By Li Wangming Source: CRIENGLISH Published: 2016-4-27
In the past few days, we`ve read a lot about the Changzhou Foreign Languages School, which is newly built on the toxic brownfield site polluted by the chemical factories. Nearly 500 students were diagnosed with various pollution-related diseases. It is another sobering wake-up call of China’s worrying environment protection situation.
Facing the daunting challenges of air pollution, water pollution and soil pollution, China took bold actions to engineer a steady transition into sustainable development. In November 2012, the 18th National Congress of CPC put forward an important concept of “Building a Eco-Cviliaztion” as one of the five pillars of Socialism with Chinese Characteristics. In April 2015, the CPC Central Committee and the State Council jointly issued a holistic and integrated plan on Accelerating the Construction of Eco-Civilization. In March 2016, the newly released 13th Five-Year-Plan emphasized green development and the overall improvement of environment will be achieved within the next five years.
However, it requires a huge amount of money to build a Eco-civilization. As a rule-of-thumb, one country needs to invest 1% to 1.5% of its Gross Domestic Product (GDP) to prevent its environment pollution from exacerbating. Only when the investment reaches as much as 2% to 3% of its GDP, can this country see an improvement in environment. In 2014, China invested a total of 957.55 billion Yuan, namely 1.5% of its GDP in environmental pollution control. It is not enough. A research report released by the People’s Bank of China emphasized that, during the thirteenth five-year-plan period, in order to improve the environment, China will need to invest at least 2 trillion Yuan in the green industries every year, and the government could only provide 10% to 15% of the money required. To close the funding gap, the participation of the private sector and every citizen is essential. A potential solution is issuing green lottery.
I. Green Lottery can Raise Money for Sustainable Development
Lottery can date back to the ancient Roman Times, when the emperors would use lottery to organize festival events and raise extra fiscal incomes. Since then, more and more countries around the world issue lottery to increase the revenue of their governments. According to the statistics from World Lottery Association, the global sales for the state-regulated lottery sector in 2014 are conservatively estimated at USD 292.7 billion. A total money of USD 77.8 billion was returned to society in treasury, education, sport, social activities, culture and other good causes in 2014, which represented a return to society of 28.4 cents for every dollar of lottery sales.
China began to issue lottery in as early as the 1980s, since then the lottery industry has witnessed a rapid growth. According to the statistics from the Ministry of Finance, China`s domestic lottery sales in 2015 reached 367.9 billion Yuan, the sales of sports lottery and welfare lottery reached 166.4 bilion Yuan and 201.5 billion Yuan respectively, while the money raised for public causes of the two categories of lottery reached 41.5 billion Yuan and 56.4 billion Yuan respectively. During the 12th Five-Year-Plan period, the gross sales of sports lottery and welfare lottery in China reached 679.8 billion Yuan and 862.8 billion Yuan respectively, while the money raised for public causes of the two categories of lottery reached 176.6 billion Yuan and 248.8 billion Yuan respectively.
Since lottery can play an important role in raising money for good causes, several countries around the world have tried financing green and sustainable activities via lottery. In February 2010, Japan issued 700 million pieces of green lottery priced at 300 Yen to increase the public awareness of environment protection. In September 2011, UK issued low-carbon lottery to raise money to expand investment in carbon reduction projects. It`s estimated that a two-pound lottery could help reduce 100-Kilogram reduction of carbon dioxide. China also issued a specific sports lottery in July 2012 to raise money for the environment protection of Sanjiangyuan Nature Reserve in the Qinghai Province. Meanwhile, Mr. Chen Fei, a representative of National People’s Congress also called for the Central Government to issue green lottery to finance the funding gap of environment protection.
II. Eco-Finance can Enable Green Lottery to Punch above its Weight
Green lottery can raise money to help finance the sustainable development, but it`s not enough. Even if China could sell as many green lottery as sports lottery or welfare lottery, and raise 40 to 50 billion Yuan for environment protection. Compared with the trillion-Yuan-demand, green lottery could only provide a tiny percentage of money needed.
Mr. Deng Xiaoping once said, finance is very important, it`s the core of modern economy. A lot of experts and scholars suggested that China could use eco-finance tools to raise money for environment protection and green transition. For example, China could establish national or local green banks, set up PPP green industry fund, issue green bonds and provide tax incentives for green bonds investors. However, to implement the bank, fund, tax incentive and other policy recommendation, China needs a lot of money, this is exactly where the money raised by green lottery can make a significant contribution.
The combination of green lottery and eco-finance could play an important role in accelerating China`s green transition. For Example, As the the only equator principle bank in China, the Industrial Bank Co., Ltd has a registered capital of 19 billion Yuan, but provided more than 800 billion Yuan green loans by the end of 2015. If the money raised by green lottery could help establish a 10-billion-yuan green bank in China, it would provide much more green loans than its registered capital. Similarly, China could also use green lottery to raise money and set up PPP funds which can attract investment from the private sector, provide interest subsidy or tax incentives for green loans and green bonds. Eco-Finance tools could definitely enable the money raised by green lottery to punch above its weight and facilitate much larger green investment and transactions.
III. Everyone Can Make a Contribution via the "Internet Plus"
To maximize the impact of green lottery and eco-finance and accelerate the green transition, everyone`s participation is critical. We now live in a era of internet, and internet changed every part of our life. According to the statistics from China Internet Network Information Center, China has 688 million netizens by December 2015. The 2015 annual report of Tencent Inc also highlighted that the active WeChat accounts rose to more than 697 million in 2015. China could consider selling green lottery via the internet to raise money at a relatively low cost. Since e-commerce and mobile payment are omnipresent in China, the government could also consider designing green lottery with incentives encourage lottery buyers to prefer green transportation, green consumption, green tourism and other green living habits.
IV. Next Step Policy Recommendations
Firstly, the State Council could consider launching an experimental green lottery program. The Ministry of Environmental Protection (MEP) could design and issue green lottery based on the sports lottery and welfare lottery experience. Since the People’s Bank of China (PBOC) plays a leading role in green finance, it can contribute a lot on how to use the money raised by the green lottery in the most efficient and effective way.
Secondly, the State Council and the Ministry of Finance could reconsider how the money raised by lottery are allocated. At present, most of the money raised by the sports lottery and welfare lottery were allocated to supplement social security fund and other public foundations. Since the funding gap for environmental protection is very huge, maybe the government could consider a change in the allocation of money raised by green lottery. A tentative suggestion is, 30% of the green lottery sales allocated for the lottery winners, 30% allocated as green credits which could subsidize lottery buyers’ green consumption, 30% allocated for MEP and PBOC, and remaining 10% to cover the cost of green lottery issuance and distribution.
Thirdly, the MEP and PBOC could create a green account for every green lottery buyer. Unlike sports lottery or welfare lottery, green lottery is not a win-or-lose game. Even those who didn’t win a lottery prize would be rewarded green credits, which could subsidize their green consumption. Also the green lottery buyers can increase their green credits by using public transportation, recycling the waste, buying energy-efficient and environment-friendly products. This would help the green lottery buyers to live a green lifestyle.
Fourthly, promote the use of internet. The government could considering permitting BAT and other leading companies in the internet industry to participate the issuance, distribution and marketing of green lottery under the framework of rule-of-law.
Last but not least, it`s very important to promote international communication and cooperation. US, UK, Japan and Italy are leading countries in the global lottery industry. Since China is going to host G20 Summit this September in Hangzhou, and advocate green finance as a key issue. China can strengthen international cooperation on green lottery design, distribution and marketing with other leading countries via the G20 platform. It is noteworthy that, since Mizuho Bank Ltd not only play a significant role in the Japanese lottery industry, but also a leading financial institution committed to environment protection, the know-how and expertise from Mizuho Bank could be very relevant and valuable for China`s green lottery and eco-finance efforts. Furthermore, China can use the money raised by green lottery to establish a platform to enhance international technology cooperation, and help the foreign companies to enter China’s domestic environment restoration and protection market and jointly push forward the Eco-civilization in China.
The author is Project Manager of Chongyang Institute for Financial Studies, Renmin University of China.