Let markets clean up Beijing's air

In 1992, while making short documentaries to illustrate the challenges faced by the Rio Earth Summit, I visited the Brazilian city of Cubatao, known as one of the most polluted cities in the world. You could not eat the bananas that grew in abundance on the riverbank or the fish that shoaled in the "fresh" water. Oil refiners, steel makers and fertilizer producers put a stop to that, if you valued your health.

The US government had recently imposed tighter emission controls on its indigenous industry and, in the controversial economic philosophy of the time, Brazil had implored its northern cousins to export its polluting manufacturers to its shores so the consequent wealth they created would "trickle down" to the poor. Of course, it never did, but the toxins they brought with them did, leading to children being born without brains and mountainsides being denuded of forests.

I discovered a cemetery with the marble crosses in this Christian country covered in plastic bags to protect the precious inscriptions from the deleterious effects of acid rain. It enabled me to pen the catchy line that not even the dead were safe from the pernicious effects of pollution in this valley of death.

I was reminded of Cubatao here in Beijing on Jan 12, when it was not just the Fragrant Hills that were no longer visible from my apartment on the North Fourth Ring Road, but also the Bird's Nest, just across the road. On that fateful day, an air monitor on the roof of the US embassy in Beijing recorded a reading of 775 by the Air Quality Index devised by the US Environmental Protection Agency. The scale usually goes no higher than 500. Any reading above 100 is considered to be "unhealthy for sensitive groups". Readings above 400 are "hazardous" for everyone.

Given that environmental issues are expected to be hot topics at the upcoming two sessions, one can only hope they will be taken seriously. Nobody wants Beijing's babies being born without brains.

China has experienced an era in which GDP was king. It knows the dangers of CPI usurping that reign. Now it is paying the penalty with PM2.5 — particulate matter smaller than 2.5 microns that can enter people's lungs and bloodstreams, poisoning them. The three Ps in this particular pod must somehow be separated for the health of the nation.

There's a great British saying — from the blunt-speaking county of Yorkshire, to be precise — that states: "Where there's muck there's brass." In other words, money can be made from jobs involving dirt. And what greater motivator could there possibly be to ridding China of its pollution if someone can find a way of doing so profitably. In such an instance, everyone is at last a winner.

As such, I was not surprised that my favorite financial tipsters, The Daily Reckoning, an irreverent, almost anarchical group of world-weary citizens with an eye to the main chance and a heart that beats faster for the denizens of Main Street than for the reptiles of Wall Street, were, as is often the case, ahead of the curve.

They point out that most of the really bad air comes from diesel exhaust from the tailpipes of millions of trucks and other diesel vehicles on China's roads, as well as innumerable electrical generators that back-up China's power grid.

The Daily Reckoning's writer discovered a widespread lack of catalytic converters on most Chinese trucks and stationary diesel generators and cited the Associated Press saying the emission control devices can add up to $3,200 to the price of a truck or large generator. The key part of that $3,200 is the cost of platinum and/or palladium that catalyzes the chemical reactions that dramatically reduce exhaust emissions. Without these scarce metals, no one can manufacture a catalytic converter.

One can only hope the two sessions call on China to increase the use of catalytic converters on diesel engines. This will push up the price of palladium and platinum. As Daily Reckoners would say, just as the markets created the problem, let them solve it, and some will get rich along the way if they dive in early.