Washington DC, July 11, 2007 -- Following recent media interest in the finalization of a joint World Bank-Government of China report entitled Cost of Pollution in China – Economic Estimates of Physical Damages, the head of the World Bank in China, David Dollar made the following statement:

China approached the World Bank in 2003 to develop an estimate of how much environmental air and water pollution costs China – including in human health impact terms. This was triggered by a growing concern on China's part that its rapid economic growth was carrying a large environmental and human health cost.

In response, the World Bank put together a joint Chinese and international expert team that developed a new model to estimate these costs and impacts largely based on China's unique circumstances. Building on scientific work undertaken in recent years, in particular by China's Environmental Protection Agency (SEPA), but also the Ministries of Health and Water Resources, the research project is the first of its kind in a developing country.

In fact, it's the most comprehensive report on economic costs and human health impacts of environmental pollution ever undertaken in China. The report clearly lays out the key environmental challenges facing China. In particular:

the combined health and non-health cost of outdoor air and water pollution for China's economy comes to around $US100 billion a year (or about 5.8% of the country's GDP)

air pollution, especially in large cities, is leading to higher incidences of lung diseases, including cancer, respiratory system problems and therefore higher levels of work and school absenteeism

water pollution is also causing growing levels of cancer and diarrhea particularly in children under-5

water pollution is further exacerbating China's severe water scarcity problems, bringing the overall cost of water scarcity to about 1% of GDP.

regardless of income levels in China, the willingness to pay for reduced health risks associated with environmental pollution is about the same.

In March 2007, SEPA – our joint research partner – agreed to a draft edition of the report being released for discussion at a special environmental conference in Beijing funded by the World Bank, SEPA and the Government of Norway. Before it was printed, comprehensive comments were received by the Chinese Government, particularly the State Environmental Protection Administration (SEPA) and independent Chinese and non-Chinese reviewers.

As we noted in the foreword: "Some of the subjects that have been carefully developed during the course of implementation, including certain physical impact estimations as well as economic cost calculations at local levels have been left out of this conference edition due to still some uncertainties about calculation methods and its application. How to possibly make use of these materials will be continuously worked on during and after the conference."

The final report, due in the next few months, will be a series of papers on the cost of pollution issues that will be presented to the Government.

In undertaking this ground-breaking assessment of its pollution challenges, China has shown how committed it is to addressing the problem. In its 11th Five Year Plan (2006-2010), China put environmental protection as its highest priority. The plan calls for a "resource saving society" and sets targets to reduce energy consumption per yuan of GDP by 20% and meet 10% of its energy needs from renewable sources by 2010. It also pledged to reduce total discharge of major pollutants by 10% by 2010.

In cooperation with SEPA, the World Bank has been working on a series of innovative research reports on critical environmental protection issues. Besides this report, we are also working with China in the areas of environmental administration, air and water pollution control, and national "green" accounting which incorporate environmental costs into GDP estimations.

The World Bank's lending portfolio in China reflects the Government's commitment to the environment. In fact, environment-related projects account for about 60% of our lending to China (and are also prominent in IFC and MIGA portfolios), including energy efficiency, rural and urban water conservation and pollution reduction, and sustainable rural and urban development.

The World Bank has had the full conference edition of the Cost of Pollution report posted on its website since March 2007. Please see: http://go.worldbank.org/FFCJVBTP40