On Wednesday afternoon, Chinese Vice Premier Zeng Peiyan opened the annual general meeting of the China Council for International Cooperation on Environment. The council, of which I am a member, was founded in 1992 and is the highest level international advisory body to the Chinese government on environmental issues.

In his remarks, Zeng reported that for the first three quarters of this year, the energy intensity of the economy has improved by 3 percent and that for the first time emissions of SO2 and COD, two key pollutants marked for control under the 11th Five-Year Plan (2006-10) have switched from rising to reduction trends.

He cited this change as "a new platform and starting point" for China's environmental management. At the same time, he said that he "was sober minded enough to know that there are still problems" to be solved. Among them, Zeng noted that the government would address the problem of "the low cost of noncompliance and the high cost of pollution control".

People often ask me how the United States managed to control pollution. So pardon me for a little personal story in response since these developments parallel my own.

I am a baby boomer who came of age under the energizing inspiration of John F. Kennedy. I remember watching his inauguration with national poet laureate Robert Frost shaking at the podium in the cold intoning how there were miles to go before he could sleep. And the new president was telling us that we should ask not what the nation could do for us, but what we could do for the nation.

It was an age of imagination, enthusiasm, and hope. It was also an age of fear when we faced the true possibility of nuclear war when the race could easily destroy itself. At the same time, it was faith and imagination that pledged the nation to send a man to the Moon in a decade when we really did not know how we could do that.

The 1970s brought first revelations of previously unimagined environmental damage. Picture a river on fire. In response came a renaissance, the first Earth Day, the first really serious national legislation on pollution in the US in 1970. This was the beginning of the new wave in the US.

At first it required "kicking some butt" as they say in the movies. Companies and local governments did not quite believe what was happening, but the law was the law and the federal government stepped in to see that it was enforced. The wheels of justice moved slowly but inexorably and today US environmental management is widely admired for its widespread compliance rates.

Fast forward to 2007. China currently faces the same kind of defining moment that the US faced in 1970. At that time in the US, the questions were whether we should continue to ignore the scientists' warnings? Were we to destroy ourselves what foreign enemies could not? Could we continue to fob off the mounting evidence of species extinction, ecosystem loss, and human health damage for more money?

Fortunately, as a nation we decided not to and turned away from that destructive path. Of course, we are not out of the woods yet as the US still needs to grapple with its energy profligacy and its enormous role in global warming and climate change. As a species, we may yet do really serious harm to ourselves and the planet. But there has been progress.

At exactly this moment in time, China faces the same crossroads. Every speech of the senior leaders commits China to meeting the 11th Five- Year Plan's environmental goals. I have personally heard and experienced Premier Wen Jiabao's passion about the importance of these goals.

However, the Chinese government has pledged to cut energy consumption per unit of GDP by 20 percent and reduce pollutant emissions by 10 percent in the five years before 2010. But why is this time a crossroads? The answer lies in the current debate in the National People's Congress about the reform of Law of the People's Republic of China on Prevention and Control of Water Pollution.

At issue is the question of how polluters who violate the law should be punished. At present, the law imposes the equivalent of a financial mosquito bite as a penalty which is far cheaper financially than legal compliance.

So, on the one hand, we have strong direction and commitment from the senior leaders. On the other, we have a law which says disobey the law and pay a small fine, sort of like a parking ticket. Does that sound like a national priority? Why should we be surprised when pollution increases? We have made it profitable. Of course, companies do not want a change in the law. They like it this way. They make money.

For an international comparison, consider a recent pollution case settled in the US concerning acid rain control. On October 10 this year, the US government announced a settlement with American Electric Power requiring them to make pollution control investments totaling $4.6 billion, the largest in US history.

In addition, the court decision included a $15 million civil fine and another $60 million for mitigating environmental damage its emissions caused. Compare this to the current cap on penalties of less than 200,000 yuan ($27,030) under China's Law of Atmospheric Pollution Prevention and Control. Which creates a financial incentive for companies to obey the law?

Such laws will be not that effective if the water pollution control penalties are maintained at levels below the legal cost of control.

Everyone will know why pollution increases. The message to companies would be that the State will not charge you too much if you do not manage to meet your environmental responsibilities. It is just not that important.

Credible enforcement and penalties are the foundation of environmental performance. If the laws are not enforced with serious financial consequences for non-compliance, companies will correctly understand that the government is signaling that it is not serious about controlling pollution. And they will continue to increase their emissions under the banner of development.

The 1970s in the US were a time of loss of confidence by citizens in their government. Vietnam, Watergate, Silent Spring were the talismans of the time. The bright spot was the birth of real, effective environmental pollution control. I was there, I know.

China faces this choice at a quieter and more prosperous time. Nonetheless, with the Beijing Olympics marching closer every day, the time to tell polluters that they can no longer profit from disregarding the nation's environmental laws and regulations is now.

Adopt the daily penalty from the day of violation. Enforce the law. Control pollution and improve the lives of the people. Creating real financial consequences for non-compliance will unlock the power of innovation to control pollution, reduce costs, and set China on the road to building an environmentally friendly society.

The author is chief economist of US-based nonprofit environmental advocacy group "Environmental Defense"

(China Daily November 30, 2007)