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China, in its rush to renovate the industrial and economic revolution that facilitated the west to become rich, it has incorporated the activities of industries considered dirty.  The companies in China have become the leading manufacturers of steel, cement, aluminum, chemicals, leather, paper and coke. Production and manufacture of such goods has received tough environmental rules since the processes pollute the environment. China has, therefore, become the world’s factory making it smokestack (Lindhjem et al., 2006). The increase in the number of polluting industries in China has blighted the economic growth of the country. Although the economic growth rate has risen incredibly in China, the lives of the citizens have been affected substantially.  Less effort has been put in improving the lives of the Chinese people when problems relating to land, health, land and air damages are considered (EfD, 2007). Reduction of pollution in China will involve high cost replacement and retrofitting of equipment.

The key concepts of environmental economics in China include the pollution effects, for instance, scarcity. Pollution implies that a resource in the environment has alternative utilization and hence scarce. In the year 2008, about 11% of China’s gross income was accounted for by pollution and environmental damages and problems. This led to tremendous economic losses. China is among the top economically stable countries globally. However, it is ranked116 out of 132 on the environmental performance index since it leads in the emission of greenhouse gases. Pollution from the Chinese companies has both benefits and costs. For example, the emission of gases benefits the China citizens by allowing the pursuance of other activities at lower costs (Zhang, 2012). This can be realized by estimating the efficient rate of emission, which is only possible if the marginal benefit of the emission equals the marginal costs caused by emission.

Because of the unsustainable growth model of China economy, its government has ordered for the implementation of strict environmental policies. The policies are aimed at addressing the environmental issues caused by economic growth. The Chinese government has gained significant advancements in developing sustainable lives of its citizens. The developments include reduction of pollution and poverty in the country. Environmental problems are often correlated to other problems of the social lives (Lindhjem et al., 2006). For instance, poverty as a social problem can be caused by pollution an environmental issue. Therefore, to eradicate environmental issues, other problems must also be considered. This is a problem experienced by China since alleviation of poverty requires development of the economy which is most likely to put excess pressure on the ecosystem. Moreover, the natural resources and environment can act as constraints particularly in low income areas since they seem to merge from poverty

With the evolving world, new economic theories coupled with empirical evidences have been introduced to explain the relationship between economic growth and environment. It is evident that an increase in income is not the key to environmental improvement. However, studies and researches have failed to show that economic growth facilitates degradation of the environment. For instance, the Coase theorem suggests that well definition of property rights and existence of costless transactions can make a market reach an efficient solution. The condition of this theorem is, however, not likely to be existent in a normal environment. Even with no conditions present, the Coase theorem still produces vital insights to the eradication of environmental problems for the purposes of increased economy (Rittenberg and Tregarthen, 2007). Study surveys have been utilized to measure the marginal benefit and cost curves for emission and increased pollution levels respectively. This enables China to estimate the costs expected be incurred due to emission and pollution effects on the environment. The curves also relate the economic benefits to the environmental problems arising due to pollution

This is the best news for China to facilitate its amendment of economic growth quest.  Implementation of the right policies by China at this point can help its rapid growth and the surpass of the top economic stable countries in the world.  The policies are meant to reduce the environmental deterioration caused by the rapid economic growth. The changes in the environmental economy cannot take root until the policy makers give appropriate incentives and enact the reasonable environmental policies (EfD, 2007). The policies and not the income can provide China with a sustainable and fulfilling environment.

Therefore, for China to improve its economic sustainability model, it must implement new policies that address matters relating to trade- offs environmental developments. The regulations enforcement needs to be stringent to enhance the determination of sustainable environmental factors and standards. Poor enforcement of policies can lead to the poor state of the environment. The Chinese government pays attention to the most visible problems, for example, air pollution. Incorporation of the public in the policy implementation is essential to the Chinese government since only the public knows its preference for combining pollution and income. Other new policies like the aforementioned are needed to enable the regulation and enforcement of policy systems that are both economically and environmentally sustainable.

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