By Hou Liqiang | China Daily

Model combining ecological restoration and development promises win-win solution. Hou Liqiang reports.

The government’s ambitious plans to promote ecological progress, a priority of the central leadership, have created a potential multitrillion-yuan market for soil remediation work in the next three decades.

Many companies involved in the industry have already experienced robust growth, but the potential of the market has yet to be fully unlocked.

While a lack of talent with adequate expertise is one hindrance, industry insiders say businesses involved in soil remediation also face financial challenges because returns are not immediate.

They say the establishment of a business model combining ecological restoration with development projects is the key to tapping the industry’s massive potential, because it could not only increase companies’ incomes, enabling even bigger investment in treating polluted soil, but also help free cash-strapped local governments from the need to raise funds for expensive remediation work.

Elion Resources, a private company headquartered in Beijing, was one of the first enterprises to spot business opportunities in the central leadership’s increasing attention to the environment. Company vice-president Zhao Jinling said it decided to enter the ecological remediation industry in early 2014, with soil remediation and desertification control among its major businesses.

The rapid growth of its ecological remediation branch shows Elion made the right choice.

“The branch has achieved annual revenue growth of about 100 percent on average,” Zhao said.

It started with only 20 employees, but had almost 100 by the end of 2014, with annual turnover of 400 million yuan ($59.8 million). It now has more than 1,000 employees, Zhao said, and revenue last year shot up to 5 billion yuan.

“Obviously, the high attention from the central leadership does provide an impetus for the market’s development,” he said.

Gaiya Env, headquartered in Suzhou, Jiangsu province, has experienced even more explosive growth since it was established in 2012, with the soil remediation solution provider’s revenue rising by about two-thousandfold, according to Cheng Gongbi, the company’s founder and president.

The company earned 60,000 yuan in 2012 and 120 million yuan last year.

Cheng, who has a PhD in geology, said the huge potential of China’s environmental protection market was one of the factors that prompted him to quit his job at an environmental company in the United States in 2011 and return to China to found Gaiya.

Huge potential

According to a report published by the Research Institute for Environmental Industry, which is affiliated with the Beijing-headquartered China Environment News newspaper, if soil pollution is curbed by next year and the soil environment is comprehensively improved by the middle of this century, conservative estimates put the size of the market at 1.9 trillion yuan. It put the upper end of the potential market at 5.6 trillion yuan.

Wei Li, a board member of listed company Beijing GeoEnviron Engineering& Technology, forecasts that the soil remediation market in China could be worth 21.2 billion yuan this year.

One thing driving the industry’s growth is an increasingly complete system of policies, laws, regulations and standards for soil remediation, she said.

The country’s first national law on soil pollution and control came into effect on Jan 1. It stipulates that national and provincial funds should be established for soil remediation, and also clarifies responsibilities for soil pollution.

In addition to a general guideline for soil management, China now boasts specific regulations for this in urban areas, farms and mines. A national standard for soil quality also came into force last year, said Wei, who has been involved in the emerging industry for 15 years.

She said the country’s rapid urbanization, and associated real estate development, has been another driver of the industry’s growth. With the complete system in place, local governments need to remedy soil pollution before allowing land to be used for property projects.

“Soil remediation projects or soil pollution surveys were carried out in all 31 provincial-level regions in the Chinese mainland last year. Tianjin and the provinces of Jiangsu, Hunan and Zhejiang led the way, each spending more than 1 billion yuan,” Wei said.

Gao Jie, secretary-general of Zhongguancun Zhongxin Soil Remediation Industry Technology Innovation Alliance, said the soil remediation industry is also booming because of industrial restructuring in many cities, with many factories being moved out of downtown areas.

The land formerly used by factories cannot be left idle, because many local governments need to develop valuable downtown land to boost their revenue. But remediation has to precede development, Gao said, because much of the land has been contaminated by industrial pollution.

“The huge market potential in soil remediation has yet to be unlocked,” Gao said, adding that many projects are pilot ones because the national survey of the soil pollution situation is continuing.

He said financing is a key challenge that has been hindering the industry’s development, as local governments previously had to foot the bill for soil remediation work. The law on soil pollution control may help, because it states that polluters or those with the right to use the land should pay for the cleanup.

“But it’s not yet known if the polluting companies or owners of landuse rights, many of them small and medium-sized, can afford the high cost involved,” Gao said. “It’s also not easy to identify the polluters because it’s difficult to trace how land was polluted.”

The industry needs to reform the current business model, which only concentrates on soil remediation, to address the challenges, he said, adding that combining soil remediation with further development, for example real estate projects, could offer a solution.

Gao said local governments could give contracts for projects involving remediation and development to big State-owned enterprises, which have better access to financing, and companies specializing in soil remediation could become subcontractors.

Environmental improvement often makes land more valuable, and such a model could help create a win-win situation. Local governments would earn revenue from land transactions without having to pay for soil remediation, while developers could also benefit from higher land values.

Zhao agreed that the model offered a solution to the industry’s financing challenges, adding that Elion had tried it successfully in a project in Tianjin.

Meanwhile, he said, the industry is also troubled by a lack of expertise in areas such as soil remediation and promoting the business model.

Cheng said Chinese universities have not provided the talent the industry needs, with students majoring in environmental engineering and science learning more about air and water pollution than soil pollution. They might know a lot about chemistry and biology, but their knowledge of geology was poor.

“My companies have to train most of the talent we need,” he said. “We need to reform universities’ cultivation of talent for soil remediation. It’s not possible for companies to cultivate the talent they need all the time, and that makes it extremely challenging.”

Story originally published in China Daily