China battles soil pollution caused by industrial waste; looks for someone to foot 5 billion yuan bill

Nearly four years after a massive state-run steel mill on the outskirts of Beijing was closed to help cut smog in the Chinese capital, little has been done to clean up the contaminated site.

The factory's idled chimneys dominate a landscape of rust-encased piping and rail tracks that once fed 8 million tonnes of steel into China's economy each year. The 95-year-old former mill, owned by the Shougang Group, China's fifth biggest steel producer, is one of thousands of sites across China where soil has been polluted by industrial and agricultural waste.

Blocking any meaningful action is the question of who pays - the state, which owns all land in China, or the company. The cost of treating the land alone was an estimated 5 billion yuan (US$ 816 million), said Gong Yuyang, managing director of ESD China, a land treatment firm which has been involved in talks on cleaning up the 8.6 square km (3.3 square mile) facility.

What worries environmental experts is that if it's this hard to deal with contaminated land in Beijing, where there is greater political will to tackle pollution, it will be even more difficult to detoxify farmland in poorer rural areas.

"The real issue is that there is no incentive for a company like Shougang to spend a huge amount of money cleaning up this site," Gong said in an interview with Reuters.

Shougang, parent of Shenzhen-listed Shougang Corp, declined to comment.

According to a survey published by the Ministry of Environmental Protection in April, 19.3 % of samples taken from Chinese farmland showed excessive levels of heavy metals or chemical waste. In central Hunan province, government research seen by Reuters showed more than three quarters of its ricefields had been contaminated.

Farming on 3.3 million hectares (8.15 million acres) across China has already been banned indefinitely. According to Reuters calculations, the cost of making all that land fit for crops or livestock would be around 5 trillion yuan (US$ 813 billion), based on average industry estimates to treat one hectare.

In its soil survey, the Ministry of Environmental Protection blamed industrial firms for failing to deal with mine tailings or chemical waste. But it also cited the use of wastewater for irrigation and the overuse of pesticides and fertilisers, which often contain heavy metals.

"Liability is hard to determine, and they aren't going to make farmers pay the bill," said Gong.

Polluter Doesn't Pay

China's government declared war on pollution in March in a bid to head off rising public anger over the environmental costs of rapid growth. It is under particular pressure to reduce the risk of contaminated crops entering the food chain.

The government is drafting laws that will allow the state to decide who is responsible for contaminated land, as well as create new financing mechanisms to pay for the clean-up,
according to Gong and others who have been consulted on the legislation. Such mechanisms are expected to involve the establishment of dedicated new funds for cleaning up, as well as subsidy and loan facilities to help cover treatment costs.

But the law is not expected to be completed until at least 2017, experts quoted in state media have said, with the first draft still unfinished.

For now, there are few economic incentives for companies to act.

"There is no market-driven initiative for this," said Wu Yixiu from environmental group Greenpeace in Beijing.

"The 'polluter pays' principle has not really been discussed or put on the policy agenda in China," said Wu. "You can see this in the heavy metal pollution clean-up business, where the
major payer is still the government."

There is also little clarity over who is ultimately responsible.

"The big debate going on now is that the big companies are state-owned and when they were contaminating the land, there was no law," said Gong. "Even if they benefited from such contamination, the profits went to the state. Why should the company be held liable?"

While forecasts by government-backed research institutes suggest the market for land treatment, or remediation, could generate 200 billion yuan in annual revenue by 2025, government officials say it's still at the very early stage.

"The market for soil remediation is still very small," Zhuang Guotai, head of the ministry's ecological office and the official in charge of drafting the new legislation, told a recent conference.

Zhuang said preliminary estimates showed the market would be worth trillions of yuan in around 40 years.

The ministry did not respond to requests for comment.

FARMING CONTINUES

Plans by Shougang to turn the mill into a heritage site to showcase its history or knock some of it down and convert the area into real estate have been delayed as the company assesses the damage done by nearly a century of smelting, said Gong.

Samples taken in 2011 showed excessive levels of cadmium, chromium and lead at the site, according to published research, but a full treatment plan has not yet been completed.

"Shougang is profit-driven and unless the government drives it, nothing happens," said Gong, an industry veteran.

The scale of the problem means many local authorities have either chosen to ignore soil contamination or are immobilised by the challenge, said one manager at another land treatment company who declined to be identified.

Stop-gap measures have been introduced in some regions. Trees have been planted for example in severely contaminated areas in the lead-producing town of Tianying in Anhui province to deter farmers sowing crops within a 100-metre radius of smelters, although farming continues, local residents have said.

In Hunan, rice production in polluted sites has not stopped, although the government's priority has been to ensure tainted crops don't enter other markets, said Wu of Greenpeace.

"They are not prohibiting farming because once they start that process it will threaten the overall volume of rice production," said Wu.

(1 US dollar = 6.1469 Chinese yuan)