources for the Council, its WGs and Task Forces. The government of the Netherlands will be supporting the Task Force on Enterprise Development and Environment. The government of Norway is funding the WG on Biodiversity. GTZ is providing a multi-year, multi-purpose grant to the Council. The CCICED'S funding totaled 3.8 million USD in 2001, 82% of which is channeled to the WGs and Task Forces. The financial report is attached to the Secretariat's report.

　　58. The Secretariat has been laying the groundwork for Phase Three of the Council. Terms of Reference (TORs) were drafted and circulated for comments; a final draft has been presented to the Bureau for approval. Meetings with existing and potential donors were conducted in order to secure funding sources. Suggestions for Phase Three study areas were solicited from relevant departments of the State Council; responses are being compiled. Procedures for the establishment of Council Task Forces have been drafted; discussions are continuing on the form and function of the 3rd Phase Council.

　　ITEM 8. REPORTS BY THE WORKING GROUPS AND TASK FORCES

　　59. Vice-Chairs Len Good and Xie Zhenhua presided over the presentation of the Working Group and Task Force reports and ensuing Council discussions.

　　a) Forests and Grasslands Task force 

　　60. The Task Force Co-Chairs, Mme. Uma Lele and Professor Shen Guofang, outlined the group's findings as they tabled their report before Council. The following points were made:

　　61. Flooding, drought, ecological degradation are some of the factors that led to China taking action to protect its forests and grasslands, as well as to the creation of the Task Force; the GOC is spending substantial funds on a response. What China is doing is unique because it combines command and control with a variety of incentives, and because it operates at all administrative levels, is multi-scale, multi-temporal and multi-sectoral.

　　62. The Task Force has tried to identify existing knowledge experience, policies and gaps in China and elsewhere in this area, and provide independent advice to the State Council. In a first phase, case studies based on household surveys were conducted; simi1ar work conducted by WWF and FF was also used. The second phase is to do policy analysis and analysis of long-term implications of policy fine-tuning. Options proposed by the Task Force are to enhance the welfare and economic future of people who depend on the forest and grassland environment, while ensuring the needs of downstream communities are also met.

　　63. China's implementation experience is summarized. The first component of the forest protection policy is conversion of cropland with a slope greater than 25 degrees back to natural vegetation-a two-year pilot program involving 334,600 hectares. Conversion has been conducted rapidly and through government orders; displaced peasants receive food aid, financial support, seed and seedlings. The program has been well received because of the preceding drought and the level of compensation offered (higher than farmers' past production). However, the Task Force studies are not conc1usive on the environmental benefits of the program. Income benefits to households are not materializing. Uncertainties now exist over ownership of land and trees. It is also unclear what the long-term effects of this program will be once compensation payments stop some five years hence. More communication with households is needed on the program itself. Clarification will be required over issues such as property rights and the timing of financial flows.

　　

　　64. The second component of the policy is the logging ban. Household response to this differs based on whether or not people live in timber rich or timber poor areas. In timber poor areas, financial assistance is welcome because people had not been harvesting much timber. In timber rich areas, the program is not welcome because it means a significant drop in revenues; households lose their source of income, which has impacts on school drop out rates and social conflicts. The logging ban also has implications for neighboring countries that are lumber exporters-in effect, China may be exporting deforestation to other countries. A more balanced approach may be needed, with different programs in forest rich and forest poor areas; a multi-sectoral approach should be pursued; monitoring the ban is necessary, so is evaluating the program.

　　65. Recommendations made were based on the findings of the case studies. Key is to promote farmer participation and consultations with households in order to ensure the programs are more responsive to their concerns. Technical issues and constraints should be addressed. In the next phase of the Task Force's work, the focus will be on resolving some of the technical issues identified over the past year, as well as defining costs and benefits of the land conversion program - particularly ecological ones. Other issues include legal and property rights implications, fiscal and financial policies, economic incentives, trade implications and so on.

　　Discussion

　　66. This Task Force is indicative of the new model proposed for the Council; it involves quick reporting requirements, solid funding, clear objectives, a high priority issue. The good results achieved are encouraging: its report is excellent because blunt and based solidly on facts. But continuity is needed in order to examine the long-term effects of programs such as China's forest protection plan. There is a need to use adaptive management strategies, linked up to policy making. There is also a need for effective indicators of success that are also sustainable development indicators built into such programs. A greater emphasis on economic analysis should be integrated, with possible cooperation from the Economics WG.

　　67. It is troubling that China's logging ban has international implications. If China wants to be viewed as an environmentally friendly country, it must take this into account. The Council should take a strong position on this issue and its Task Force could help China envisage alternative options.

　　b) Energy Strategies and Technologies

　　68. Professors Thomas Johansson and Ni Weidou, Co-Chairs of the Working Group on Energy Strategies and Technologies underlined the following findings from the WG's report: 

　　69. A review of the past ten years' work was undertaken in the context of China's own FYPs and Agenda21. Energy technologies that support sustainable development or have potential have been assessed. The options include energy efficiency, supply options, coal and its derivatives, natural gas, hydro and renewable energy sources. These options were explored and findings were presented to the GOC in past years; the GOC has acted on a number of these.

　　70. During the past year, the WG looked at alternative energy scenarios projected using the Markal model; assumptions are built in regarding population growth, economic growth, urbanization etc.; constraints such as import restrictions on oil and gas are also built into the model. The major insight gained through the process is that even with aggressive end-use efficiency improvements, base-case technologies alone will not allow China to reach sustainable development goals. However, adopting advanced technologies would allow China to meet those economic growth and sustainable development objectives.

　　71. The key for China will be to put the emphasis on energy efficiency, a mix of energy resources and the development of advanced technologies. These energy future scenarios are not necessarily more expensive than business as usual, But innovation will be essential, with China developing its own and accessing foreign technologies thanks to its greater integration in world markets. A remarkable and important finding of the WG is that there are plausible energy strategies that are within reach, enabling China to continue economic and social development through the next 50 years, while ensuring security of energy supplies and improving the quality of the local, national and global environment.

　　72. The findings are based on realities facing China. First, in terms of energy resources endowment, the greatest potential lies with coal and with renewable energy sources. Secondly, modernizing the energy system must go hand in hand with modernizing the economy. Thirdly, the specific realities such as the rural and urban situations, geographic disparities and others influence the timing and nature of strategy implementation. Fourth, continuous planning will be required to allow adjustments with respect to changing factors and conditions-given the long lead time required to turn over the energy capital stock.

　　73. It will be several decades before a sustainable energy industry of necessary scale is in place. Hence the initial heavy emphasis must be on energy efficiency in all sectors. Then there should be a switch from smoke generating direct combustion in favor of cleaner energy carriers such as steam, electricity, gas and hot water. Following this step, the modernization of coal conversion must be pursued. Finally, renewable sources such as wind, solar and hydro-electricity's potential should be evaluated; economic and institutional barriers to this development can only be overcome by the government. Imports of oil and gas will continue, but China should explore fuel alternatives for transportation such as hydrogen fuel cells.

　　74. The WG has plans for future work into the next Phase: more research is needed in areas such as long term energy futures through modeling, syngas, liquid fuels and vehicle alternatives, rural energy options. Areas of study will be determined by the GOC. But China needs to have the tools to make key strategic energy decisions in order to allow for sufficient time for research and development, as well as policy formulation.

　　75. The WG's findings are too important for China to rely on the single channel of Council recommendations for transmission to the GOC. Transmission shou1d be through multiple channels and at multiple administrative levels. Key strategic links must be established with powerful agencies such as SDPC, SETC, the State Power Corporation and MOST.

　　Discussion

　　76. The September 2001 report on renewable energy prepared by the Renewable Energy Task Force for the G8 Summit in Genoa is commended to the WG. Its final results and findings are highly relevant to China in the field of renewable energy.

　　77. It would seem the WG's report down plays nuclear power. Yet nuclear power is of interest to China. China is developing new technologies, notably the pebble bed technology. The option of nuclear power is being re-examined by many governments now. If countries decide to cutback on their consumption of fossil fuels for reasons other than depletion, only nuclear power can fill the gap in the short term. The WG should give the issue more detailed attention in the future.

　　78. The WG has dealt effectively and imaginatively with one of the most crucial issues facing China. Energy demand is rising rapidly and coal remains the most available energy source. The long-term strategy developed allows for stable energy supply and environmental protection; it also puts industry in a leading position. The conclusion that China will be able to pursue social and economic development for 50 years if it adopts advanced technologies implies there will need to be a shift in energy sources as well as more efficient utilization of energy. China, with its unique mix of talent and resources is one of the best-placed countries to take advantage of emerging technologies. It should take on a leadership role in the advanced coal technologies, helping to guide the process of transforming dirty coal into a clean energy source.

　　79. In order to assist China in modernizing its coal utilization, perhaps the suggestion should be made to the GOC to have one province model the desired approaches. There is also a need to assist China, through modeling or other methods, in making the use of renewable energy sources more economically feasible. There is also perhaps a need to look at the use of fuel cells outside the obvious transportation sector.

　　80. The WG report is important because it indicates China may be able to avoid negative climate change effects while continuing economic growth. Moreover, China is large enough to have an effect on the global rate of technical change and adoption. This will be particularly important in the coming years as countries negotiate the second phase of the Kyoto commitments.

　　81. Energy consumption in China has to take into account the 900 million rural population which still burns biomass for heat and light and hence contribute greatly to deforestation; natural gas and electricity use should be encouraged. Technological change influences energy use and determines waste and emission levels. National security is tied to energy issues. In order to avoid undesirable effects, a greater effort shou1d be made to adopt more advanced technologies, to innovate, to encourage the use of biogas and other renewable energy sources. In determining the desirable energy resource mix, consideration needs to be given to its end use in any given area. For instance in northern China, energy conversion and heat transmission from underground thermal energy could be tapped. More valuable fossil fuels can be used for transportation.

　　82. There is still some disagreement on nuclear energy in the scientific community: the issues of cost, safe waste disposal and proliferation need to be answered before wider adoption is recommended. It is interesting to note that the WG's report model indicates that nuclear energy is not a necessary part of the energy mix for China.

　　83. A number of renewable energy sources are already cost-competitive in China, but there is a lack of an enabling environment to encourage greater integration of renewable energy sources in existing power grids. There is also the issue of existing subsidies for conventional energy sources provided by governments, who at the same time state the intent to curtail their dependence on conventional energy sources. This represents a clear case where policy does make a difference. China has been reducing these subsidies; policies recommended by the WG would see large markets tapped to support renewable energy development (such as the renewable energy portfolio standard presently included in the 10tn FYP). Similarly, fuel cells could feed into existing power grids-but policies need to be favorable.

　　84. In China, 7% of the total power supply comes from nuclear sources; with completion in 2005 of a new plant in Guangdong, this will increase. In the near future, it is estimated nuclear energy will supply 10% of China's needs.

　　85. Syngas from the oxygen-blown coal gasification process is attractive in that it allows for reduced energy consumption per unit and the price of electricity. The Yanzhou and Jincheng Coal Bureaus in Shanxi and Ningxia have worked with the WG to develop this approach and demonstrate its use for local power, heat and light.

　　86. The competitiveness of renewable energy sources is affected by perverse subsidies on conventional energy sources and by the absence of a tax on pollution. Were there to be a green tax or emissions charges applied rationally, renewable energy would be more cost-effective. At present, the tariff on wind energy is Y0.2 RMB higher per kilowatt-hour than thermal power. The Beijing "Green" Olympics of 2008 could boost the demand for these sources. In all energy substitution situations, policy support is key.

　　87. Carbon dioxide resulting from coal gasification could be sequestered in the oceans through the stimulation of plankton bloom. This might present an opportunity for China if it were ecologically feasible.

　　88. Institutions and administrative procedures are key factors when considering energy financing and technological change. Restructuring the energy sector in China is complex and as yet incomplete-which will affect strategic choices China has to make in terms of technologies, but also in terms of socio-economic policies. China is aware that it needs to be able to assess these various options and their consequences.During Phase Three, these fundamental questions of strategic energy choices, and how change is managed institutionally, need to be explored.

　　c) Sustainable Agriculture

　　89. Dr. Bernard Sonntag, international Co-Chair and Professor Sun Honglie, Chinese Co-Chair of the Working Group on Sustainable Agriculture presented there annual report to the Council. The following issues were high1ighted:

　　90. The WG focused its 2001 activities on China's southeast coastal region; this area was selected because rapid economic development has radically altered the environment. The WG selected the Yangtze and Pearl river deltas for their field survey and workshop; aside from key researchers from various administrative levels, the workshop included the Co-Chairs of the Biodiversity WG. Presentations covered invasive species, biotechnology and impacts of WTO accession on China's agriculture.

　　91. The coastal region covered represents only 5% of China's territory but is home to 20% of the population and generates one-third of the nation's GDP. The southeast coast is propitious for agriculture with its sub-tropical to tropical climate, allowing for up to triple cropping-although there are seasonal droughts and floods. Traditional crops dominate but agriculture is diversifying into floriculture, aquaculture and horticulture. Farming in the region is occurring on an increasing scale, and is often more capital-intensive due to joint-venture investments and other factors. The region is also characterized by serious competition for land; farmland is being lost to urbanization, industrialization, transportation and recreation.

　　92. Environmental problems in the region are serious and are threatening sustainable agriculture; most problems manifest themselves through declining water quality. Non-point pollution is serious, with the culprit being most often-excessive application rates of fertilizer and pesticide. Point source pollution occurs where waste management systems are inadequate, usually intensive livestock operations, households and township and village enterprises (TVE). Acid rain and ozone pollution have an impact on agriculture as well. There is also a potential problem with invasive species introduced for horticulture and floriculture.

　　93. The WG is putting forward key recommendations to deal with the identified problems. In order to tackle water pollution caused by excessive farm chemica1s use, environmental management needs to be improved, new regu1ations on non-point pollution need to be introduced and enforced, investment in R&D needs to be increased and concrete actions to broaden adoption of remedial technologies need to be taken.

　　94. In order to deal with excessive use of fertilizers-50% of which either evaporates or is lost in surface or ground water indirect production subsidies should be removed, production should be rationalized on the basis of comparative advantage, farmer education on the costs and income penalties of excessive chemical use should be intensified, and more efficient, ba1anced fertilizer use should be encouraged.

　　95. In order to deal with the overuse of pesticides, a national integrated pest management (IPM) strategy should be developed and the conflicting roles of government departments with respect to regulation, production and sale of pesticides should be resolved.

　　96. The overuse of fertilizers, pesticides, hormones and veterinary drugs is affecting food safety.Residues in foods will also affect China's ability to export products to the EU, Japan and the US. Food safety is a key e1ement of food products trade under the WTO. Other measures recommended address this problem, as would research into rapid residue detection techniques in food markets.

　　97. During the Fourth Meeting of the Second Phase of the Council, it was recommended that the SAWG look into the WTO, biotechnology and biodiversity conservation. On WTO, a paper by Huang and Rozelle (attached to the WG report) explores the impacts WTO is expected to have on China's agriculture.

　　98. On biotechnology, it is clear that despite rather widespread use of some of its products, controversy is raging over inter-species gene transfer. China has an active program of biotechnology development; it needs to be an active and informed participant in the global debate over biotechnology. A paper on the issue is attached to the WG report.

　　99. There are concerns over the introduction of invasive alga species. The SAWG generally supports the recommendations of the Biodiversity WG on invasive species, eco-system management, reclamation with native species, avoiding monoculture reclamation and the return of fragile cultivated land to native vegetation. But SAWG does not support a prohibition on introduced plant materials; these materials should be evaluated on a case by case basis in order to minimize risks.

　　100. Future possib1e Council Task Force topics for the Third Phase include: aquaculture, non-point source pollution from crop inputs, fragile land management practices, pollution mitigation using biological approaches, tillage and crop residue management, livestock wastes, rural transition, sustainability of agriculture in west China, and carbon sinks and climate change.

　　101. The WG has listed its pub1ications. In addition, a book on sustainable agriculture is to be published by the WG by year end.

　　Discussion

　　102. Farmers can be asked to convert land back to natural vegetation, but if the livelihood these farmers switch to is not sustainab1e, sloping, marginal land will once again be cultivated. Environmental conservation cannot be an end in itself; rural development is needed. Similarly, in order to have farmers utilize chemicals more rationally, solid education is needed. A hopeful note on rational resource use in agriculture is the news that rice will no longer be planted around Beijing where water is so scarce.

　　103. There is a lot of work on GMOs in China, but doubts have been expressed regarding the authorities' ability to control the experiments. Chinese scientists are concerned because GMOs can be beneficial but they also pose risks. In addition, taking into consideration the resistance that GMOs are facing in certain markets, China might be well advised to set aside areas where GMO-free products are grown. The EU's current debate on the reform of the Common Agriculture Policy and farmers' roles in conserving land should be of interest to China as well.

　　104. The issue of excessive farm chemical use is serious; technical and policy guidance needs to be strengthened. In some areas where soils are rich in organic matter, farmers don't know the appropriate rates of application. Further soil mapping needs to be done in China and application rates should be done accordingly.

　　

　　105. Non-point pollution should be given priority for future work by a Council Task Force. Throughout the world, there is a lethal combination of livestock wastes and excessive fertilizer applications. One there, this groundwater pollution is very difficult to eradicate. Water pollution has killed people in some countries. Ear1y measures shou1d be taken and farmers should be involved in the government's efforts.

　　106. Bio-safety is becoming an issue because of the present ease of travel and the important trade in plants. While customs and immigration procedures can control the movement of people and some goods, the ability to keep out invasive species is lacking. Climate change is compounding the prob1em. Invasive species can have serious impacts on the environment and on food production.

　　107. Improving food quality and food safety while cleaning up the environment represents a win-win situation for China. Already, Heilongjiang province has determined to become a "green", organic food producing area. Cropping methods and inputs are changing accordingly. Products that are "green" fetch significantly higher prices in domestic and foreign markets. But China needs help as it develops this approach.

　　108. The next reform challenge for China will be in the area of land use rights. The household responsibility system whereby every household was assigned land contributed to increased productivity but at present is limiting the necessary increases in scale and access to credit. The Chinese People's Political Consultative Conference (CPPCC) is presently looking into legislation on land use contracts. At present, large joint ventures are consolidating land from farmers through land use rental, and rationalizing farm production through economies of scale and improved use of inputs. In order to capture the profits, some farmers are purchasing equity in these enterprises. Several innovative approaches are being tried

　　d) Pollution Control

　　109. WG Co-Chair Tony Schneider underlined the following questions during his presentation of the WG report to the Council: 

　　110. The WG produced an assessment on the state of the environment, including the provision of guidelines. A key finding regarding the WDS, is that an assessment of the present state of the environment in the region should be made in order to be able to judge future impacts of deve1opment in the region and the effectiveness of pollution prevention measures.

　　111. The WG completed an extensive study of Guangdong province's Pearl river basin. There will be a continuation of the project on the issue of area source pollution.

　　112. The WG has also been involved in doing research on policy options for carbon dioxide mitigation. The GOC authorized the WG to start work on this question in 1998; the Netherlands government provided funding. The study was to look into the cumulative effects of various mitigation policies and measures to slow down CO, emissions; it was also to study strategic options enabling China to reach sustainable energy utilization in the future. Following two years of work, this task is now complete and reports have been produced in English and Chinese.

　　113. The study explored scenarios through innovative methodologies: this involved detailed modeling of key energy consuming sectors such as iron and steel. The findings reveal that China has been able to effect significant emissions reductions, thereby holding the total emissions in 1995 to the 1985 levels. This demonstrates that while China had no ob1igation under international agreement to reduce carbon dioxide, it has taken a responsible attitude to climate change mitigation. This has contributed to sustainable development in China and environmental protection globally.

　　114. To study future policy options, two baseline scenarios were established: one involves China in a globalization world which assumes rapid economic growth, rapid technological change, free trade and imports of foreign fossil fuels; the second represents an environment conscious China, assuming sustainable economic development, constraints on trade and technology transfer, and the use of domestic energy sources.Some 11 mitigation policies or measures are then introduced into the model. Several recommendations are derived from this process. The study revealed that mitigation measures and policies represent a win-win situation for the economy and the environment.

　　115. From national studies, the WG also did a regional study of Shanghai, combining an examination of the environment and energy planning. The analytical tools developed are meant to assist China and its regional governments with necessary planning. A next phase could involve similar modeling of Chongqing municipality. The WG recommends that the models used be combined with macro- economic models in order to better reflect economic rea1ities. The national models can a1so be combined with regional models, providing valuable tools for policy options research and planning. Research on the CDM should be conducted during the next Phase, with demonstration projects illustrating energy efficiency gains.

　　Discussion

　　116. The debate on pollution control in China enters a new phase now these powerful ana1ytical tools and data are available. This is the fruit of ten years of investment and collaboration; the analysis was done on the all-important climate change issue. This report will help China play an important role in climate negotiations not only because of its ro1e within the G77, but also because of its CO2 profile. Thanks to this study, China can demonstrate internationally that it has taken its global responsibility. The study also points the way to the measures that need to be taken: energy efficiency and shifting the fuel mix are the first steps to take. The CDM could be used within the Kyoto protocol. For future Council work, assistance could be provided to China in project identification and encouraging such projects' realization.

　　117. The report addresses the issue of urbanization. The development of mega cities in China and elsewhere poses a challenge; cities, from centers of civilization can become centers of crime and pollution. This is something that should be a focus of the Council's work during Phase Three.

　　118. It would be interesting to compare China's performance with other countries and with a global average when it comes to its decreased growth rate of CO, emissions; it is also interesting to compare the rate of growth of emissions with GDP growth. While there are no comparable figures from other countries on rates of carbon dioxide emissions growth, it is possible to compare GDP growth in China with the emissions growth rate. This comparison shows that between 1992 and 1998, energy consumption per unit of GDP growth was decreasing.

　　119. The WG should be encouraged to prepare materials explaining the ana1ytical tools used in the study-materia1s which would be more accessible to the non-specialists. This is to ensure Council findings can have a broader reach. In order to replicate the Council model to other countries, it is also important to include international comparisons in report findings, to put the China situation in the proper context.

　　120. Current trends seem to emerge from the energy consumption data. From 1995 to the present, CO2 emissions have stopped rising. More recent statistics appear to demonstrate that with the economy growing at a 5-7% rate per year, the use of coal has declined by 40% over the past four years. This would represent a remarkable shift towards greater energy efficiency since 1995. But data accuracy has been a problem in the past in China. When drawing conclusions from complex models and scenarios, the qua1ity of the data used is of prime importance. Otherwise recommendations drawn from faulty analysis could be misleading.

　　121. It seems clear that growth rates in the transport sector were greater than others; energy efficiencies had to be realized in other sectors to compensate for the growth in transport energy consumption. It will be key in the next 10-20 years to mitigate for this, since during that time transportation will still rely mostly on conventional energy sources. Realistic mitigation options include fuel efficiency; this is especially important for China. Opting for the smaller, fuel-efficient vehicles found in Japan and the EU, as opposed to larger inefficient vehicles found in North America, will make a difference. Regulations and fiscal measures could be used by the GOC to encourage energy efficient options.

　　122. The Council should recommend that China ratify the Kyoto accord and that it develop mechanisms to comply with the agreement. China is crucial to the success of global emissions mitigation; it is also in China's interest to see Kyoto succeed, given the potential impacts of climate change on flooding.China has also an important political role to play in that it will be important for the United States to be brought back into the Kyoto fold. The US will be considering carefully China's actions in this context.

　　123. China's economic reserves of natural gas are not substantial, therefore natural gas will not be a major energy source. China will have to rely on imports by pipeline and by tanker (liquid natural gas). The same import dependence exists with oil. This is why it is crucial to look at alternatives such as coal gasification. Following September 11th, there is great concern over the security of oil and gas supplies from areas of the world that could be destabilized. Political, economic and technological factors combine to make coal gasification a realistic option. Mitigation of carbon dioxide is an issue, but it can be done with coal bed storage or carbon sinks. China's West to East gas pipeline will not resolve China's energy supply problems: the solution is coal. The Council should provide China with R&D support on coal gasification.

　　124. This WG's analysis is based on sound science but for the next phase of the Council, it will be important to distill usable advice from those studies for consumption by China's leaders. A process to identify these issues from Council reports should be drawn up; these issues should be isolated prior to the Council meetings. This would allow the Council to make bo1d and provocative recommendations to the GOC-recommendations that are more strategic, policy oriented and cross-sectoral.

　　125. On energy strategies and options, SEPA is not the lead agency. This issue is the purview of the SDPC-not present at this session. The purpose of the Council is to bring together people who are from different ministries and agencies to hear about environment and development. If they are not present, SEPA will be charged with transmitting these insights to relevant authorities-which may not have the desired impact. It will be key for the next phase of the Council to reflect on how to bring effective people into the deliberations.

　　126. The Council should think about ways to publicize in the media key analytical findings such as those on China's contribution to greenhouse gas emissions. During Phase Three, the Council should find a mechanism to allow for broader dissemination of its research results in order to contribute to the pub1ic debate on these questions.

　　e) Cleaner Production

　　127. The Co-Chairs of the Cleaner Production WG, Mme. Qian Yi and Mr. Tsugio Ide, presented to Council their report and highlighted the following pertinent issues:

　　128. In 1993, SEPA and SETC convened a national conference on pollution and attention shifted from end of pipe controls to the total production process. The Cleaner Production WG was established in 1997. Since then, the WG has contributed to making cleaner production (CP) a priority for the GOC. Ten cities and five industries have been se1ected as CP demonstration sites. In the 10th FYP, SETC and SEPA have been assigned the responsibility of promoting CP. The first law on CP is to be promulgated by the National People's Congress (NPC) in 2003.

　　129. The WG helped build the infrastructure required for the expansion of CP throughout China. Key ministries and agencies have been brought together and now share information on CP. The WG supported the first citywide demonstration of CP, in Shanxi province's Taiyuan city; other cities and five major industries will be adopting this approach.

　　130. The WG assisted local officials in drafting CP regulations, promoting public awareness, supporting staff training, documenting and publicizing information on the projects and the benefits derived from CP.

　　131. The WG conducted workshops and seminars in order to raise awareness of CP, sponsored national and international CP conferences, developed assessment indicator systems for use in evaluating the effectiveness of CP. The indicator system was designed following a collaborative project between Tsinghua University, Shanxi University and CAS.

　　132. In terms of the Council's future, it must be noted that the implementation of CP is still uneven in China. The WG report therefore proposes a task force be shock to develop a national strategy and mechanism for the adoption of CP. CP should be integrated in China's social and economic development plans, as well as taken as an objective of the GOC's macro-economic policies. Incentives need to be adopted by local governments to promote CP. CP should be one of the criteria by which local government performance is assessed by the central government. In addition, it is now necessary to summarize the experience of cities and industries that have implemented CP in order to identify the barriers and determine how to remove them. Given the demonstrable economic advantages of CP, the financial sector should be encouraged to support CP. Efforts should be made to expand CP adoption from the manufacturing sector to primary and tertiary sectors as well as to related government agencies.

　　133. It will be necessary to conduct further studies on innovative approaches to CP. As CP adoption spreads worldwide, new theories and applications emerge-such as di-cycle assessment, sustainable consumption, eco-industrial parks and the recycling economy. Government agencies need support from a taskforce to study such emerging concepts and try them out: Further inputs will be required in the process of policy making. As China promulgates the CP Law, there will be a need to follow this up with regional and local laws.

　　134. Thanks to this WG, the concept of CP is now known more widely; in certain places such as Taiyuan, citizens are well informed on the nature and benefits of CP. Senior leaders are now mentioning CP in key speeches and documents. The promotion of CP requires legislative, administrative, management economic and financial measures. There is still a long way to go; only 500 enterprises in China are now implementing CP.

　　Discussion 

　　135. MOA has been considering the application of CP in agriculture and has been involved in consultations regarding the draft CP Law.

　　136. Supply and demand for CP should be considered. Their a1ready exists a good supply of CP technologies in the world. The key is creating a demand for this technology. The government has two important functions in this regard. The government should provide incentives for CP in order to stimulate the demand for the technologies. The government also has to offer technical assistance to small and medium enterprises (SME) to stimulate adoption.

　　137. CP has come of age. From the Rio Conference preparatory process, the business sector was involved in developing ways to make sustainable development a reality; this is where the concept came from. Over the past ten years, the WBC has fine-tuned and promoted the concept of eco-efficiency, with CP as the mechanism to achieve this. It is now necessary to take this one step further through laws, regulations and incentives. But the case needs to be made to the business sector using costs and benefit arguments. In the case studies presented by the WG, cost-benefit analysis should be highlighted.

　　138. It is hoped in the future that the WG could focus on the mining sector. China's coal and other mines are severe polluters. More efforts should be made to promote ISO 14000 standards in that sector as a step towards CP.

　　139. A lot can be learned from the demonstration projects implemented through the efforts of the WG. However on the CP Law, some issues need clarification. The implementation of CP will evolve given the technologies available; adoption is difficult to legis1ate. If only 500 enterprises are presently abiding by CP, does it mean all other enterprises are in violation of the Law? It maybe premature to bring in this kind of legislation in China.

　　140. There is an urgent need in China for environmental technologies which cannot be met solely by imports. Much will have to be produced domestically. This would help making the technologies more accessible and thereby promote adoption of CP. There is also the related need to establish China Business Council for Sustainable Development. A growing proportion of China's economy is now in private hands and the GOC needs a mechanism with which to dialogue with the private sector on issues of environment and development. These consultations are necessary before determining which incentives w ill be effective. Technologies can be expensive and pricing of resources is key to their adoption. A key constraint in this regard is the human expertise; this is an area where the Council could be active in its next phase.

　　141. UNEP has made contributions to this WG, particularly by supporting a conference on CP in Beijing earlier this fall. UNEP also has a unit working on the issue of industry and economics in Paris which works in close cooperation with the private sector and promotes CP. UNEP is willing to work in this area during Phase Three of the Council. It would be key for a sectoral task force to look into CP's linkages with sustainable energy use, transportation and pollution control.

　　f) Biodiversity

　　142. Biodiversity WG Co-Chairs Johan Schei and Wang Song presented their annual report to Council, underlining the following points: 

　　143. An exhibition of photos summarizing the work of this WG is presented; this experience is also presented to Council members in a report. Interesting findings on invasive species are commended to Council members and reflect some of the SAWG report. The WG has a1so developed biodiversity principles for developers, planners, policy-makers and politicians which should help them become more familiar with key concepts. Similarly, guidelines for the restoration of forests and other natural habitats are being developed. Thus the WG recognizes the importance of outreach to a wider public.

　　144. Further activities include publicizing the China Species Information System

　　(website: www.chinabiodiversity.com) and developing the Endangered Species Red List for China. China has over 9,000 vertebrate species; it is one of the 12 mega-diversity regions in the world; China has a global responsibility and opportunity to take care of the world's natural heritage. There has been considerable attention on the panda, but many species are under greater threat of extinction. For instance, Qinghai province where the WG held meetings this year is home to the remaining few Przewalski's gazelles; once they disappear, the species is gone forever.

　　145. There has been a switch in focus from species-centered conservation to the conservation of whole functioning ecosystems. Biodiversity is the biological base needed for development; if functioning ecosystems are lost, both ecological and economic values are lost. The WG has worked on estimates of the yearly value China's GNP which is derived from natural ecosystems; this estimate indicates biodiversity values are greater than direct revenues from resource extraction.

　　l46. The WG held its meetings this year in Qinghai in order to ha on problems occurring in high-altitude grass1and ecosystems and put this in the context of the WDS. This was a1so an effort to build capacity on biodiversity in the province. Direct contact does facilitate adoption of conservation values and approaches. As a result of presentations on invasive alien species, high-level officials have decided to stop using Oregon grass seed for grassland restoration programs.

　　147. WG recommendations sum up past experience and focus specifically on future challenges. First, focusing on broad national issues, the WG recommends better integration of ecosystem conservation in policies and development plans. Sectoral integration is necessary, as is the involvement of relevant agencies in addition to SEPA. Threats to biodiversity are originating outside and solutions must involve those main actors. The WG would welcome a cross-sectoral task force to deal with these issues. This task force could promote horizontal dialogue and cooperation among key agencies; criteria for sustainable resource use and for different types of "ecological construction" projects incorporating biodiversity values should be developed.

　　148. There is a need to study China's protected areas. Selected areas are not necessarily the most representative in terms of biodiversity. There is also evidence that biodiversity is deteriorating in these areas. This would dovetail with the current Millennium Ecosystem Assessment to which China should contribute.

　　149. The WG recommends an action plan for biodiversity be developed in the control of the WDS.Developments in the fragile ecosystems of west China need to be preceded with biodiversity impact assessments. Policies and programs should similarly go through strategic environ mental assessments (SEA). Stringent monitoring should be put in place to follow development impacts as well as the progress and effectiveness of forest and grassland restoration programs. There has been good cooperation of this WG with the Task Force on Forest and Grassland.

　　150. The WG recommends work be done on the key bio-security issue, of which bio-safety is a part. The GMO issue is a complex one, with wide ramifications' China, an exporter of GMO crops, has taken a balanced and considered position in international meetings on the issue. The WG is cooperating with China on the bio-safety protocol; this protocol should be ratified so the necessary control mechanisms can be put in place. The issue of invasive alien species is also becoming more urgent and requiring government intervention.

　　151. Economic incentives need to be developed in order to compensate local residents for the protection of ecosystems such as upper watersheds; sustainable livelihoods for residents upstream-who help protect people living downstream-need to be supported. The appropriate mechanisms, fiscal or otherwise, need to be explored. Greater efforts must be don to educate the public on biodiversity concepts, values and benefits.

　　152. Members of the Biodiversity WG are discussing options to be pursued for the next phase of the Council. Much valuable work remains to be done.

　　Discussion

　　153. Very little is being said or done on soil biodiversity-micro-organisms that enrich soils and are highly specific to given local conditions. Particularly in west China, this diversity should be better understood and inventoried. Similarly, little has been done on the biodiversity of the Himalayas. This is the most important watershed in the world where some of the major rivers originate. The area is under threat and should be the focus of study for this WG.

　　154. The concepts behind the Chinese terms "ecological construction" are still unclear and should be explored in order to avoid misunderstandings. The WG recognizes this problem and recommends it be better defined, with clear criteria for what is allowable in terms of "ecological construction" projects.

　　155. The Biodiversity WG is moving into areas beyond biodiversity proper, into the role of bio-processes and ecosystems to the economy and the security of China. Fundamental concepts of ecological goods and services comprising bio-safety, bio-security and biodiversity conservation need further work. Future work should take the perspective of environmental security for the country and the economy} this would allow the Council to reconcile work done by the SAWG, the Task Force on Forests and Grasslands, with input from the Economics WG.

　　156. The issue of trade in endangered species, particularly medicinal plants and animals, deserves greater attention from the Council during Phase Three because of its international dimension. Linkages could be established with the SAWG and the WG on Trade and the Environment. Positive and detrimental aspects of this trade need to be further understood and explored.

　　157. Very litt1e is known as yet on the potentia1 of the Kyoto Protocol and the CDM for biodiversity conservation. In China where the issue of carbon sinks and emissions trading become a central part of climate change mitigation policy, biodiversity stands to benefit. Agriculture is the single largest water user, and most development plans involve expanding agriculture. The issue of agriculture, water use and biodiversity impacts need to be examined further. The sustainable use of medicinal plants and animals as a mechanism for biodiversity conservation is perhaps a more useful approach than outright bans in China. This is because economics are now central to biodiversity management and conservation. Local people need to be involved in the management of biodiversity for sustainable livelihoods and development. These broader questions should be the focus of future work by a Council task force.

　　158. China is already doing a good job on raising public awareness of biodiversity through television and radio programs on the environment. But more needs to be done. Non-sustainable harvesting of medicinal plants in western China is still going on. Further work on issues that are central to this WG, such as invasive alien species, needs further attention.

　　g) Trade and Environment

　　l59. Co-Chairs David Runnalls and Ye Ruqin made the following remarks in presenting the annual report to Council:

　　160. The WG on Trade and Environment was established in 1994; its work encompasses a difficult crosscutting issue, in part because the trade community is often reluctant to admit there is a relationship between trade and environment. The two issues are closely interlocked; policies in one area which ignore the realities of the other are doomed to failure. This has been seen over the past few years, in particular with the failure of the Multilateral Agreement on Investment (MAI).

　　161. The WG's program has focused on five areas: China's relationship with trade groupings such as WTO and APEC; the identification of potential green barriers to China's exports; competitiveness and environmental standards such as ISO 14000, as well as the issue of pollution havens; trade and technology, specifically the potential offered by Activities Implemented Jointly (AIJ) and the CDM under the Kyoto Protocol.

　　162. Over the past year, the WG has concentrated on the impact of WTO accession on China's environment. China has been working on making its laws and regulations WTO-compliant. But China has as yet no intention to study the impacts of accession on the environment and the possible mitigation options it could pursue. A 1iterature search on how to conduct environmental assessments of trade agreements was commissioned. The forestry and fisheries sectors were studied. A workshop was held in Beijing in August, bringing together scholars who have conducted such assessments with members of the WG, scientists from CAS, the Development Research Center of the State Council, CASS and Nanjing Agricultural University.

　　163. The recommendation emerging from the workshop is that the Council should commission an assessment of the environmental implications of China's accession to the WTO. Because accession is only one step in a long modernization and reform process for China, it is difficult to isolate WTO specific impacts. But the economic changes wrought by WTO will define China's future environmental agenda. This assessment should carry a high priority for the Council and the GOC.

　　164. The WG also recommends the use of the CDM under the Kyoto Protocol to help China with the WDS. The WG is presenting to Council a paper on the use of the CDM to promote sustainable development, and in particular the transfer of clean coal technology, to west China. China should become an early participant in the CDM, and the GOC should give priority to CDM projects in the west. China will be the largest host of CDM projects and nothing in the Protocol could prevent China from restricting these projects to a given geographic area.

　　165. China shou1d further estab1ish a center for CDM implementation, identify priority provinces and key sectors and enterprises, and help Chinese enterprises negotiate the details of the CDM projects - especially the terms of technology transfer with foreign governments and firms.

　　Discussion

　　166. The CDM may indeed offer attractive opportunities with respect to western China and more work will be needed to define how it is to work. Under the Kyoto Protocol's CDM, greenhouse gas credits can be extended to investors (countries, firms or individuals); these credits do represent a monetary value for investors. It is easy to predict scenarios where most credits would be earned by converting existing plants instead of investing in new projects. In west China, it is new investments that are needed in infrastructure; is this readily consistent with the current understanding of the CDM? Still, there is potential for the use of the CDM with existing enterprises in western China-a good starting point.

　　167. During the first day of the Council Meeting, the MOFTEC minister did not discuss the link between WTO accession and the environment. This indicates that perhaps the main function of the Council has yet to be understood. Yet for China this issue could boomerang, as it has in other countries such as Canada. It is presently shaping Canada's forest practices, as well as trading patterns with the US and the EU. It would be preferable for China to learn about this before it faces punitive measures. The study recommended fits nicely with the need for the Council to be more policy-oriented. If this work were done well, it could provide a model for other countries; the intersection of social, economic and trade issues with the environment makes the work groundbreaking. The WG should be .renamed Trade and Sustainable Development to better reflect the nature of its work.

　　h) Environmental Economic

　　168. Co-Chairs Jeremy Warford and Li Yining underlined the following issues during the presentation of their report to Council:

　　169. This WG has been part of the Council since its inception. During the ten years of operations, the WG fostered six major publications.

　　170. The WG had no clear mandate at the outset. The key issue was China's transition from a command and control economy where administrative measures are used, to a market economy where market-based mechanisms are more effective. But the market cannot be relied upon to deal with environmental issues, in part because of market failures when it comes to costing environmental impacts. The first item for the WG was therefore to look at pricing: a consensus was reached on optimal pricing for natural resources, taking into account externalities and depletion. General principles for conducting case studies were also agreed upon. During the First Phase, the pricing of water, coal and timber were examined in greater detail.

　　171. During the Second Phase, the WG did extensive analyses on rice production, fisheries and grasslands. The general conclusion drawn is that there is a significant difference between the optimal price and the actual price of natural resources. This is because the market typically underestimates the real social costs of natura1 resource extraction.

　　172. On the issue of government intervention to allow for more rational pricing, the WG took the position that immediate, full adjustments would not produce optimal results. Economic equity and efficiency dictate a gradual adjustment; this recommendation has been proven right over the past ten years.There are still constraints to achieving optimal pricing; China is in the process of removing the most overt perverse subsidies, and some prices are now increasing to reflect real cost but the process will take time.

　　173. The WG studied pollution taxes, pollution levy systems and the enabling conditions for these measures. These conditions are important for the success of measures recommended by other WGs.Biodiversity and eco-tourism were also addressed in a study that looked at the public's willingness to pay for biodiversity protection. This willingness to pay can be tapped to provide sustainable livelihoods for local peop1e and to prevent degradation of non-protected neighboring areas. The methodology for this kind of estimates is still being developed; best practices are recommended.

　　174. Economics as a science is ill equipped to estimate full social costs; usually these are underestimated.However, while it is difficult to come up with exact estimates, the direction of the price reform needed is clear from the analysis.

　　175. The WG is presently completing work on the link between poverty and the environment. Market and po1icy failures exacerbate the problems suffered by the poor; the poor also tend to suffer most from environmental degradation. It is key to identify which group benefits and which groups lose out from given environmental mitigation programs and policies, in order to promote princip1es of efficiency and equity.Environmental issues are characterized by conflicts of interest; obstacles to policy reforms stem from vested interests. A first step to informed policy making is this fact-finding analysis.

　　176. All studies done so far by the WG relied on partial equilibrium models. The WG is now looking at the case for green taxation US in an econometric model of China's economy developed at Harvard University. This model allows for the exploration of various scenarios, allowing predictions of the effects on the environment and the economy of different environmental taxes. However, models such as this one must be used with caution since they are built using assumptions and data which may not be robust. More work needs to be done on the building blocks of this complex Computable General Equilibrium model; funding will allow the WG to continue work on this until next June, with resu1ts available to the Council by next year.

　　177. A key finding of the WG was the estimation of the cost to China's economy of air and water pollution. Earlier estimates had put the figure at 10% of GDP, but the WG's findings are that air and water pollution alone are cutting China's GDP by 14.6%. The amount would be greater had the WG been able to include the costs of desertification, biodiversity loss and so on. A key lesson is that wealth cannot be created if wealth is being destroyed in the process. More in-depth studies are needed during the Third Phase on this issue.

　　Discussion

　　178. A close valuation of the cost of environmental degradation is needed, otherwise fiscal policies and budgets that don't reflect real costs and exacerbate problems will continue to be implemented. An array of measures taken together has the potential to make a difference; these measures are fond in recommendations of this WG and others. Laws, regulations, surveillance, training of staff, economic incentives-all have potential. China however should watch how deficit cutting is implemented; in other countries the retrenchment of surveillance staff has had negative impacts on the environment. It should be noted that negative incentives such as pollution taxes can be less effective and in fact have perverse impacts; in some cases enterprises pass on the tax costs to consumers while reducing their investments in R&D.

　　179. The observation that the poor bear most of the costs of environmental degradation is true and always has been. Poor neighborhoods in ancient cities were found downwind of smelly factories. In dealing with climate change, poor countries will be more affected. Caution must be exercised in determining the pollutant to be targeted through trading mechanism: SO2 trading has reduced significantly emissions, yet acid rain has not been affected due to the concurrent reduction of particulates which buffer the emissions.

　　180. The issue of environmental taxes should be a focus of the Council's future work. Environmental legislation has been passed in China; now enforcement is key. The experience in the Netherlands shows that green taxation is a broad instrument which is more effective than other environmental laws and reaches all desired targets. Accurate levels of taxation for China have yet to be determined. Improvements on the econometric models used for analysis may be needed to achieve these analytical results.

　　181. China is going through a deep economic reform process, with two factors likely to contribute to improvements on the environment. The increasing use of market-based instruments will help people behave in more environmentally friend1y ways; in addition rising incomes will assist this process. There is also increasing public pressure to clean up the environment; local NGOs are springing up to do advocacy work.

　　182. The estimation of environmental value cannot be estimated using models. But it is possible to estimate the cost of repairing the damage-for instance the costs associated with flood damage can be estimated. This can be used as an incentive to promote action and change. Taxation was used initially to discourage behavior, but as has been proven in the case of tobacco taxes, smokers are not deterred by taxes.However positive incentives do result in change. The WG might look into the extent to which China cou1d use the new consumer market preferences to its own advantage. For instance, labor intensive, ecological agricultural practices in China could result in tapping high va1ue export markets, benefiting both China's environment and farmers' incomes.

　　183. One economic value of biodiversity is difficult to capture: the insurance value of biodiversity. The infinite variation among and within species holds the insurance of survival for species and ecosystems-hence of sustainable development. This is perhaps an area of future inquiry for the WG.

　　i) Enterprise Development and the Environment

　　184. A brief presentation on the newly formed Task Force co Enterprise Development and the Environment was made before the Council. The following points were made:

　　185. The Task Force was set up in April with financial support from the government of the Netherlands.The issues considered are of paramount importance: enterprise development is directly related to environmental protection. However, the members of the Task Force have yet to meet in order to start their program.

　　186. A recent survey reveals that roughly 40% of China's enterprises are aware of CP but many of them are losing money and in no position to invest in pollution mitigation technology, no matter how great the economic benefits of doing so. Government agencies will have to take this into consideration when setting policies.

　　187. The enforcement mechanisms used by government to encourage enterprises to curtail pollution or resource waste need to be well thought out. Administrative methods relying on deadlines, fines, closures are not always effective; enterprises often flout the regulations or resume emitting more pollutants once regulators have left. The Task Force has an important contribution to make to Phase Three of the Council.Possible crosscutting work with other WGs can be explored.

　　j) Transportation

　　188. The Co-Chairs of the Transportation WG, Wang Yangzu and Rudolf Petersen, presented their report to Council, highlighting the following issues:

　　189. Initially, the WG addressed urban transport problems; they are given first priority because of air pollution and the social impacts poor transport can have. Findings presented from this work state that the GOC should put emphasis on public transport modes, bicycling and walking, while mitigating the increasingly dominant use of cars in cities. The WG concludes that increasing the road network does not provide solutions; roads do not cure congestion. This lesson has been learned in developed countries where the car is the main transport mode.

　　190. During the second year of operations, the WG focused on inter-urban transport, considering in particular the impact highways have on the environment such as the degradation of habitat. Also considered is the lack of secondary road network enabling farmers to access markets. A clear finding from this work is that financial resources should be shifted from highway construction to upgrading secondary road networks. In addition, the issue of responsibility for road maintenance and repairs needs to be thought through.

　　191. Over the past year, the WG examined integrated transport planning and policy. Integration requires dovetailing transport and the policies of other sectors such as energy, trade, environment and so on-this needs to happen at various levels. The integration of transport planning into a comprehensive spatial plan for land use planning purposes on local, regional and national levels is of importance when it comes to meeting future transport demand for various modes.

　　192. Integration of the various components of the transport system should first be improved between urban and inter-urban areas, with improvements made also to various modes such as rail, road and inland navigation. A special challenge is the installation of hubs and links between the various modes in order to allow customers as many options as possib1e. Public policy must intervene to promote the least environmentally damaging modes.

　　193. Among the WG's recommendations to the GOC, the following were highlighted:

　　1) In order to promote integrated transport planning, there needs to be improved institutional and legal integration; one ministry needs to be responsib1e for transportation, with various divisions handling different modes-there are five Departments involved in transportation policy at the national level at present. While there are other possibilities, most countries have found this approach to be the most effective.

　　2) Implementation of environmental policy shou1d be mainstreamed into the transportation sector. Transport policy makers should also be made responsible for the environmental consequences of transport decisions.

　　3) Environmental costs should be incorporated, budgeted and financed in the same way as conventional investments and operational costs. For instance in road construction, the investments are separate from environmental mitigation measures such as building noise walls or restoring vegetation along the highway; costs such as these should be incorporated in the transport project's overall budget.

　　194. Integrated transport planning is the challenge to overcome lack of cooperation and bridge the gaps between administrative responsibilities; this requires the development of integrated planning procedures.

　　195. In the final months of the WG's mandate, a joint proposal was developed with SEPA and the Chinese Academy of Transport Sciences in order to study how strategic environmental assessments (SEA) could be applied to the transport sector in the WDS. The SEA approach brings together all stakeholders and promot6s coordinated decision making.

　　196. For the Council's consideration in view of the Third Phase of its work, it is useful to sketch future prospects for China's transport sector. China is starting a vast motorization program, spurred in part by the opening of its borders and reduction of tariffs following WTO accession. The development of China's domestic car industry will also promote car ownership. This will have consequences for the domestic and global environment and needs to be fully evaluated. The SEA approach could be used for this and could lead to different policy directions for China. It is widely believed that efforts to curb greenhouse gases in other countries could be negated by an increase in car density in China. Among other measures, China needs to consider the regulatory and fiscal framework to promote fuel-efficient cars.

　　197. There is a need to develop a vision for a sustainable mobility future for China. Over the short term, China can make full use of available technologies; it needs to avoid the planning decisions that could narrow its future options, but rather invest in options which will give China future flexibility. In terms of infrastructure, it is key to build up the kind of pub1ic transit system which will attract maximum use.Over the long term, it is important for China to put in place spatia1 land use plans for cities and regions, minimizing the demand for conventional transport and the loss of valuable land to roads. China has the most effective rai1way system in the wor1d; future policies should maximize the benefits from this key asset.

　　Discussion

　　198. The WG report does not sufficiently emphasize the importance of rail transport for the future. The report underlines the need to control the proliferation of cars. This lesson has been learned the hard way elsewhere. Twenty years ago, the UK determined the future was with road transport and rail lines were pulled up; it now faces the onerous task of re-establishing an effective rail network. Giving in to the automotive industry is a mistake.

　　199. The importance of inter-modal links should be highlighted. If such links are not planned adequately, it is expensive to patch up the network after the fact. The key is effective use of the different modes. China should also look into the feasibility of high-speed rail links between cities; while it is not necessary to opt for the highest speed options, it is key to ensure speed reliability. Rail transport should also be key for bu1k commodities; truck transport exerts a heavy toll on road and highway networks. In addition, more work needs to be done on the economics of public transit and rail transportation, since governments are reluctant to spend public funds on these goods, which leads to high costs and deterioration of the infrastructure.

　　200. In conducting SEA of transport or other policy issues, it is important to involve the public in the process in order to take these views into account. For the public to participate in a meaningful way, mechanisms must be used to encourage and support these participants. In addition, the level of language used in the relevant documents should be accessible to non-specialists. Capacity may need to be developed in order to allow public participation.

　　201. The SEA methodology needs to be fully understood for the approach to yield resu1ts. Prediction models are increasingly used in environmental assessments. But these models require data availability.Most models are developed elsewhere and caution should be exercised in simply transposing them to areas where the basic assumptions may not ho1d.

　　202. The recommendation to the GOC on assigning transportation responsibilities to a sing1e ministry or department is endorsed. Only through this institutional reform can the environment be fully integrated in transport decisions.

　　203. The majority of China's population is still living in the countryside. The demands placed on motorized transportation in urban areas will be phenomenal if rural out-migration continues. There is a risk that mega-cities will develop, leading to the destruction of historic city centers and the sprawl of peri-urban areas with workers commuting from the outskirts to work, shop and enjoy recreation in the city center.Ideally, people should live in areas where motorized transport is not required for most daily displacements. The proliferation of cars leads to wasted space for roads and parking. The only way to deal with the problem is to reduce the need for transportation. This requires radical urban planning.

　　204. It would be erroneous to think that capital investment is necessarily needed for improving the railway system. In fact, improvements in management and information processing can increase capacity dramatically for a small cost.

　　205. One of the difficulties of transport planning is "modal split". Once transport demand parameters are established, decision-makers must then determine how much of the demand should be filled by the private and the public sectors. Erroneous assumptions made in the US in the past have led to an over- investment in roads and highways-it is now too late 'to change this basic orientation of the country's transportation system. Caution should be exercised in deciding between private and public options; distorted prices and perverse subsidies can lead decision-makers to the wrong conclusions. China needs to learn from the mistakes and successes of other countries in this regard.

　　206. China's decision to emphasize the automotive industry is based on the belief that this can become a pillar of the economy and a catalyst for growth. The Council needs to take this into consideration as it moves into more strategic aspects of the transportation sector.

　　207. There are concerns arising now from the increase in air transport; this has associated risks of increased pollution and impacts on the ozone layer among others. Unbridled expansion of air transport should be checked. Alternatives need to be developed-rapid rail transport can be such an alternative.

　　208. A large proportion of China's present railway rolling stock is ferrying coal throughout the country.This is an expensive proposition. Coal gasification, enabling the development of syngas cities where energy derived from coal can fuel industrial development, would increase the value added of the products shipped from the coal producing areas. This would make rail shipping more cost effective.

　　209. The increase in car traffic in the report is questioned. Lower projected increases could be more accurate. In addition, it is important to consider the type of fuel used in motorized vehicles. China is not doing conversion to ultra-low sulfur diesel for cars and trucks. Yet pollution could be curtailed by promoting the use of such fue1s.

　　210. While several recommendations made by the WG are positive, most will not have much impact over the short to medium term. Over the short run, road transport will increase at a much faster rate than rail transport. This is because car prices are decreasing while disposable income is rising. Increased car ownership is inevitable for China. To mitigate the negative effects, -we need to advocate better fuels, more efficient engine design and other similar measures.

　　ITEM 9. DISCUSSION AND APPROVAL OF THE RECOMMENDATIONS

　　

　　211. With Vice-chair Xie Zhenhua presiding, members discussed the recommendations drafted by Sir Crispin Tickell to be presented to NPC Chairman Li Peng. These are based on the WG recommendations.During the discussions that followed, members made the following points:

　　212. One of the recommendations states that China is exporting deforestation to other countries because of the logging ban. Timber production in China is still 15 million cubic meters per year. The Chinese government is working on the establishment of economic forests for industrial use in ten years. Therefore this point should be excised from the recommendations. In addition, the text states that the logging ban should be reconsidered and made more flexible. This needs to be clarified; in fact greater flexibility should be demonstrated in planted forests.

　　

　　213. Members are reminded that the recommendations as drafted reflect both the WG reports and the discussions in Council.

　　214. A statement is made in the document expressing doubt regarding the ability of China to feed its popu1ation in the future. Chinese experts do not hold this opinion; there is a belief that China has the capacity to convert wasteland to agriculture, and marginal land to natural vegetation. Grain supply can be fully guaranteed. Livestock production is increasing, and improvements in rangeland production will allow for further expansion. There is no doubt in China on its ability to feed the population; the text should be modified.

　　215. The points made about trade and environment need to be expressed as recommendations, instead of general comments. 

　　216. Statements made in the sustainable agriculture section regarding water pollution need to be corrected. It cannot be asserted that agriculture is the worst culprit for water pollution. We do not have the data to support this conclusion.

　　

　　217. China at present does not have an international obligation to cut its carbon dioxide emissions. But China has made great efforts to cut these emissions. The sentence in the text should be corrected to reflect this. There are similar problems with the passage dealing with the CDM.

　　218. Cleaner production is a concept that applies to other sectors besides manufacturing and industry; the WG is actually recommending it be extended to the primary and tertiary sectors of the economy.

　　219. The introductory passage should include a sentence referring to the WDS. The concluding passage should also include a mention of the visit made to Gansu by some members of Council.

　　220. Syngas and the opportunities it presents should be given greater emphasis in the section on energy.

　　221. In the economics section, mention is made of the responsible attitude required of public officials and the need for additional skills training. This passage should be altered. The sustainable agriculture section makes a blanket statement on overuse of farm chemicals; this should be modified to indicate "in certain areas", since there are regions in China where very few chemicals are used. Finally, agricultural non-point pollution is an important contributor to water pollution but it cannot be asserted that it is the worst contributor.

　　222. The recommendations should reflect the fact that this session is the culmination of ten years' experience in a unique venture. The fact that the Council model will be presented at the WSSD in Johannesburg adds to the prestige of the Council. The report should draw together some of the crosscutting issues that come out in various sectors. And perhaps key papers produced under the aegis of the Council should be listed in an Annex.

　　223. Cleaner production should be presented in a separate section from the pollution control issues. Bunching them together leads to misunderstandings about the very different nature of these issues.

　　224. The list of recommendations gives the impression that the Council deals with technical details rather than strategic issues. There is more to the Council than the sectoral work done by the WGs. The document should also indicate that the Council has a future role to play.

　　225. Various wording changes were suggested and submitted to the drafting committee for inclusion.

　　ITEM 10. GENERAL DEBATE ON THE THIRD PHASE OF THE COUNCIL

　　226. With Vice Chair Xie Zhenhua presiding, members expressed their views on the form, function and goals of the Council during the Third Phase. During the debate, the following points were made: 

　　227. There should be a WG dealing with mining and mineral exploration; the impact of this sector of the economy on the environment needs to be studied. Mining exploration, mine waste disposal, mining effluent, land reclamation are all affecting the environment. In the context of WDS, many provinces will be developing the mining sector; this should be done in an environmentally sensitive manner, avoiding mistakes committed elsewhere.

　　228. Agriculture is key to sustainable development. Phase Three of the Council should still encompass this sector. Agriculture's role has changed from simply providing food to also conserving natural resources, ecosystems and landscapes. The Council should also continue to assist the process of horizontal dialogue and cooperation among various ministries. This would improve the implementation of Council recommendations.

　　229. The Council needs to be cognizant of its advisory role with respect of the GOC. It is there to add value to China's own rapidly expanding capacity in the area of research, policy and planning for sustainable development. In addition, China is finding that it already has the legal instruments needed; what is necessary now is enforcement and China may need assistance with setting up the necessary systems.

　　230. The Council needs to reflect on the modalities needed to increase its flexibility and responsiveness, and hence its timeliness and usefulness to China. Perhaps Council meetings agendas should allow for a review of progress, but also to draw links among various sectors in order to highlight strategic, thematic issues and suggest policy-oriented approaches to the GOC, its line ministries and provincial authorities.

　　231. The title of the Council shou1d perhaps be reviewed. Should its name not be China Council for International Cooperation on Sustainable Development? It will also be important in the next Phase for Council to include members who actually implement the measures advocated, i.e. industrialists, business people and investors. Their presence can infuse the debate with insights based on practical experience.

　　232. In the past up to now, there has been excessive attention paid to technology transfer; this is not an important barrier. But efficient implementation of technology is difficult in a market environment. It requires management skil1s and others. The Council should also consider this gap; the transfer of management skills is more complex and challenging than technology transfer for China.

　　233. China has had trouble with its public image globally; it has not been adept at telling the story of what it is accomplishing. The consequences of poor public relations are serious. The Council might consider setting up a WG or Task Force which could help China put together a communications strategy on sustainable development.

　　234. Policy recommendations should be broader in scope. There should be a shift from specific technical and sectoral considerations to macro, cross-sectoral, strategic issues. There should also be greater responsiveness and flexibility on the part of WGs and Task Forces. The central government should provide more support to SEPA so that the information generated and the databases can be made accessible to a wider audience.

　　235. Consideration of environmental laws should be included in the Council's Third Phase work. Gaps need to be identified for the GOC. There should be more work on the environmental industries in China to highlight the opportunities related to this sector. In addition, environmental education and increasing public awareness should also be a focus of work.

　　236. Qu Geping's paper outlines the five major changes that have occurred in China. Are we likely to see other changes over the coming five years? The Council should cast its coming workplan in such a way as to capture these issues and deal with the challenges they pose. Next year's WSSD is likely to call for the revitalization of the concept of sustainable development China gained from the Earth Summit in 1992 because it took a systematic look at implementing Agenda 21. China now is in a position to influence the deliberations at the WSSD. The Council should reflect on how its work will fit into this agenda. The for should be, as it has been in the past, on local phenomena which have a national or global significance.

　　237. It is remarkable that the Council sends numerous recommendations to the GOC without mentioning the word "poverty". Poverty is likely to be underlined at the WSSD meetings. As the Council moves ahead, consideration should be given to the way poverty will be taken into account in future work.

　　238. An integrating theme is emerging now: the Council is moving beyond environmental quality to the concept of environmental security. The Council may have a role in helping define this and recommend how this needs to be acted upon for China.

　　239. The Council is still having difficulty distilling common themes from its work, making more strategic recommendations and incorporating relevant findings from other organizations. Linkages must be established with organizations such as the WB and the ADB which are also working on these issues in China. The Council has yet to get a good sense of the way relevant government departments view its work. These issues should be considered before the next Phase is launched; this and results achieved should be summarized for incoming Council members as basic briefing material.

　　240. The role of business is growing in China; this will accelerate with accession to the WTO. Business has the role of implementing many of the Council recommendations that are and will be adopted by China. The emerging Task Force on Enterprise Development and Environment may take a look at how business can promote sustainable development; its work has yet to be defined. SETC has now approved the creation of the China Business Council for Sustainable Development; this Council is meant to be a meeting place between Chinese and international entrepreneurs so experience and skills can be shared. It would also be advisable to include Chinese business people among the membership of the Council's next phase. There is also a need for the inclusion of sustainable development principles and practices in the business, management and public administration curricula in Chinese schools and universities; the Council may be able to play a role in this area as well.

　　241. Regional issues should be prioritized; in particular, western China's particular environmental and economic challenges should be the main focus. China's particular circumstances and realities need to be kept at the forefront in order to ensure the Council's work is relevant. The research, analysis and findings of the CCICED need to be more broadly disseminated through seminars and workshops in order to expand the scope of the Council's beneficiaries.

　　242. A self-assessment of the Council's work was completed one year ago. This year, we find ourselves without much of a clear picture of what has to happen for the Third Phase. Priorities, targets, results should be agreed upon. The German government has pledged financial support for the Third Phase: disbursement of these funds will require a more concrete idea of the form the Council will take and what the focus of its work will be. Some ideas for Task Forces and WGs have been put forward; possibly, a Task Force on SEAs should be launched in order to explore this instrument and test its application in western China. But what is really needed is a sense of China's priorities and objectives over the next Phase.

　　243. The WG on Transportation should continue the good work done during the Second Phase, focusing more on west China. The environmental impacts of road and rail transportation need comprehensive study and research.

　　244. The Council could also provide a bridge, enabling the international community to better understand what China is doing and why. Very little is understood of this today, yet this is most necessary. The wealth of work produced by the WGs should be shared. This communication role should be one that is taken on during the next phase.

　　245. There is a polarization now between protection and sustainable use of resources; this is particularly the case with biodiversity. The question could be dealt with in a strategic way by the Council during Phase Three. Environment and development represents a continuum, as does protection and sustainable use. The meaning of the word "sustainability" should be clarified in practice; this needs to be explored in the China context. In addition, the impact of China's future consumption decisions should be considered; the scale of China's impact on the global economy and environment make this imperative.

　　246. The agenda and priorities of the Council should be set by the GOC. But who speaks for government? The State Council has the vision and mandate to do this. The Council should see one of its roles as promoting communication between ministries involved in the environment. A lot of work on the environment is being done by a variety of donors; the Council should garner and synthesize this work. In addition, a communications strategy needs to be drawn for the Third Phase.

　　247. Japan will continue to contribute to the Council during Phase Three.

　　248. Although the Council has an advisory role, this advice needs to remain securely tied to solid scientific work. CAS has a specific responsibility in this regard. Greater integration between scientific work in China and the Council's activities and recommendations should be achieved. For instance, CAS is involved in research into the impacts of the construction of the Golmud-Lhasa rail line on the environment of the Qinghai-Tibet plateau. This is the kind of fundamental work that provides a solid basis in order to draft the recommendations.

　　249. Thought has to be given on the value added of the Council in a very different China than the one that existed when the Council was first set up ten years ago. The Council is a link between the international community and China on environmental questions. China is emerging as a powerful player, and accession to the WTO will support this process. The most important area of mutual interest between China and the world is the impact of China's growth on the environment. The Council is at the heart of this interface.

　　250. The Council should has on linkages between issues which are often treated as separate, particularly in China. One of these is the linkage between environmental policy and economic policy; another is the one between science and technology and the environment. The Council should explore work on some of these linkages. The Council can adopt a long-term, forward look at the issues under consideration. The Council should also take its independent advisory role seriously, not shying away from voicing unpopular views.

　　251. Access to China's top leadership is one of the strengths of the Council. If this access is to be preserved, the ways in which the Council brings its ideas forward is critical. It behooves the Council to be imaginative and clear in presenting its message in order to further the thinking and debate within Chinese circles.

　　252. The Council has worried about the continuity of the WGs while agreeing that flexibility is important. It would be possible to have a core group and bring in other people as and when they are needed in a responsive way. But the kind of relationships that have been built over the years among WG members is valuable. This kind of capital should not be squandered. The interface between the Council and the WGs needs to be thought out; too much interface on the WGs would hinder the more integrative functions of the Council. The Secretariats should be strengthened. The Council is on the verge of becoming a major operation but it does not have the support it needs for meeting preparation. Focusing at each meeting on specific themes of key relevance to China would add to the effectiveness of the Council and the power of its message.

　　253. As announced by Chairman Wen Jiabao during the Opening Ceremony of the Fifth Meeting of the Second Phase, the GOC has approved a Third Phase for the Council. The GOC, the Canadian government and that of other countries all believe that the Council has a key role to play; they have agreed to support the next phase and funds have been allocated to that effect.

　　254. There are areas which will need improvement in terms of operations and procedures; therefore the Council Bureau will be working on the changes, to then be submitted for approval by the GOC. The selection of WGs, Task Forces and members will be considered by the Bureau, based on participants' views and following the guidance of the GOC. Third Phase participants will mostly be drawn from Second Phase ranks.

　　ITEM 11. CLOSING CEREMONY

　　255. With Vice-Chair QU Geping presiding, Vice-Chairs Xie Zhenhua, Len Good and Qu Geping addressed members of Council during the Closing Ceremony of the Fifth Meeting of the Second Phase.During these presentations, the following issues were highlighted:

　　256. Members and experts are thanked for their support and contribution to China over the years. Phase Two of the Council continued on the path set during Phase One. Many of the recommendations of the Council have been adopted by the GOC over the years.

　　257. Phase Two saw some improvements in terms of the operations of the Council. A yearly theme was set in order to stimulate informed comment and advice from members. Keynote speakers are invited in order to provide substance for the debate. This has allowed meetings to become more topical.

　　258. The focus has also shifted to pilot and demonstration projects. This has allowed recommendations to be grounded in reality. Task Forces were also set up to deal with urgent issues, providing support and advice to decision makers. Studies and analysis provided by the WGs and Task Forces helped support the formulation of macro policies.

　　259. The Secretariat's work was also strengthened during the Second Phase. Strong support for the WG activities and for Council meetings was provided by staff of the Secretariat in China and Canada.

　　260. The Council brings together foremost experts in their fields; together they work on key issues.China's top leaders have met Council members to hear directly from them. This is a unique model in the world. The Council has become a successful example of international cooperation in order to achieve sustainable development. The Council has played an important role in supporting and promoting sustainable development in China. It has brought new ideas to China and promoted open and frank debate.

　　261. The Council, due to the links forged with the central and provincial governments, is associated with progress achieved in the following areas:

　　1) The level of integration of environmental protection and environmental development has increased. During the 10th FYP, the government has agreed upon various criteria for sustainable development. Environment is now a key element of the economic restructuring taking place during the 10th FYP.

　　2) The legal framework to deal with environment and development has approved. Various laws have been promulgated; others were amended. Clear guidelines are set on pollution control and environmenta1protection. Cleaner production, environmental assessment, pollution levies these and other approaches are now part of China's legal framework.

　　3) Market based mechanisms have been introduced to promote environmental goals. Water and energy prices are now being reformed to reflect real costs. Tax incentives are also being used. ISO 14000 certification as well as the certification of organic foods have been implemented. 

　　4) Areas under environmental protection have been expanded to include urban, rural and other areas. For instance, the national forests protection plan has been adopted.

　　262. The governments of Canada, Germany, the Netherlands, Japan, Norway, the United Kingdom, the European Union, the World Bank, the Asian Development Bank, Rockefeller Foundation, Ford Foundation, the International Union for the Conservation of Nature, the World Business Council on Sustainable Development, the Australian International Agriculture Research Center and shell Company are thanked for their support.

　　263. The GOC has approved a Third Phase for the Council. This represents an acknowledgement that the past ten years have been fruitful. Future support for the Council has already been pledged by Canada and others.

　　264. Participants have emphasized the importance of access to China's top leaders; the leadership has demonstrated its interest in the Council's work and recommendations. This interest will continue. 265. There is great value placed on the personal relationships that have developed among members and experts. There are fears that relationships built over the past are at risk as the Council enters its next Phase. Participants should be reassured; Phase Three will draw mostly on Phase Two membership.

　　265. Frustrations exist around the relationship of the Council to the WGs; this is organizational in nature. It means members do not get WG reports in a timely manner and their information is not synthesized to address more strategic issues. Some changes will be made to address these shortcomings.

　　266. As the world and China change, the orientation of the Council may have to be recast. Increasingly the Council will have to integrate into the more technical discourse some of the "softer" issues such as institutions, capacity building, management and so on.

　　267. Gratitude is expressed to past and current participants: members, experts, Secretariat staff, interpreters for their participation and efforts. The GOC is thanked for its hospita1ity.

　　268. The government of Canada is gratefully acknowledged for its substantial support to the Council and for the contribution of three CIDA Presidents who served as Council Vice-Chairs over the past ten years.

　　III. RECOMMENDATIONS OF THE COUNCIL TO NPC CHAIR LI PENG

　　269. The fifth and last meeting of the Second Phase of the China Council (CCICED) took place in Beijing from 13 to 15 October 2001. This was the tenth time that the Council had met. At this meeting the Council undertook a review of the results achieved over the past decade, in particular those of its joint Working Groups. It also considered possible adjustments to its future priorities and procedures to ensure its continuing effectiveness as a high level advisory body to the government of China.Since the Council convened in 1992, there have been radical changes in China in attitudes and policies towards sustainable development. As before in the long history of China, the good health of the relationship between humans and their natural environment is once again recognized as an overriding priority, and protection of the environment has become an essential element in policy and planning. It cuts across all areas of economic activity, and requires an integrated approach, involving all parts of government (local and regional as well as national), and full use of legal, economic, technical, and administrative instruments. It also brings market mechanisms within the framework of the socialist market economy. Thus sustainable development with Chinese characteristics is becoming a defining feature of modern China and its prospects for the future.China's weight and influence in the world is constantly increasing. In no area is this truer than in global treatment of sustainable development, and this will be manifest at the forthcoming World Summit on Sustainable Development in Johannesburg in 2002. The Chinese government will have a strong and positive story to tell.The Council is a unique institution which brings together people from China and other parts of the world to cooperate in furthering sustainab1e development in China. All members have valued and profited from the experience, which could be a model for use elsewhere. The practical work of its Working Groups and Task Forces has covered the whole spectrum of sustainable development, including economics, sustainable agriculture, protection of biodiversity, particular1y in restoring forests and grasslands, control of pollution, cleaner production methods, promotion of the environmental dimension in business enterprise, energy strategy, transport issues, and the relationship between trade and the environment, with the implications for China of future membership of the World Trade Organization. Attached are the reports of each Working Group and Task Force. It will be seen that a common thread is the importance of policies which reconcile protection of the environment with social and economic development (to the advantage and profitability of both), and the vital need for their coordination at all levels of society. In summary the Council's Recommendations now follow.

　　a)Environmental Economics and Management

　　270.As the Council has emphasized on previous occasions, the role of environmental economics in a socialist market economy is critical. Although it is easier said than done, governments have the responsibility of determining true costs, and ensuring that prices take due account of them. In doing so they have to take account of the social impacts of price reform. The Council recommends that the government should

　　* aim to ensure that in exploiting natural resources the users should recover total costs of production and consumption, including those of environmental damage and pollution;

　　* to accelerate improvements to the current system of pollution levies and use of other instruments for environmental control: in particular levels of fees and charges should increasingly reflect total costs of environmental damage, and monitoring and enforcement capacity should be improved;

　　* to develop capacity in all government agencies to understand the implications of environmental damage in policy making, and to develop incentives for public officials. Particularly important will be training in the development of skills in economic evaluation of the costs of environmental degradation and remedial actions, methods of pricing policies for exploitation of natural resources, environmental incentives and disincentives, and linkages between environment, poverty and public health. The cost of undoing previous damage should never be forgotten;

　　* to undertake environmental impact assessments applying not only to individual projects, but also, where feasible, to economic policies in general;

　　* to avoid exporting Chinese environmental problems elsewhere (for example a ban on logging in China could cause deforestation and environmental degradation in other parts of the world);

　　* to use models and scenarios as appropriate to assess possible future developments and their environmental impacts.

　　b)Sustainable Agriculture

　　271.Agriculture is at the base of the Chinese economy, and now faces a series of problems. There are shortages of water, declining water quality, and excessive use of fertilizers and pesticides in some areas, particularly coastal regions. Like cities and industry, agriculture contributes to water pollution. The consequences are many: higher production costs and lower incomes for farmers as well as land, air and water pollution of all kinds, involving threats to food safety.

　　272.Many of these problems will become more important after China joins the World Trade Organization. The safety and security of food supplies depend ultimately on the manner in which the supply chain is managed from soil and water to the consumer. It will also be necessary to work out and assess critically the effects of increasing use of biotechnology, including development of genetically modified organisms. The Council recommends that the government should aim

　　* to reconcile the sometimes conflicting roles of government Departments over regulation, production and sale of fertilizers and pesticides;

　　* to remove any indirect subsidies on fertilizer production;

　　* to introduce pollution taxes, and thereby increase agricultural efficiency;

　　* to increase public awareness, particularly among farmers, of the environmental costs of poor agricultural management;

　　* to promote production of food in certain areas, free of pesticides. chemical fertilizers and genetically modified organism, for which a market is rapidly developing.

　　c)Forests and Grasslands

　　273.At present Chinese forests and grasslands are in trouble. In particular there is a lack of coordinated policies regarding land conversion, forest protection and replanting, property rights of individuals and communities, logging (and compensation for the current logging ban), and policies to rehabilitate damaged soils.

　　274.The Council recommends that the government should aim

　　* to conduct a full cost benefit analysis of land conversion and natural forest protection programs, taking into account ecological and socio-economic benefits and costs at every level;

　　* to put in place long term arrangements for monitoring and evaluation, and supply the necessary funds;

　　* to integrate watershed management with particular regard to property rights and use of appropriate technologies (including natural regeneration and the use of appropriate tree species to maximize ecological and economic benefits);

　　* to reconsider and in some cases relax the current logging ban according to particular circumstances.

　　d)Biodiversity

　　275.China has unique biological resources which, as the Council has said on previous occasions, still seem to be undervalued and insufficiently protected. While destruction of topsoils and forests, and soil erosion are visible to the naked eye, the impoverishment of biodiversity and the natural resource base fail to attract much attention. Diversity of species and the microorganisms which support them are of fundamental importance. The Council recommends that the government should aim

　　* to improve coordination whereby the various sectors involved in biodiversity management and conservation are brought together, with particular regar4 to the maintenance, functioning, and in some cases restoration of whole ecosystems;

　　* to establish guidelines for ensuring conservation of species and ecosystems, and restoration of biodiversity in the different ecological and geographical circumstances of China;

　　* to review current regulations for protected areas and their enforcement; and to undertake a national assessment of the status and functioning of ecosystems in China (in cooperation with such international programs as Diversities and the Millennium assessment);

　　* to establish a national biosecurity program to cover issues arising from the invasion of alien species, and those relating to uses of biotechnology. In this respect early ratification of the Cartagena Protocol on Biosafety is highly desirable;

　　* to develop new economic incentives for conservation and maintenance of ecosystem services, in full association with local communities. Nowhere is it more necessary to work out integrated policies for biodiversity and ecosystem functioning than in the Western Development Strategy.

　　e)Cleaner Production and Control of Pollution

　　276.Increasing industrialization and urbanization underline the need for cleaner production and control of pollutants of all kinds. These cover all aspects of the economy. Future Chinese membership of the World Trade Organization represents a further challenge Cleaner production and pollution control go hand in hand with environmental benefits. They create many opportunities for more efficient and profitable production. Failure to adopt them can carry heavy penalties, with implications for human health and impacts on ecosystems generally. Yet special consideration needs to be given to the poor and disadvantaged who may suffer most from otherwise necessary reform.

　　277.A particular problem is the control of pollution of river basins. Comprehensive measures are necessary to reduce pollution from distant as well as nearer sources, including factories by the riverside and area sources.

　　The Council recommends that the government should aim

　　* to establish special regulatory systems which require local government to integrate cleaner production into local development plans, to bring in the environmental dimension generally, and to assess and monitor performance on a regular basis;

　　* to interest and encourage private investment;

　　* to take maximum advantage of recycling materials whenever possible, and in disposing of waste without damage to the environment;

　　* to pursue current demonstration projects by city and industrial sector, and draw on the experience already gained;

　　* to conduct further studies on how best to promote cleaner production, and advance work on national legislation on the subject, possibly following the precedent set in Taiyuan.

　　278.Reduction in emissions of carbon dioxide and other greenhouse gases is a worldwide problem. Climate change of the kind predicted in the Third Assessment of the Intergovernmental Panel on Climate Change could bear very heavily on China, with increased climatic extremes of floods and droughts. It should be a priority in Chinese policy to combine reduction in greenhouse gas emissions with economic growth, rising living standards and sustainable development generally. A paper prepared by the relevant Working Group on "Policy options for CQ2 emission mitigation in China" should be widely disseminated, including abroad.

　　f)Energy

　　279.Demand for energy is constantly increasing. The point of departure for future strategy should be China's endowment in natural energy sources, the greatest being in coal and such renewable sources as hydro, wind, solar and biomass. At present Chinese dependence upon coal has diminished, but coal will remain a vital resource. Coal gasification technology will be fundamental in allowing a high leve1 of energy self-sufficiency if all syngas options are properly used. But in this respect it is essential to develop means to ensure capture and disposal of the excess carbon dioxide inevitably produced by this technology. It is very much in China's interest to join with other countries in promoting what has been called the low carbon economy.

　　280.The development of other energy sources and technologies is essential. The Council recommends that the government should aim

　　* to emphasize energy efficiency improvements in all sectors, especially at the point of end use;

　　* to move away from smoke-generating direct combustion towards such cleaner energy carriers as electricity, gas and steam;

　　* to evaluate and develop small scale hydro power;

　　* to develop Chinese resources of wind, solar and biomass (at present very much underused);

　　* to pursue research into other energy technologies, including nuclear, so that costs and benefits can be more accurately assessed;

　　* to ensure that environmental costs are taken into account in pricing different forms of energy;

　　* to encourage foreign direct investment, joint ventures, and private/public partnerships to gain access to capital and advanced technologies;

　　* to set targets for application of renewable energy technologies, using subsidies as appropriate, to achieve economies of scale, and drawing upon experience in this respect elsewhere.

　　281.A strategy for sustainable energy supply should not be seen as a burden on the economy. On the contrary, such a strategy offers opportunities for innovation, and economic and social development.

　　g)Transport

　　282.As the Council has said on previous occasions, China is no different from any other country in needing an integrated transport policy in which the advantages and disadvantages of different modes can be judged against each other. As the number of private cars increases and traffic congestion worsens, so does the need for better and more reliab1e public transport, particularly in cities. Prices for all kinds of transport, whether of people or freight, should reflect the real social, economic and environmental costs. Throughout, environmental standards need to be strictly applied.

　　283.Five Departments are at present involved in transport issues, and this can sometimes lead to conflicts of interest. The Council strongly urges that responsibility for different modes of transport should be brought into a single Department, which should be responsible for overall policy and planning taking environmental considerations into account throughout. Transport reaches into every aspect of modern society, including land use, pollution, urban and town planning, and development generally. Of particular importance is the need for an integrated strategy and procedures for assessment to take account of such issues as development of rail against road transport, especially of freight, the future use and costs of air transport,

　　the rehabilitation of inland waterways, and the full association of the public, including local communities, in future planning. China should learn from the mistakes of other countries, which, for example, destroyed some of their railway networks for the sake of road transport, but are now having to restore rail facilities at great cost. Prices of fuel should reflect true environmental cost.

　　284.If, as seems inevitable, use of cars and road transport increases, at least in the short term, strict environmental standards need to be applied to motor vehicles, and best available clean technologies need to be used. Throughout, the impact on city and town life should be carefully assessed. Smaller more compact cities, including home, work and recreation, should minimize the need for transport. These cities have their own sustainable transport arrangements, including the use of bicycles, and are being increasingly favored elsewhere in the world.

　　h)Trade and Environment

　　285.Chinese accession to the World Trade Organization will have far reaching effects on the Chinese economy and society generally. The impacts have yet to be fully worked out, and an integrated assessment of the environmental consequences is urgently necessary. The World Trade Organization itself has yet to come to terms with the environmental dimension, and China may in the future play a creative role in establishing a better balance between commercial and environmental considerations in and out of that organization.

　　286.An important opening for China is Chinese participation in the Clean Development Mechanism for promoting sustainable development once the Kyoto Protocol comes into force. Early participation in the Clean Development Mechanism should help secure substantial foreign investment and transfer of advanced techno1ogy to China. In projects within this framework, the government may wish to give priority to the Western Development Strategy where the opportunities for low carbon emissions and application of modern technology are particularly large.

　　287.The Council commends the papers and recommendations made by the individual Working Groups and Task Forces. Some of their reports are of general interest. The Council recalls its previous advice to the government

　　* to play a full part in international negotiations on such issues as climate change and sustainable development;

　　* to review some of its environmental legislation and do more to enforce it;

　　* to retain the responsibilities of government even when advancing privatization in some sectors and the use of market forces;

　　* to bring sustainable development to the attention of ordinary citizens, and bring information about it into the educational process;

　　* to learn from the mistakes of other countries, protect its unique environment and culture, and make its own distinctive contribution to sustainable development.

　　288.A delegation of the Council made a trip to Gansu Province and visited the sites of two projects aimed at environmental rehabilitation through afforestation, water catchment and prevention of desertification. These complex projects, which have the sponsorship of the local branch of the Chinese Academy of Sciences, merit full support.

　　IV. MEETING WITH NPC CHAIR LI PENG

　　a) Council presentation:

　　289. During the meeting with NPC Chair Li Peng, several Members of Council addressed the Premier and stressed the following issues:

　　290. The first purpose of the Meeting was to celebrate ten years of operations. Relationships between Chinese and international members and WG participants have grown strong; mutual knowledge and understanding have grown. The Council is rightly proud that the Chinese government has drawn on its work to set policies and programs.

　　291. The second purpose of the Meeting was to discuss the Council's Third Phase. Participants are delighted that the GOC has approved this Third Phase. Organizational changes will be made in order to improve the effectiveness of the Council. Key to success will be the Council's ability to draw on the participation of top experts in their fields. Equally important is the willingness of China's senior leadership to receive the recommendations of the Council.

　　292. The third purpose of the Meeting was to review and discuss the WGs' latest reports. Four main messages have been distilled for presentation:

　　1) Over the past ten years, the environmental dimension has made its way into the mainstream of public administration in China and in other countries.

　　2) It is clearer than ever that there must be coordinated government action, taking into account the economy, the environment, the social dimension and others. For good policy making, governments must take holistic approaches; the environmental dimension is a key part of this.

　　3) Governments require flexibility in order to incorporate the environmental dimension in various aspects of their work at the nationa1 and regional levels.

　　4) The influence and weight of China in international affairs need to be highlighted; the forthcoming meetings in Johannesburg will allow national representatives to discuss and take joint action on sustainable development.

　　293. Environmental economics is of key importance. The recent UNEP report on the state of the world environment shows a deterioration of most indicators; this will require the world's governments to altogether in order to deal with these prob1ems. Identifying true environmental costs is key to taking the correct action.

　　294. The economy as a whole is a subsidiary of the environment. Markets determine prices but are incapable of reflecting costs accurately. Governments have a role to play in ensuring true costs are taken into account in price determination. Models and scenarios can be useful tools in this regard.

　　295. The accession of China to the WTO is imminent. It should be remembered that the WTO is not a perfect organization or instrument, particularly when it comes to environmental issues. The WTO needs China to help improve its operations and ensure the environment is more fully taken into account.

　　296. The Council has been at China's service for the past ten years. It is here to help and to continue to contribute, as the GOC sees fit. It represents a model which may eventually be emulated by other countries.

　　297. Land reclamation to promote regeneration of grasslands and forests has been entrusted to the Ministry of Forests; the approach adopted is to plant trees everywhere, even in areas where trees are not suited to the ecosystem, such as many areas of northwest China. In such cases, the investment is wasted and worse ecological damage results.

　　298. The GOC must pay attention to the livelihood of people who are involved in ecological construction projects. Economics dictate that when subsidies stop, people will revert to farming in order to survive, thereby negating decades of work. MOA needs to be planning strategies to deal with this. The government should also pay attention to the species used in reforestation projects, avoiding monocultures and ensuring the species are appropriate to the specific eco-systems.

　　299. Non point source pollution is of agricultural nature in rural areas, while in dean areas it is household waste. The SAWG's field tour of southeast coastal areas revealed severe problems due to the overuse of nitrogen fertilizer - application rates in China are much greater than in most other countries of the world. Surface and ground water is so polluted it is no longer potable. This also has an impact on food safety and on the quality of the foods produced - these products cannot be exported as a result.

　　300. Invasive alien species are a serious threat to food production and to the environment in China. The state will need to take action to prevent the inadvertent introduction of damaging alien species.

　　301. Members of Council agree that the CCICED model is unique and worthy of replication. A propitious forum for this will be the WSSD in Johannesburg in 2002.

　　b) Chairman Li Peng's response

　　302. There is a growing awareness in China, on the part of the government and the public, regarding environmental issues. China is a less developed country which is industrializing. China's population is still growing. Many challenges lie ahead.

　　303. China has been attempting to deal with environmental issues at different levels and from different perspectives; China was the first country to take action in key priority areas. This has been done to avoid the mistakes committed by other countries which chose to promote economic growth first, and then to clean up the environment.

　　304. The GOC upgraded its policy of environmental protection to the status of a basic state policy; the only other basic state policy deals with population control. Then environmental protection was incorporated in the GOC's development policies; China is determined to continue developing and allow scope for future generations to pursue development as well.

　　305. In many areas once basic needs are met, people demonstrate the desire to improve the environment in order to increase quality of life. There are two indicators of this trend: deputies to various administrative levels' Peoples' Congresses are now hotly debating environmental problems and solutions; a growing number of pollution complaints are being received from the public -- enabling the government to develop a formula whereby monitoring is done in partnership by the government, the media and the public.

　　306. Legislation on environmental protection is now in place; it is part of China's progress towards the rule of law. Through the auspices of the NPC's legislative committee, the necessary pieces of legislation have been promulgated and China now has a relatively complete framework. This is complemented by regulations and decrees issued by various government levels on relevant issues. Legislation alone is not sufficient. Actual enforcement of the laws needs to be monitored and supervised.

　　307. China is increasingly taking steps to reduce air pollution. Beijing has been a focus for this work because it is the country's capital and its showcase, but also because Beijing was in the running for the 2008 Olympics. The other problem that has received focused attention is the red tides in the Bohai Sea. Action has been implemented and progress if being made.

　　308. It is difficult however to assess China's overall progress in environmental protection. In some aspects, things are getting better; in others, there is deterioration. But without the government's efforts, there is no doubt the situation would be worse.

　　309. The Council has recommended the GOC invest more in environmental protection; there is agreement on this. In addition, the business community should be mobilized; polluters should pay. Over the past few years, 0.9% of China's GDP has been spent on environmental projects; over the 10th FYP, this proportion is expected to rise. A recent phenomenon is the emergence of an environmental industry in China; enterprises are specializing in environmental protection. This trend will grow.

　　310. Because both the government and the people see the environment as a priority, improvements will be made. China stands ready to fulfill its international obligations in this regard, because pollution knows no border. In this context, a delegation will be sent to the WSSD in Johannesburg next year.

　　311. A major focus for China in the coming years will be the 2008 Olympics which Beijing is hosting. A lot of work in the environmental field will need to be done in order to meet the International Olympic Committee's requirements. The Beijing municipal government has a plan in place to improve the environment; large amounts will be invested to that effect by the central and municipal governments.

　　312. In order to meet the challenge of the 2008 "Green" Olympics, changes will be made to the fuels burned in the city; cleaner coal will be used; coal combustion as a whole will be curtailed. Urban transportation will be improved; as people buy more cars, pollution will get worse. The way to deal with this is to continue investing in the city's subway and the various components of its public transportation system. A network of ring roads and connecting expressways will be completed. Construction projects in Beijing are to be more environment-friendly than in the past. The municipal government has an obligation now to report daily on air quality.

　　313. Over the next century, the GOC will demonstrate that it sees the environment as a priority; key documents are being issued that attest to this fact. One step taken is the commitment to reduce emissions by 10% - a sizeable challenge. There is to be an improvement in the general state of the environment as well. Great efforts will be needed to achieve these goals given China's 1arge population.

　　314. On the issue of reforestation, it is clear that precipitation is key. If there is little rain, trees planted in arid areas will not grow. It is also clear that an increasing population that requires greater quantities of grain to feed itself will lead to damaged forest and grassland ecosystems. Subsidies paid to farmers to grow trees will not last forever and new ways must be devised to provide farmers with adequate incomes. New income sources are needed; we have learned this lesson in the past through various projects.

　　315. The mention of non-point pollution and its impact on water quality is a good one. High levels of fertilizer, particularly nitrogen, are being used but their efficiency is low, leading both to high production costs and to pollution. The government will have to work on this issue in order to promote more optimal use of farm chemicals.

　　316. China is now moving towards both greater industrialization and its population is still increasing. But the goal is to achieve increasing industrialization through the use of information technologies and high-tech. The top polluters and wasteful users of natura1 resource will be eliminated as China goes through restructuring its industries. Environment is part and parcel of the restructuring criteria.