Introduction

　　Over the last ten years, there has been a significant transition underway in the world's approach to international environment protection - from cleaning up and repairing the damages frompollution to the implementation of comprehensive prev ention strategies. One key element of this approach is the adoption of cleaner p roduction (CP) mehods throughout the economy.

　　Cleaner production is the continuous application of an integrated preventive env ironmental strategy applied to processes,products, and services to increase ecoe fficiency and reduce risks to humans and the environment.

　　·For production processes: conserving raw materials and energy, eliminating tox ic raw materials, and reducing the quantity and toxicity of all emissions and wa ses.

　　·For products: reducing negative impacts along the life cycle of a product, fro m raw materials extraction to its ultimate disposal.

　　· For services: Incorporating environmental concerns into desining and deliveri ng services.

　　Cleaner production requires changing attitudes, developing responsible environme ntal management, and the use of environmental management tools such as cleaner p roduction assessment, life cycle assessment, and ecodesign. By promoting efficie ncy, CP can contribute to improved economic performance at the same time that it reduces risks to human health and the environment.

　　Township and village enterprises (TVEs) are one of the primary sources of income and employment that support the rural economy of China and they contribute sign ificantly to the national economy. The great majority of TVEs are industrial ent erprises and their growth and development has been a major factor in the rapid g rowth of Chinese industrial production. However, this rapid growth of Township a nd Village Industrial Enterprises (TVIEs) has brought about increasigly serious environment problems. These problems have had a significant negative impact on e nvironmental quality (both locally and throughout China) and destroyed valuable natural resources. At the same time,they are also undemining the health and deve lopment of these industries. Therefore, the adoption of cleaner production shoul d be promoted both to improve the environment and to ensure the continued growth and developmet of the Chinese economy.

　　1. The Current Status of TVIEs

　　1.1 The Role and Improtance of TVIEs in the development of the National Economy

　　In the last 20 years, TVIEs have rapidly developed and expanded as part ofthe na tional program of economic reform and the development of a market economy. They have been particularly encouragedin order to increase incomes in rual areas and reduce proverty. TVIEs have taken a variety of forms including: collective enter prises managed by villages and towns, cooperative enterprises with investments b y groups of farmers, individuals enterprises, and othe types. Most TVIEs are sma ll-and medium-sized enterprises, but a few of them are very large in size.

　　The growth of TVIEs has been phenomenal. While China's overall industrial produc tion was increasing almost 18-fod between 1980 and 1995 (an annual rate of 21 pe rcent),the output of TVIEs grew by a factor of 100 in the dame period. As a resu lt, TVIEs produced more than 55 percent of China's total industrial outut in 199 5, up from less than ten percent in 190. (See Table 1.) Almost 60 percent of Chi na's total growth in industrial output during this period was due to TVIEs.

　　Table 1 Total Industrial Production and Production of TVIEs

　　Taxes paid by TVIEs have become a major source of government revenue at all leve ls. In 1995, the taxes paid by the TVIEs amounted to 130.17 billion RMB, which m ade up 20.8% of total government income in China. One third of all export income and foreign exchange earnings were also due to TVIEs.

　　Township and village enterprises of all types have become a driving force behind veelopment in rural areas. TVIEs have become the primary source of income for t he rural economy of China. Non-agricultural production acuounted for 70% of tota l rural production in 1994, up from only 30% in 1978. TVIEs are also the main so urce of employment for surplus labor in rural areas. Since 1978, employment in a ll types of TVEs has increased at the rate of 5.75 million people per year. As s hown in table 2, the total employment among all TVEs in 1995 was more tan 120 mi lion, almost 60 percent of which were employed in TVIEs.

　　Table 2 Labor Distribution in All Types of TVEs (in millions)

　　1.2 Environmental Problems Related to the Development of TVIEs

　　The rapid development and growth of TVIEs, has been accompanied by an increasing ly serious set of environmental problems. Many of these problems have been cause d by weaknesses in the management and operation of the TVIEs, including low leve ls of technology, very inefficient use of energy and other resources, poor manag ement, and a general lack of environmental awareness. A national investigation o f pollution in TVIEs, conducted by the National Environment Protection Agency (N EPA) and other institutions during 1996 and 1997, indicated that between 1990 an d 1995 pollution disharges by TVIEs increased rapidly and they aaccounted for a growing share of pollutants discharged by all national industrial sources (see T able 3). had increased by 121 %, COD by 24 %, SO2 by 23 %, dust by 182%, and sol id waste by 552%.

　　Table 3 Pollutants Discharged by TVIEs in 1995

　　TVUEs have contributed a great deal to overall environmental pollution and ecolo gical damage in China. For example, the great number of small paper mills and ch emical plants concentrated along the Huaihe River have made the river severely p olluted, resulting in frequent fish kills and contamination of water supples. In the city of Wuxi, wher TVIEs are quite developed, there are almost no existing bodies of water that meet even the third grade of water quality. Some sulfur pro ducing areas in Sichuan and Guizhou provinces are engulfed in sulfur smoke and p eople are suffering from the toxic gas. In Xinwen and Gonfei counties of Sichuan Province, only dead trees, bare hills, and scorched earch can be found within a reas of several hundred square kilometers. The sulfur dioxide concentrations are more than 50 times the national air quality standards.

　　TVIEs have become a major contributor to the nationl economy and they are going to continue to develop rapidly in the future. They key question is how to make t heir growing indstrial production compatible with environmental protection. If C hina is to achieve sustainable development, we must focus much more attention on quickly solving this problem.

　　2. Cleaner Production and TVIEs in China

　　2.1 Initial Development of Cleaner Production in China

　　With the growing awareness of the importance of and understanding of cleaner prd uction methods in the world, the concept has been quickly introduced into China. In 1993, the first workshop on cleaner production in China was held in Xiamen. Since then, several cooperative programs have been completed, with the support o f the UNEP, thw World Bank, and a number of foreign governments, institutions, a nd experts. All of these projects involved studying the need for cleaner product ion, CP audits and demonstrations, training on CP auditing and CP methods (both technicians and trainers), and evaluation of results. Some additional programs a re currenently in progress, such as the program of cooperation with Canada in Be nxi, Liaoning Province, related to the control of air pollution. These programs have primarily promoted the implementation of cleaner production in state-owned enterprises (SOEs).

　　Based on incomplete statistics on 18 provinces and municipalities, such as Beiji ng, Shanghai, Jiangsu, Shangxi, and Liaoning, over 200 enterprises have already begun to implement cleaner production. Not only have they achieved substantial e nvironmental benefits, but the economic benefits obtained from the implementatio n of cleaner production have reached more than 500 million yuan.

　　2.2 Implementation of Cleaner Production in TVIEs

　　With the introduction of cleaner production in China, there has been some limite d attention paid to TVIEs. In 1993, a study sponsored by the World Bank was cond ucted on developig a managemet system of the minimization of industrial wastes i n TVIEs. As a follow-on to that study, there is an ongoing demonstration project looking at waste minimization in TVIEs. These projects, which have investigated the characteristics of TVIEs including a few case studies, have provided a fram ework for a management system of waste minimization in TVIEs in China. A few TVI Es in Qingdao and Yantai have also explored specific ways to implement cleaner p roduction.

　　Other projects related to CP in TVIEs have carriedout cleaner production audits in a few TVIEs in the city of Shaoxin and Shandong Province. In addition, some i nternational cooperation programs designed to help poor areas have included the implementation of cleaner production as an important component of their projects . However, although cleaner production has been implemented in few TVIEs, the nu mber of enterprises involved is still very small and cleaner production has not yet spread very widely among TVIEs in China.

　　2.3 The Effects of Cleaner Production in TVIEs

　　Since cleaner production has not yet been widely implemented by TVIEs and there are a number of barriers (see below) to achieving widespread adoption of cleaner production in the immediate future, it is difficult to assess the full potentia l of CP in China. However,some idea of the potential impactof cleaner production in TVIEs can be seen from the effects of the cleaner production audit experiment in Yantai and Wujin.

　　The malt plant in yantai provides malt to breweries. In 1994, the plant initiall y spent RMB 150,000 to upgrade the technology used int eh malt making process. T he old technology. referred to as "intermittent dipping", was replaced by "sprin kling dipping". As a result, three quarters of the water used in the process was saved and water consumption in production dropped from 5.6 tons to 1.5 tons per ton of malt produced. Wastewater discharges were also cut by 75%. Subsequently, the plant invested an additional 200,000 yuan in the renovation of a drying ove n to devrease coal consumption. Using new technologies that incorporated reusing waste gas heat,enhanced ventilation, and sedimentation of dust, coal consumptio n fell to 150 kilograms from 170 kilograms per ton of product. The total money s aved from the two investments has reached 4,350,000 yuan annually. Due to the im plementation of cleaner production, the use of energy and water has been greatly reduced, with a corresponding reduction of pollution and waste disharges, and p toduction costs ave been cut significantly so that this plant has become highly competitive and its product is now sold throughout the country.

　　A second example is the Taihu Chemical Works in Wujin whch made reform on 1amino -anthraquinone process. The previous proces was: benoyl benzoic acid (BB acid) i s synthesized at first, then it is modified in order by nitrification, nitrozati on, reduction, purification and oxidiation and turned to be 1-amino-anthraquinon e. According to material balance, the ratio of raw material/product was 24:1, wh ich indicated 23 tons of wastes arose on 1 ton products; furthermore, process of rinsing produced a large amount of wastewater and polluted severely. After CP a uditing and technical investigation the process was changed. The direct tifinirc ation of anthraquinone was applied other than synthesis of BB acid. This reform gained good return as follows: (1) Production cost was reduced from 302,000 to 2 ,000 yuan per ton of product. (2) Chemical reaction rate was increased and perce ntage of effective ingredient o prduct was raised. (3) Due to solvent extraction and rectification process the productivity rate and product quality were improv ed. Environmental effect was remarkable: 2/3 wastewater volume was reduced, 3/4 ~ 4/5 COD was abated and the treatablity of wastewater was improved.

　　From these few examples, it seems likely that cleaner production has a very high pootential in TVIEs. Cleaner production can improve resource efficiency and ene rgy utilization, decrease costs,increase profits, eliminate or reduce pollution disharges, and protect the environment. It is clearly and important step toward achieving sustainable development.

　　3. Barriers to the implementation of Cleaner Production in TVIEs

　　In spite of its great potential, it has not been easy to implement cleaner produ ction in TVIEs in china. There are a variety of impediments caused by a lack of understanding and training, limited resources, poor enforcement of environmental regulations, and weak incentives that all need to be addressed if CP is to beco me a major force among TVIEs.

　　3.1 A General Lack of Awareness of the Improtance of Environmental protection an d Cleaner Production in China

　　The underlying motivation for implementing cleaner production in TVIEs (or any o ther enterprise) must be the recognition of the importance for all Chinese peopl e of conserving natural resources and protecting the environment. However, the t raditional focus of most people in China (including government officials, as wel l as managers and workers in TVIEs) has been on economic development, income, an d employment. The importance of encironment protection for long-term economic su cces and the protection of human health has not been recognized as a priority, w ith the result that development patterns continue to be high input and high cost . Many government agencies, enterprises, and most people think that environmenta l protection and cleaner production are only the responsibility of the environme nt department. since cleaner production is not well understood or widely support ed, it is difficult to get the public to focus on its implementation in TVIEs.

　　Withi TVIEs, neither the executives nor the average employees have paid much att ention to the implementation of cleaner production. Cleaner production is usuall y conisdiered as an unnecessary burden. Environment prrotection activities tend to be limited to end-ofpipe treatment, even under government pressure. Pollution prevention has not been considered throughout the whole production process.

　　3.2 Limited Management and Technical Skills and Low Levels of Technology

　　The employees of TVIEs (including managers) often have only limited education an d training. Management in TVIEs is frequently poor and the enterprises often suf fer from antiquated equipment and backward technologies, all of which make it ve ry difficult for them to undertake the implementation of cleaner production. Eve n the potential for development of the enterprises is sericously limited.

　　Technological developmet is a fundamental element needed to prople cleaner prodc ution implementation in TVIEs. But before new techologies can be adopted, manage rs and workers need training to improve their skills and capacity to use improve d technologies. TVIEs often also need financial resources to enable them to acqu ire such technologies.

　　3.3 Lack of Training and Eductaion programs in Cleaner Production for TVIEs

　　Even where managers and workers in TVIEs are concerned about pullution and becom ing more efficient, they often lack information and the knowledge they need to u ndertake the implementation of CP. Due to lack of funding and priority within th e government, programs to promote cleaner production and to provide information, training, and support are quite limited. There are very few institutions in chi na which are capable o conducting training programs on cleaner production. Curre ntly, those programs that exist are mainly focused on state-owned enterprises. T here are few opportunities for TVIEs to get training on clenaer production. As a result, the dissemination of knowledge about CP in TVIEs is far from enough and the recognition and practice of cleaner production have been affected greatly.

　　3.4 Few Economic Incnetives to Encourage the Iplementation of Cleaner Production in TVIEs

　　In additin to lack of knowledge, there are few strong financial incentives to en courage managers of TVIE to adopt CP. The costs of pollution often fall primaril y on people outside of the TVIE-people living down-stream or down-wind from the enterprise. Pollution disharge fees are relatively low, and do not reflect the e nvironmental and health costs of the pollution. As a result, there is little inc entive to spend money or very much effort in reducing waste and pollution.

　　Similarly, the prices of resources, such as energy and water, used in the produc tion process are frequently very low and sometime even subsidized. Their prices do not reflect the full value of the resources and the costs to society of their use. But the low prices undermine the incentives that a TVIE would have to redu ce the use of such resources by becoming more efficient and reducing waste.

　　3.5 Existing Environmental Laws and Regulations Tend to Focus Directly on Pollut ion Reduction (encouraging end-of-pipe treatment) and Are Not Uniformly and Effe ctively Enforced

　　China has a variety of laws to control pollution. However, they are primarily di rected toward limiting the emissions of pollution and enforcement is often not e ffective. The main focus of enforcements has been concentrated in urban areas an d on state-owned enterprises.

　　Due to limited capacity and resources for administration and management of these laws and regulations, TVIEs are often not forced to comply with pollution stand ards or to pay the full amount of pollution disharge fees.

　　Even when enforced, these laws encourage on-end-of pipe treament of prevention a nd control of industrial pollution, rather than reduction of pollution at the so urce. although more attention is beginning to be paid to pollution prevention an d cleaner production, the operational requirements for implementing cleaner prod uction management and administration has not been set yet.

　　4. Policy Recommendations to Encourage and Support the Implementation of Cleaner Production in TVIEs

　　Fostering CP in TVIEs requires that there be legal requirements and financial in centives to increase efficiency of resource use and reduce pollution, and that t here be training and support systems for managers and workers to enable them to develop and implement successful cleaner production activities within their ente rprises. Therefore, the priority recommendations of the Working Group are:

　　·to strengthen the legal and regulatory framework in which TVIEs operate,

　　·to develop financial incentives (market mechanisms) that encouage both increas ed efficiency and reduced pollution, and

　　·to build the capacity of TVIEs to implement CP through training and support.

　　4.1 Strengthen Legislative and regulatory Controls over TVIEs and Improve Enforc ement Capacity

　　(1) Strengthen the Administration and Enforcement of Existing Environmetal Laws and Regulations as they apply to TVIEs

　　Greater attention and more resources should be devoted to the administration and enforcement of current laws and regulations regarding environmetal protection a nd pollution control, in order to increase pressure on TVIEs to reduce pollution (by implementing CP or other methods). The ministry of Agriculture, SEPA, and t he State Economic and Trade Commission (SETC) all have some responsibility for T VIEs. They (and their provincial and local counterpart offices) need to cooperat e in the administration of existing environmental laws.

　　EPBs and other local agencies responsible for administering the pollution levy s ystem need to be given more resources and a stronger mandate to enforce the coll ection of discharge fees from TVIEs and ensure their use for reducing pollution. Such regulations as environmental impact assessments and the three-simultaneous policy, need to be uniformly enforced for TVIEs. Although these laws and regula tins do not explicitly mandate cleaner production, their enforcement will prodid e incentives to consider CP as part of a business strategy for reducing pollutio n and environmental impacts.

　　(2) Revise Current Laws and Regulatios and Develop New Ones that Place Emphasis on cleaner Production Rather than End-of -Pipe Controls

　　Existing environmental laws and regulations should be reviewed and revised to ma ke cleaner production more central to their approach. Applications to establish or expand TVIEs (of other enterprises) should include specific requirements to p romote cleaner production. Where required, Environmental Impact Assessments (EIA ) should incorporate CP standards to mitigate potential environmental impacts. F acility siting, expansion, and operating permit should be made conditional on te h adoption of cP practices in the normal operations of the enterprises seeking s uch permits.

　　The regulations of the pollution levy system should be modified to encourage the use of discharge fees by TVIEs (and other enterprises) for investments in clean er production. The three-simultaneous policy should make CP a requirement of the design, construction, and operation of new facilities.

　　SEPA, the Ministry of Angiculture, and SETC should work togehter to devulop othe r regulations to promote the adoption of cleaner production by TVIEs.

　　(Additional specific recommendations for strengthening environmental regulation and wide promotion of CP in TVIEs can be found in the UNEP paper entitled "Rec ommendations for Promoting Cleaner Production in TVEs in China. "Of course stre ngthened administration and enforcement of laws and regulations would also affec t SOEs and other enterprise.)

　　4.2 Create Strong Financial Incentives for Cleaner Production

　　(1) Increase the Prices of Resource Inputs

　　One of the most important benefits of CP, in addition to reducing pollution, is that it is more efficient-reaquiring fewer resources for a given amount of produ ction output. However, this benefit may not appear very important when the price s of inputs are very low. The low prices for energy, water, and other resources usually fail to reflect the full costs (including environmental costs) of their use and are often the result of perverse subsidies. Gradually increasing the pr ices of such inputs through the elimination of subsidies, taxes on resource cons umption, or other means would create strong incentives for TVIE to adopt CP in o rder to reduce their cots their costs and increase their profits.

　　(2) Raise the Level of Pollution Discharge FEES AND Waste Disposal Costs

　　If the costs for waste disposal and pllution emissions were a significant portio n of the costs of production, the TVIEs would have stronger financial incentives to adopt CP in order to lower their costs and increase profitability. In additi on to the strengthening of the administration and enforcement of the pollution l evy system (desacribed above), the level of discharge fees should be raised so t hat continuing to release pollution is no longer a financially viable option fo r TVIEs. The structure of the levy syste, should also be altered so that there c ontinue to be incentives to reduce waste, even if discharges are below the stand ards.

　　(3) Increas Direct Financial Support for Cleaner Production

　　establish government loan funds for investments in improved technologies and oth er steps to promote the adoption of CP. Special revolving loan funds could be es tablished for smaller TVIEs. Publicly supported industrial development loans to TVIEs should give preferentce ot investments in cleaner production. Internationa l investment funding (both public and private) for industrial enterprises (inclu ding TVIEs) should incorporate clean technologies and CP methods into new and ex panded facilitiles

　　Tex incentives could be offered for limited periods of time for TVIEs that inves t in cleaner production technolgies, and government agencies should take the lle ad in purchasing products and services only from supliers that have adoped CP.

　　(It is important to note that all of the proposed steps to strengthen financial incentives for cleaner production in TVEVs would also provide increased incentiv es for SOEs and other enterprises to adopt CP measures.)

　　4.3 Build Capacity for the Implementation of CP in TVIEs

　　(1) Developing Awareness and Knowledge of CP in TVIEs

　　Cleaner production is a consept that is not widely understood throughout China. This general lack of understanding eists not only in TVIEs, but also in the gove rnment agencies, industry,and the general public. Widespread eductin - on the li nks between pollution and public health, on how resource use efficiency can educ e waste and pollution, and on how CP can improve the economic performance of ind ustrial enterprises and the environment at the same time - is a long-term effort that the government should undertake to change people's perceptions and basic u nderstanding of CP.

　　Education on cleaner production should be provided for national government admin istrators in the Ministry of Agriculture, SETC, SEPA, and other ministries and b ureaus. Provincial and local EPBs, the Ministry of Agriculture's local TVIE depa rtments, other local government agencies, managers, technicians and workers in T VIEs, and the general pubic should all be made aware of the economic, as well as environmetal benefits of cleaner production. The intent of these education and awareness programs would be to improve the management of the government programs to implement cleaner prodction, to strengthen supervision y executives in envri onment protection departments, to raise the enthusiasm of techniscians and worke rs in implementation of cleaner production, and to make the public aware of the importance of cleaner production. Public education should be provided through al l available media. Such as newspapers, magazines, television, and radio. Various training courses should be organized for government administrators, enterrise m anager, technicians, and workers.

　　The education and advocacy materials and training courses should include:

　　·the concept of clener production,

　　·the relationship between cleaner production, envrionmet protection, and the he alth of workers and public,

　　·the connection between cleaner production and improved economic performance of enterprises,

　　·the significance of cleaner production to the sustainable development of the s ociety 9the combination of social, economic and environment benefits), and

　　·successful examples of cleaner production.

　　(2) Establish an Institutional Structure and Capacity for Training and Support o f TVIEs (and other Enterprises) in Implementing Cleaner Production

　　In order to strengthen its leadership role, the SETC's Resource Conservation and Comprehensive Utilization Department should cooerate with SEPA and the Ministry of Agriculture to set up a collaborative program to promote and support the ado ption of cleaner production. To implement this responsibility, the three agencie s should develop a network of institutios and agencies throughout China to promm ote the C concept and provide training and technical support to TVIEs (and other enterprises). The China National Cleaner production Center should play a centra l role in providing information, training materials, and technical support to th e other organizations within the network, and should be linked to the rest of th e network through a nation-wide information web system (connected through the In ternet).

　　To fill out the network, additional centers for cleaner production will need to be set up in each province and major city, as well as in many counties. These co uld be set up within local EPBs, TVIE departments, industry associations, or tec hnical schools. These local CP centers would develop and provide both training a nd technical support to TVIEs. Training would cover a range of courses at differ ent levels, including businese, financial, and CP training for managers of TVIEs and technical training for supervisors and workers. Technical support would pro vide direct technical asistance to TVIEs in conducting CP audits and the plannin g, design, and implementation of cleaner production processes.

　　(3) Conduct Demonstrations of Cleaner Production in TVIEs

　　The demonstration of CP in TVIEs can provide important examples of the econmic a nd environmetal benefits of CP and practical lessons for implementing these prac tices throughout China. Effective demonstrations can show increased efficiency a nd economic benefits for the enterprise, reduction of pollution disharges to mee t and exceed discharge standards, andimproved management. technology, and use of manpower resources.

　　Individual TVIEs should be selected for demonstration projects, based on their i mportance in the economic development of a region, their representiveness of maj or industries,the amounts and types of pollution that they produce, and the amou nts of energy and other resources that they consume. Pulp and paper mills, print ing and dyeing, electroplating, coke production, tile production, lime productio n, cement production, brewing and food processing are all suggested as potential candidates for CP demonstration projects.

　　It would also be useful for a demonstration project to look at CP in one or more industrial districts where, for example, the presence of mutiple TVIEs can offe r opportunities for efficient sharing of energy resources, waste materials fromo ne enterprise can be recycled for use as input to another, transportation requir ements and costs can be minimized, and common waste treatment facilities can be sited. The demonstration of these multiple benefits of CP in industrial district swould provide useful lessons for further increasing economic and environmental benefits. It is suggested that good demonstration sites might be found in the in dustral districts for elevtronics manufacturing, light industry, or processing i ndustries found in the developed coastal coastal regions of eastern China or in industrial districts for energy generation or mineral resource extraction in the middle and western regions of China.

　　It would be necessary for a demonstration project to study the oeration mechenis m and effects of the implementation of CP in a province. Through the internatona l cooperation projects various enterprises have conducted the CP auditing and te sting, but the implementation of CP has not become a conscious action or establi shed a good operating circulation. Taking a province as a demonstration to study the operation mechenism for implementing CP from high level will be very import ant to promoting CP in China.