Brownfield remediation: profit vs. social responsibility

(Ecns.cn) – In recent years, China's nascent land remediation industry has been developing at a breakneck pace, spurring the number of companies engaged in dealing with contaminated "brownfield" sites that factories leave behind.

The trend is an economic upside of urbanization in China: with demand for housing so hot, most contaminated sites are redeveloped into residential communities long after the old factories have been relocated to outlying suburbs. As a result, the profitability of this unregulated industry has surged.

However, opportunities always come with challenges. Companies engaged in the business are faced with a multitude of issues, including what prices to charge, how much time should be used to clean up sites and what techniques to apply. Moreover, the decisions they make today could affect the health of the people who live on the sites in the future.

No longer secret

A generally unfamiliar term to the public, brownfield remediation is a very important process of pollution management, in which contaminated land previously used for industrial purposes or certain commercial uses is cleaned up for redevelopment.

In China, poor industrial planning in the past, especially during the modernization drive of the Great Leap Forward (1958-1961), has made land contamination a very serious problem; the industrialization and modernization process has left a vast legacy of polluted industrial and commercial areas, according to a report released by the World Bank.

Now, as rapid urban expansion results in the need to redevelop these industrial areas mostly into residential communities, the concentrations of hazardous waste or pollution must be dealt with carefully, which has given rise to a number of lucrative business opportunities.

Many companies have taken advantage, quickly growing from nothing into major players in the industry overnight. On February 21, 2012, when BCEG Environmental Remediation Co announced its plan to go public, the veil of secrecy was finally lifted on the industry, reported the Southern Weekly.

Worth billions

In China, if brownfield remediation accounts for roughly 10 percent of the environmental industry during the 12th Five-Year Plan period (2011-2015), it will be a business worth hundreds of billions of yuan, said Gao Shengda, editor of an environmental remediation website.

In countries where the environmental industry is more developed, such as the US, the UK and Australia, the ratio is as high as 30 to 50 percent.

Now China's "gold diggers" are lining up. According to statistics released by hjxf.net, an environmental remediation website, more than 20 new land remediation companies were registered in China in 2011.

In the World Bank's report, it noted that the city of Chongqing spent 800 million yuan (US$126.3 million) to assess the contamination of 45 lots of land in 2009, and that the cost of cleaning up the land is expected to exceed US$2 billion.

Currently in China, brownfield remediation projects can cost tens of millions of yuan, and most reach above 100 million yuan (US$15.8 million). Last year in Beijing, a massive remediation project cost more than 700 million yuan (US$110.5 million), making it a "land king" of the industry.

Under such circumstances, many state-run enterprises have set their sights on the burgeoning industry, and more money is flowing in. At the end of 2011, Sequoia Capital invested in a Beijing-based environmental remediation company secretly, noted the Southern Weekly.

Big challenges

Four years ago, the Beijing Bureau of Industry and Commerce disagreed with the term "remediation" when a company wanted to register itself under the name "BCEG Environmental Remediation Co, Ltd."

Four years later, that company is going public on the Growth Enterprise Market (GEM). Gao Yanli, general manager BCEG, said the turn came at the beginning of 2011, a year when invitations from the China Environmental Remediation Development Strategic Forum could not satisfy the growing demand, as environmental departments at various levels had all begun paying attention.

Since the number of professional brownfield remediation companies is still far from sufficient in China, these environmental departments function as an important force in dealing with contaminated land after old factories have moved elsewhere.

Yet the World Bank pointed out that in China there are no comprehensive technical guidelines or standards for soil pollution monitoring, environmental risk assessment or soil remediation techniques officially issued at a national level.

Under such conditions, the market lacks standards concerning pricing and clean-up techniques, and as of today no companies have disclosed their cost structures for remediation.

The reason why the cost of cleaning a piece of land is so difficult to estimate is that no one knows what pollutants lie underground before excavation. In general, the cost of cleaning varies according to the period of time allotted to complete the job; the shorter the time, the higher the price.

Meanwhile, remediation technologies in China are still in the pilot stages. Most cleaners simply excavate, remove the contaminated soil and dump it elsewhere without neutralizing the poisonous elements, even though many technologies are available to do so, noted the Southern Weekly.

Clearly, there are still many hurdles to overcome for China's brownfield redevelopment, yet the country is moving ahead slowly. But as the government takes a circumspect approach to resolving these problems, the companies should proceed out of a sense of responsibility to society, not just a wanton desire for profit.