Published by EH.Net (September 2016)

Matthew E. Kahn and Siqi Zheng, Blue Skies over Beijing: Economic Growth and the Environment in China. Princeton: Princeton University Press, 2016. ix + 271 pp. $33 (hardcover), ISBN: 978-0-691-16936-1.

Reviewed for EH.Net by E. Mark Curtis, Department of Economics, Wake Forest University.

Pictures of blue skies are not usually so jarring. Yet that is exactly the emotion one feels upon noting that the pristine azure sky that adorns the cover of the book, is set against downtown Beijing, a city normally seen covered in gray, foreboding smog. The title of the book, and its cover, speak to the optimistic message that Kahn and Zheng wish to impart to readers. Their central argument is that conditions are in place for China to experience dramatic environmental improvements in the coming years. Chinese citizens are increasingly mobile, well-educated and wealthy. As a result, they are demanding a higher quality of life and a cleaner environment. China’s central government recognizes this change and, in an effort to keep power and promote stability, is responding to ensure that the environmental demands of its citizens are met.

The idea that countries become greener after reaching a certain income threshold is not new to environmental economists. However, most in the public sphere continue to express pessimism over the future of the environment in China. So why the doom and gloom? Some of the pessimists worry that China’s government is fundamentally different than western governments that have overseen past transitions to greener economies. Others are pessimistic due to a limited understanding of important concepts in environmental economics. Kahn, Professor of Economics at the University of Southern California, and Zheng, Associate Professor at Tsinghua University in Beijing, are the perfect duo to confront this pessimism. They do so by providing westerners with a much-needed lens into the social and political institutions of China and by giving readers an excellent overview of the key insights that environmental economics has to offer.

The book is organized into three parts. Part I provides an overview of China’s major pollution sources. Chapters on China’s industrial sector, their growing suburbanization and their transportation sector serve as an excellent primer for readers with only a casual understanding of the rapidly changing milieu in which households, businesses and government officials operate. In addition to containing a plethora of current statistics and trends, these background chapters are filled with intriguing stories that demonstrate the incentives and constraints faced by polluters, households and the government. Many of the issues mirror those in the United States but others are entirely specific to China. For example, China has no property taxes and the majority of local government revenue comes from the selling of land that has been appropriated from farmers. There is an excellent discussion of how this distorts incentives and results in urban sprawl. We also learn of fascinating examples where market forces are starting to improve environmental outcomes. For example, Coasean bargaining is at work as Hong Kong and Japan have begun directly supporting Chinese manufactures’ investments in pollution-abating capital in order to improve their own air quality. The transportation chapter will be particularly intriguing to readers unfamiliar with the astounding vehicle growth China has experienced in recent years.

Part II of the book discusses the rising demand for environmental quality in China and provides evidence of citizens’ willingness to pay for clean air. Here, Kahn and Zheng are able to draw from their own research to show the tremendous demand the Chinese people have for a clean environment. Part III discusses the ways which the government has begun to promote environmental improvements and the ways in which they continue to hinder improvements. Interviews with local mayors reveal the substantial differences that exist in local government officials’ willingness to push for a cleaner environment and give non-Chinese readers an overview of the political economy issues that cause such variation to exist. The central government is placing increasing pressure on mayors to meet environmental goals and they are now more likely to allow citizens to voice concern over environmental issues through social media and even public protests. However, mayors vary in the extent to which they feel the need to promote a cleaner environment. Mayors whose cities rely on jobs from dirty industries continue prioritize industrial growth, but younger, more educated mayors in wealthier cities realize that their citizens are beginning to vote with their feet and relocate if their city’s bundle of local public goods sufficiently lags behind other cities with comparable job opportunities. There are also excellent discussions of the inter-agency conflicts and power struggles that exist within the central government.

The book is thoroughly enjoyable to read but is not without flaws. First, American readers would benefit from a detailed, high quality map of China. An easily referenced map at the beginning of the book would greatly enhance the reader’s experience and save them from potentially distracting google map searches on their computers and phones. Second, at times the authors let the Chinese central government off easy. In the first chapter they mention the incredible popularity of the 2015 environmental documentary “Under the Dome” and they mention the praise it received from the head of China’s Ministry of the Environment. However, the fact that the Chinese government actually banned the movie three days after its release is relegated to an endnote 231 pages away. Yes, there are discussions of corruption, repression of environmental movements and lax enforcement but the emphasis of the book is clearly on the positive steps China’s government is taking to improve environmental outcomes. This highlighting of the positives is an important counterpoint to the prevailing narrative that westerners have of China’s government. However, a reader unfamiliar with the topic may come away with an overly rosy view of China’s government. Finally, the conclusion can feel a bit like a “catch-all.” Two topics discussed in the conclusion (Directed Technical Change and the different implications of global versus local pollutants) probably deserve fuller exposition earlier in the book.

Nonetheless, what Kahn and Zheng have done is truly impressive. Pollution in China should be a first-order concern for any person concerned about the global environment and its future. Westerners know China is important, yet they face tremendous barriers to understanding the economic and political forces that drive China’s environmental outcomes. The authors tear down these barriers in a meticulous way that clearly lays out the incentives of all involved parties. Their optimistic take on China’s environmental future is refreshing and needs to be heard. Who knows, maybe in the not-too-distant future the sight of a blue sky over Beijing won’t be jarring at all.

E. Mark Curtis is the author (with Gale Boyd) of “Evidence of an ‘Energy Management Gap’ in U.S. Manufacturing: Spillovers from Firm Management Practices to Energy Efficiency,”
Journal of Environmental Economics and Management (2014).

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