An Estimation of the Environmental Costs of China’s Industrial Development

This paper estimates China’s industrial costs under the virtual cost accounting approach. The estimation results show that Chinese industries have disbursed an increasing amount of environmental costs since 1992 while expanding environmental investment; China’s industrial cleanness has been on the rise since 1998; the virtual industrial environmental costs have been in decline since 1998. In 2007, the total industrial environmental costs accounted for merely 0.73% of gross industrial output value and only 2.52% of industrial value added; the virtual environmental costs accounted for merely 0.23% of gross industrial output value and only 0.81% of industrial value added. These figures indicate that the effects of environmental costs on the international competitiveness of Chinese industries are very limited even if China complies with the highest environmental standards