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China's massive and long-term pollution problem is putting an economic thesis to the test.



The theory, known as the environmental Kuznets curve, contends that the environment must suffer in order for a society to achieve financial growth. Only when the growth has been reached, the premise says, can the society then afford to clean up the mess—if it wants to.

As the world's largest economy after the U.S., China appears to have the necessary wallet. It may also have the will after years of mounting deaths attributed to polluted air and water.

But the combination may still not be enough to reverse decades of environmental destruction.

"The pollution problem in China is just terrible and has been for some time," said Susan Tierney, an economist and energy strategist at the consulting firm Analysis Group.

"There are constant health alerts, and you can't see buildings a quarter of a mile away," she said. "They have a long way to go to reach economic growth and addressing the pollution problem."

It's been a fast-tracked desire to become a world economic power that put China in the pollution cross hairs, said Mark Milstein, a professor of management at Cornell University.



"They wanted to catch up very quickly with the developed world and have been trying to get as much energy as possible out of each dollar invested," said Milstein, who conducts research on the environment.

Even though China is one of the leading manufacturers of alternative energy sources—wind turbines and solar energy panels—it has seven of the 10 most polluted cities in the world, according to a study by the Asian Development Bank and Tsinghua University.

The main culprit is the country's dependence on coal, experts say. China, the world's largest user of coal-derived electricity, has built an average of two coal-fired power plants every week in the last decade.

Another factor is the rapid urbanization and the energy demands that come with it. Nearly 52.6 percent of the population, 712 million out of the 1.3 billion people, live in or near cities. That's up from 26 percent in 1990.

The mixture has produced a grim toll on human lives.



Outdoor air pollution contributed to 1.2 million premature deaths in China in 2010, according to a study released this year on leading causes of global deaths.

Another study found that severe pollution has slashed an average of 5½ years from life expectancy in northern China as toxic air has led to higher rates of stroke, heart disease and cancer.

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The bill in China from pollution added up to $100 billion in health care and lost wages in 2009, according to the World Bank. That's about 3 percent of the country's annual gross domestic product.

To corral the pollution, China is trying to take major steps, such as reducing its coal dependence. China's coal imports grew by 17 percent in the first 10 months of the year—down by nearly half from the 30 percent growth rate of 2012.

The government also recently said it would stop approving coal-fired power plants in heavily polluted industrial areas, and has announced a national goal of lowering the concentration of harmful particles in the air by at least 10 percent between 2012 and 2017 levels.

That will have a global impact as well. Particulates of mercury collected in countries like South Korea, Japan and even the U.S. have come from China.

China is also looking at its huge construction projects differently. In 2008, China set up its own chapter of the World Green Building Council to help create energy-efficient structures.

"Buildings consume 40 percent of all energy around the world," said John Mandyck, chief sustainability officer for United Technologies and an adviser to China's council.

"In my talks with Chinese officials, they realize the need to have economic expansion with the environment in mind," he said. "They want to have 30 percent of all new construction green by 2020."

Still, the pollution in China will likely get worse before getting better, experts say.

Case in point: The Chinese government announced last week that pilots of domestic airlines are being trained to fly blind landings into the country's 10 most polluted cities, including Beijing, because of the smog.

Meanwhile, not all of China's population may feel like they are wealthy enough to "think green." In 2012, China's gross national income per capita of $6,091 ranked 90th, and about 128 million people still live below the national poverty line.

"There are a lot of poor in China, and the country has to create jobs for the huge population," said Analysis Group's Tierney. "They still have to create economic growth and stop pollution of the air and water. It won't be easy."

But rich or poor, people in China may feel a breaking point's been reached, said Edward Sappin of Sappin Global Strategies, an energy investment firm.

"As China has continued on its rapid economic growth, most Chinese have been happy to let Beijing do as it pleases," Sappin said.

"But continued air and water pollution threatens to add to misgivings over societal challenges such as official corruption and a slowing number of new job opportunities for graduates," he said.

China's pollution fix could actually provide an economic boon in and of itself. The country plans to spend some $270 billion over the next five years to clean up air and water, creating jobs and investment in green technology.

China is hardly alone in facing the test of Kuznets' curve. Experts point to the constant battles in the U.S. over cleaning up the environment while keeping a struggling economy, dependent on massive amounts of energy from fossil fuels, humming along.

What China has become, said Cornell's Milstein, is a reminder and warning of how far the world has to go on balancing the environment and economic growth.



"We have the technology to find solutions to keep the world's resources safe and clean," Milstein said. "It's just a matter of finding the political will to make it happen."

—By CNBC's Mark Koba. Follow him on Twitter @MarkKobaCNBC.

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