Natural gas is often seen as an ideal option to optimize China's unsustainable energy mix. Gas could improve the country's environment because of its lower air pollution and carbon emissions. Abundant domestic gas supplies could also make the country less dependent on energy imports, a longstanding goal of Beijing. Demand for gas is planned to grow to 260 billion cubic meters by 2015, up from 108 in 2010, an astonishing annual growth rate of almost 20%.

But since gas production increased by only 14% a year between 2006 and 2010, China needs to either quickly ramp up its domestic gas supply or increase its gas imports. That domestic supply is greater than is generally believed, given common story lines about how China lacks energy resources. According to the U.S. Energy Information Administration, China has more technologically recoverable shale gas than any other country in the world, enough to fuel the entire Chinese power sector—the largest in the world—for 30 years.

This is inspiring Beijing to dream of a U.S.-style shale gas revolution for China. Shale gas supplied less than 2% of U.S. gas output in 2000, but 10 years later it reached 23% and is projected to account for 49% by 2035. America's dependence on imported oil as a percentage of national consumption has rapidly diminished from 60% in 2005 to slightly over 40% today.

To gain access to state-of-the-art shale gas technology, both China National Offshore Oil Corporation and Sinopec have recently made strategic investments in North American shale gas assets. At home, after a rather disappointing round of bidding for shale gas drilling rights in June 2011, when only six state-owned companies were invited to participate, the Ministry of Land and Resources announced last month the second round of bidding. Realizing that America's shale revolution has been powered by small- and medium-sized enterprises instead of Big Oil, Beijing also is allowing Chinese private enterprises and Sino-foreign joint ventures (as long as they're controlled by Chinese parties) to bid.

But China is hardly on track to replicate America's success. Several factors still threaten to trip up Beijing's efforts to bring the shale revolution to the Middle Kingdom.

"Technologically recoverable" is not the same as "economically recoverable." Shale gas deposits in China are generally located in mountainous areas and remote deserts, and are buried deep underground. While the technology exists to extract gas in those conditions, it's not cheap. Drilling costs in China have run as high as $16 million per well, compared to only several million dollars in the United States.

This need for capital is related to the weakest link of China's shale gas industry: the country's inability to attract the right types of developers and incentivize private enterprises to spur much-needed innovations. Major international players, while interested in investing, are well positioned to resist transferring critical technological know-how to their Chinese counterparts— which effectively leads to a prolonged learning curve.

Despite some signs of openness, China has struggled to attract investment from smaller foreign players. Beijing already faced an uphill slog since many smaller American drillers face financial troubles due to low gas prices in their home market. Making matters worse, the legal vacuum for shale gas development (including licensing, exploration and production); a lack of intellectual property rights protection for technology; low gas prices in China; and a dearth of easily recoverable fields for new entrants all are deterring investment.

Beijing also has a hard time attracting the right kind of domestic developers. China lacks strong protections for private property rights, especially in the energy industry. Shale gas investors will have noticed the most recent consolidation of the Shanxi coal industry starting from 2009, in which the government forced mergers among ostensibly private mines and mostly benefited state-owned companies. Not surprisingly, private investors in China are more likely to be interested in short-term speculation instead of long-term investment in research and development that is key to a Chinese shale gas revolution.

Nor will China necessarily reap environmental rewards from shale gas. Hydraulic fracturing—which uses pressurized fluid to break up the shale deposits that contain the gas—is water-intensive and many shale gas fields in China face serious water shortages, making it difficult to scale up output. Even in regions where water availability is less of a concern, inexperienced or irresponsible drilling practices risk fresh water contamination.

Though China currently has only 62 shale gas wells in trial development zones, Beijing has recognized the importance of water management in China's Shale Gas Development Plan for 2011-2015. Even so, China's problematic environmental enforcement records and the country's highly fragmented water governance mechanism certainly do not necessarily hold the promise of moving the water management agenda toward the right direction.

Shale gas can improve China's environment and energy security. But there are too many barriers that will prevent China from duplicating America's success. The shale revolution can certainly spread across the Pacific one day. But for that to happen, Beijing will need a major revamp of basic policies such as protection of property rights.

The biggest obstacle to environmental protection in China is not a scarcity of funds or technology, but a scarcity of motivation, says Ma Jun of Chinese non-profit group IPE.

China has achieved remarkable economic successes over the last three decades. For years, it has led the world in GDP growth. But widespread industrialisation and urbanisation, along with growth based on increased use of resources, mean the nation also leads the world in energy consumption, carbon emissions and release of major air and water pollutants. Pollution is severe, resources are scarce and public health is threatened. The environmental impacts are felt both regionally and globally. 

More and more Chinese people are coming to understand that development founded on ever greater resource consumption is not sustainable. And yet this mode of development maintains our GDP growth and, by extension, our tax revenues, jobs and political careers. Local officials see no other option. Many believe that the day when resource and environmental constraints restrict growth is not here yet – nor do they expect to still be in office when it arrives. 

But while in theory we have not yet reached the top of the Kuztnets curve, environmental constraints have suddenly increased. In less than a year from August 2011, we saw popular protests against the PX plant in Dalian, a molybdenum and copper smelter in Shifang and a waste-water pipeline in Qidong. Faced with tens of thousands of “walking” protestors, the local governments compromised, cancelling huge investment plans or even relocating facilities on which tens of billions of yuan had already been spent. 

The new trends reflected in the three cases will all have far-reaching influence. First, the public is more environmentally aware than ever before, and reacts strongly, perhaps radically, to health risks. Second, microblogs and other social media have given the public the tools to discuss social issues and to organise. Third, the government is reluctant to use force to suppress public actions aimed at defending environmental rights and health. 

And so the new administration will face an environmental crisis. For 30 years, China’s top-down and opaque methods of managing the environment have allowed for fast-track sanction of large-scale projects in line with already approved plans, and ensured that those projects are not disrupted by local communities. Rapid economic growth has ensued. But incidents such as those in Shifang and Qidong have shaken this system. Not only will it be hard to achieve both development and environmental protection, but social stability too may be at risk. 

Things must change. But how?

To solve the problem, we must identify its cause. Many people both in China and abroad regard a lack of money or technology as the key obstacle to environmental protection. Yet China’s huge investments over the last decade have not remedied its grave environmental problems. This is mostly because businesses do not have any incentive to develop or use new technology – to the point that they do not even use anti-pollution equipment that has already been paid for and installed. The biggest obstacle to environmental protection in China is not a scarcity of funds or technology, but a scarcity of motivation. 

Where should that motivation come from? A review of the history of environmental protection in developed nations quickly supplies an answer: government. Legislative bodies must create laws, the executive must enforce those laws and the courts must rule on environmental lawsuits. Motivation can also come from the market – for instance energy and water price levers can bring about energy savings and reduce pollution. 

But many of the western environmental laws borrowed here have, in China, become mere ornaments, thanks to widespread weaknesses in law enforcement and the difficulties of bringing environmental lawsuits. Other key elements such as environmental impact assessments are used for appearance sake only. Regulatory failings mean that the cost of breaking the law is far below that of obeying it – businesses are happier to pay fines than to control pollution. Market-based schemes imported by China, such as emissions trading, have not had much impact, again due to poor regulation.

If poor regulation is the problem, can’t we simply improve it? If only it were that easy. Behind those failures lies local government’s continued preference for economic development over environmental protection. The underlying reason why environmental bureaus fail is that local governments continue to offer protection to polluting companies for the sake of economic growth. Meanwhile, China’s imperfect judicial system means courts and their judges are hobbled by local government when attempts are made to bring environmental lawsuits. Also, land and water prices are kept far too low – again, because local government wants to attract investment. 

The roots of China’s failings in resource and environmental management lie not in technology, not in the inadequacies of particular people or authorities and not even in corruption, but in the system itself. The turning point for environmental protection in the west was in the late 1960s. The environment was worsening, and there was an urgent need for environmental protection mechanisms. The public made its wishes known and spurred legislators to establish environmental laws and authorities, and to implement those laws through public participation and lawsuits. 

Experiences have shown that public participation can prevent powerful interest groups from controlling policy decisions and management, while competing interests can help find a dynamic balance between development and environmental protection. China’s environmental conundrums will not be solved by changes within government alone. New mechanisms are needed to allow the communities which may be affected and citizens concerned about the environment to join in. 

Recognising fundamental rights

I propose a framework in which all parties can participate, founded on environmental rights, and supported by three main procedural rights. 

First, the basic rights: the public should be a part of environmental protection – not just for practical reasons, but because environmental rights are a basic right for citizens of any modern nation with the rule of law. Future systems for environmental governance should be founded on the protection of that right. However, while environmental rights exist in theory, in practice they extend only to exerting moral force or expressing wishes, and so it is hard to turn them into defensible civil rights. 

It is worth noting that western nations did not allow this legislative difficulty to affect the environmental rights of their citizens. Rather those democracies gave the citizens indisputable procedural rights, to acquire environmental information, to participate in policy decisions and, when those two rights were infringed upon, to seek judicial redress. These three procedural rights gave the citizens the ability to protect their environmental rights. 

These three different rights come in a certain order. 

First is the right to obtain environmental information – an environmental right to know. This gives the public the right to access, where appropriate, information held by the government on possible environmental impacts. It comes first because it is a precondition of the others. If the public is unaware of environmental risks or environmental decisions being made, or cannot get hold of any environmental data, participation becomes meaningless. 

Second comes the right to participate in environmental policy decisions and management. This is also crucial, as information itself will not clean up pollution. Ongoing social changes have expanded channels available for public participation, but participation in environmental policy decisions and management is only just getting started. The third, the right to seek judicial redress, comes into play when the first two rights are infringed upon, and again this requires further judicial reform. 

The above analysis demonstrates that the right to know should, and indeed must, come first. A legislative and policy basis for open environmental information already exists in China, with the 2003 Cleaner Production Promotion Law, the State Council’s 2004 Program for Implementation of Governance by Law and the 2008 regulations on openness of governmental and environmental information.

This foundation has allowed a system of environmental transparency to get started. In some areas the public can get hold of some environmental information, along with environmental quality and pollution figures and pollution source monitoring data. In 2006, my organisation IPE managed to get hold of 2,500 pieces of data for our pollution database from local government monitoring of businesses. In 2012, we obtained four times than number. The IPE and National Resource Defense Council’s index of environmental openness in 113 key cities demonstrates an improving trend over a three-year period. This shows that Chinese society is ready for environmental transparency.

Better policy decisions needed

Management of the environment starts with policy decisions. If the three rights described above are to be exercised in matters of environmental policy, then the environmental-impact assessment system must be reformed. Such systems were first used in the United States in 1970, and then widely adopted by other western nations, with the aim of preventing pollution from occurring, rather than cleaning up after the fact. China long ago adopted the same system, but while it copied the technological evaluations wholesale, it omitted the public-participation processes. As a consequence, the assessments are steered by small numbers of officials, developers and experts, becoming nothing but a show. Polluting and damaging projects are still approved. Environmental regulation faces similar problems.

The reform of environmental impact assessments and environmental regulation needs more transparency and participation. Specifically:

Expand the environmental right to know

All documents and materials (excluding commercial or national secrets) relevant to an environmental impact assessment should be made public before the report is accepted. This includes the full report. Once finalised the report should again be published, so that the public can see if its concerns have been answered and its suggestions adopted.

On environmental regulation, advances made so far in openness of government information should be built on, with better proactive release of environmental and pollution monitoring data and the release of information in response to requests. Legislation should be put in place for the release of information held by companies, with a system similar to the pollutants release and transfer registers of the US and EU.  

l   Expand public participation

In environmental decision-making, the public consultation should be brought forward, to when the assessment is being prepared, and made much longer than the current 10 days. At least one public hearing should be held for projects which are controversial or have obvious potential impacts.

In environmental regulation, environmental groups should be given the space and capacity to operate. Public complaints should be actively investigated, and communities and environmental groups supported in fighting pollution; courts should actively accept and hear environmental lawsuits, including class actions and the handling of public interest lawsuits examined.

l   Provide judicial redress

When the right to know and the right to participate are infringed upon, it should be possible to seek redress from the courts, to request that administrative decisions are reconsidered or that independent bodies outside the courts provide a quick re-examination.

Over the coming decade, we can predict that the public’s environmental awareness will continue to increase, that there will be greater willingness and ability to take action and that environmental change will inevitably occur. If the current closed-off systems continue, this will not only impact on resources and environment, but also threaten development and stability. Only a new approach to managing the environment, founded on fairness and transparency, and with open participation at its heart, can provide the all-important motivation to protect our environment.

http://www.chinadialogue.net/books/5201/en