The Chinese government has made much progress

specific laws to deal with different environmental problems are yet to be enacted and a set of consistent policies is yet to be formulated. The work involves listing all polluting activities in production and consumption, estimating their costs to society as externalities and specifying a set of most suitable penalties for violation and economic inducements for the adoption of clean energy alternatives. The Chinese government has made much progress in this work. However, a set of comprehensive laws and regulations have yet to be established. As suggested in our previous discussion in section 3, some suggested solutions to the energy-environment problems are phrased in future sense and some, like the imposition of high tax and severe penalties, are not stated in specific quantitative terms.

After stating the need for more systematic work in this direction the author would like to point out the difficulty in estimating the social costs and benefits of various incentive schemes in practice. In the economics literature, e.g., Uzawa (2005) and Tietenberg (2007), there is a comprehensive theory to include the role of the government in protecting the environment as natural capital required for production and consumption, but the application of the theory requires quantitative information on the cost and production functions that are difficult to obtain. The Chinese government can rely on rough cost estimates and possibly on schemes for trading emission permits when the total number of permits (total amount of pollution permitted per period) in each case is determined approximately, as illustrated in the case of air pollution emissions trading discussed in Morgenstern, et. al. 2004. The solution is an improvement over the case of not applying economic incentive schemes for environmental protection although the total number of permits can be better determined with more information on the cost and benefit of pollution.

Second, after the enactment of a comprehensive set of laws and the announcement of appropriate policies, implementation will pose serious problems, as in the case of protection of intellectual property rights. Laws are not obeyed and policies are not followed. When there are economic benefits by violating the laws for environment protection, penalties for violation have to be strictly enforced and inducements to abide by the laws have to be provided. A major hindrance to environmental law enforcement is