China Environmental Law

Did you like this blog?  Do you miss your daily dose of commentary on China’s environmental laws and regulations? Now you can own the book!

Here’s the publisher’s blurb:

In recent years, China’s leaders have started to confront the environmental, economic, and social costs of unchecked development. China’s increasing reliance on foreign oil has engendered national security fears and launched a drive for more efficient transportation systems and domestic renewable energy projects. Meanwhile, pressure from a rising middle class and the international community has focused leadership attention on ways to make China’s economic engine run more efficiently and with less impact upon the domestic and global environment. This profound shift in priorities has elevated environmental sustainability to the top of the national agenda. To advance this new agenda, the environmental laws that China has enacted over the past thirty years are being strengthened, and new environmental regulations and standards are being issued everyday. Entities operating in China are faced with the need to understand the impact of China’s environmental law requirements upon their businesses, and to take actions to ensure that they are in compliance with those requirements.

In Environmental Law in China: Managing Risk and Ensuring Compliance, Charles McElwee addresses how China’s environmental regulatory and legal frameworks are structured, how to maintain operational compliance with the environmental laws and regulations, how to ensure products sold in China comply with environmental regulations, and the potential risks and liabilities that attend non-compliance. McElwee offers unique insight into how environmental law is in fact applied, setting forth a realistic account of the way companies encounter Chinese environmental regulations at both the local and national levels.

What more can I say? Not much, so I’ll let some early reviewers do the talking:

“The great challenge in understanding China’s environmental predicament involves striking balances. Finding the right balance between despair over the problems and optimism about efforts to correct them, between the ambitious principles stated in legislation and the uneven realities of enforcement across the country, between the forces inside China willing and able to work with international environmental groups and those who shun outside ‘interference.’ In this book, Charles McElwee offers a clear and useful guide to these balances and to China’s green prospects.”

–JAMES FALLOWS, National Correspondent, The Atlantic

“Charles McElwee has written a valuable and highly readable primer on China’s environmental law framework that also provides important insight into the ways that the law is actually implemented. He points out that the trend in China is toward increased environmental enforcement, particularly of foreign-invested entities perceived to have greater capacity for compliance. All companies operating in China who wish to improve their environmental compliance should read this book.”

–ALEX WANG, Senior Attorney; Director, China Environmental Law & Governance Project, Natural Resources Defense Council

“This book is an absolutely necessary reference tool for anyone with manufacturing operations in China. Charles’s book is concise, comprehensive, and accurate but more importantly readable, even for non-EHS professionals. Working through China’s environmental regulations is a daunting and almost impossible task, and this book provides a road-map for working through China’s immense and intricate environmental compliance requirements. I wish I had this resource five years ago.”

–DAYTON J. CARPENTER, Former EHS Counsel-Asia Pacific, Eaton Corporation

Where can you purchase this work that shaved years off my life?  Direct from the publisher here or through Amazon here (this link is to Amazon US, so you may have to migrate to the Amazon where you live).  One disclaimer: I didn’t set the price, the publisher did (but it’s worth every penny).  Please let me hear from you if you’ve read it.

I was in Beijing at the beginning of the week to moderate a panel at the 8th Transnational Corporations China Forum 2010 organized by Chinese Academy of International Trade & Economic Cooperation, Ministry of Commerce, to discuss the strategic opportunities and compliance management of multinational corporations in the post-financial crisis era.  My panel focused on the multinational corporation and China’s low carbon economy.  China.org has saved me the effort of writing a lengthy post about the highlights of our discussion by featuring the panel in its story “Low-carbon revolution is on the way.” Unfortunately they chose to grace the story with a photograph taken of my right (and decidedly less photogenic side).  Oh well, all for a good cause I suppose.

Photo: china.org.cn

According to the Nanfang Daily, you shouldn’t expect a government subsidy when you buy a hybrid or electric vehicle in China in the near future.  Although the State Council announced last December that it would select five cities to test subsidies for the private purchase of “new energy vehicles,” issues surrounding the form and amount of the subsidies remain unresolved.

Amount of Subsidy

Subsidies are in place in 13 pilot test cities for purchases of passenger cars and light commercial vehicles for “public service.”  Hybrid vehicles meeting certain criteria and on a list published by the government are eligible for an RMB 50,000 subsidy and pure electric vehicles are eligible for an RMB 60,000 subsidy.¹  Commentators quoted by Nanfang Daily stated that subsidies for “private purchase” needed to be higher than those for government purchase in order to be effective.

Local v. Foreign

As Zhang Zhiyong, an auto analyst noted, “in China subsidies are bound to promote local protection.”  The article states that foreign companies have an edge in established model lines and the maturity of technology; therefore, if a general subsidy policy was implemented, it would be “very detrimental to domestic automobile companies.”  Zhang believes that the subsidies should be “aimed at the promotion of local enterprises.” “Local” in this context does not always mean Chinese vs. foreign.  Many cities are inclined to administer subsidy programs so that they give preferences to companies with strong ties to the city.²

China recently released some findings from its survey of air and water pollution sources.  The most striking fact was the significant impact of agricultural non-point sources on water pollution levels.  Air and water (at least surface water) pollution which are easily observed generate more attention than pollution of the soil, yet once you stop the sources of air and surface water pollution, those resources return to pre-pollution states fairly quickly.  The same can not be said for soil and sediment contamination.  Stopping the source of pollutants to the soil does not return the soil to the status quo ante; without active remediation the soil will remain contaminated for decades, even centuries, depending on the pollutant.  Soil contamination is a problem because it reduces crop yields, taints the food supply, and creates a source of pollution of ground and surface water.

China initiated its first soil pollution survey in 2006 with a budget of 1 billion yuan.  The survey is designed “to assess soil quality across the country by analyzing the amount of heavy metals, pesticide residue and organic pollutants in the soil.” The results of the survey were supposed to have been released at the end of 2009, but they were not.   It is unclear whether they will be released this year.  Nevertheless, some experts have “estimated one fifth, or about 20 million hectares, of China’s arable land had been polluted.” (See China’s Heavy Metal Problem http://www.chinaenvironmentallaw.com/2009/11/11/chinas-heavy-metal-problem/).

Soil pollution is caused by both industrial discharges (through direct discharges to the soil and through deposition of industrial air pollutants (such as mercury) on the soil) and agricultural activities.  Indeed, as with water pollution, it is becoming clearer that China’s agricultural sector is a major contributor to soil contamination.  A new study published by Science magazine underscores the seriousness of the soil pollution problem.

In some select areas “soils are approaching pH values at which potentially toxic metals such as Al and manganese (Mn) could be mobilized,” the authors write, concluding that “overall, anthropogenic acidification driven by [nitrogen] fertilization is at least 10 to 100 times greater than that associated with acid rain.”

China’s environmental regulatory apparatus is in the process of attempting to develop a comprehensive framework for the regulation of soil pollution.  The current scheme consisting of a few obscure notices ¹ and generally ignored soil standards is clearly inadequate to the task. A new Soil Pollution Prevention Law has reportedly been drafted and received expert feedback.  It has now been submitted to the “relevant departments for comments.”  It is not clear whether the reference to “relevant departments” refers to the various internal departments of the Ministry of Environmental Protection or other ministries which may have some stake in the issue. Both steps are preludes to the eventual passage of the law by the Standing Committee of the National People’s Congress.  Combined with the draft Guidelines for Risk Assessment of Contaminated Sites that was released last year for comment, this news indicates that the efforts to develop a soil pollution legal framework are moving forward.

Photo: Yang Xi/China Foto Press

Here’s a little game we can play while we wait for “sign up” day on January 31, 2010.  What do you think China will submit for inclusion on Appendix II of the Copenhagen Accords?

The Accord provides ¹ any Annex I party who so chooses can list on Appendix I its “Quantified economy-wide emissions targets for 2020″ including the relevant “base year.”  Non-Annex 1 Parties, which still includes China, who choose to participate may list on Appendix II their “nationally appropriate mitigation actions” (NAMAs).  Earlier drafts of Appendix II included a column marked “Action/Target,” but “target” was dropped in the final version.

“Quantified economy-wide emissions targets” and NAMAs are, of course, well established concepts under the UNFCCC and perfectly illustrate the gaping divide between what is required of developed and what is required of developing countries. ²  China’s announced target of a 40-45% reduction in its carbon intensity per unit of GDP by 2020 (over the 2005 level) is more in the nature of a quantified economy-wide emissions targets than a NAMA.  A Chinese NAMA would be something along the lines of “we will close X MW of small, inefficient coal-fired electric generation capacity by 2015.”

There is always the possibility that China won’t list anything, but I think that is highly unlikely.  My own guess is that they will list their carbon intensity goal, but I wouldn’t place a lot of money on that bet.  If they do, I think that will be a good sign that China is starting to acknowledge some erosion in the sharp developed/developing country divide of the existing international climate change framework.  If China only lists a series of actions (without any quantified carbon reduction targets or impacts), then they are signaling that they are going to fight tooth and nail to persevere the existing binary distinction.

There is a BASIC meeting scheduled for the third week in January when I suspect this issue will be hashed out among this new climate bloc consisting of Brazil, South Africa, India and China.  In the meantime, what do you think will happen?

I’m working on more thoughtful reactions to the Copenhagen Accord for both the China Economic Review and Harvard Asia Quarterly.  When those are published I’ll let you know.

China amended its Renewable Energy Law (Chinese version) on December 26, 2009.  Chinese spokespersons have emphasized the fact that the amendments require the state grid companies to purchase all power produced by renewable energy sources, but they (and the news agencies that have run with the story) fail to point out that the prior version of the law required the same thing.  In fact, the actual amendments to the law are extremely minor.

The changes include somewhat more national oversight of the preparation of sub-national renewable energy development and utilization plans, and a more explicit recitation of what should be considered in the preparation of such plans (Articles 8 & 9).

As relates to the purchase of renewable power by the grids, an argument could be made that the amendments actually weaken, or at least complicate, this obligation.  The law as originally enacted included this simple and clear requirement at Article 14:

Grid enterprises shall enter into grid connection agreement with renewable power generation enterprises that have legally obtained administrative license or for which filing has been made, and buy the grid-connected power produced with renewable energy within the coverage of their power grid, and provide grid-connection service for the generation of power with renewable energy.

Article 14 has been amended to require the promulgation of an annual regulation that will govern grid purchases of renewable power

The department of the State Council in charge of energy affairs shall, jointly with the state power regulatory organ and the financial department of the State Council, determine the percentage of the quantity of electricity generated from renewable energies in the total quantity of electricity generated during the planned period, and formulate the specific regulations on the priority power dispatching and purchase of the full amount of electricity generated from renewable energies by power-grid enterprises, in accordance with the national programs for the development and utilization of renewable energies. The foregoing regulations shall be implemented under the supervision by the department of the State Council in charge of energy affairs, jointly with the national power regulatory organ, within the year concerned.

This process seems somewhat cumbersome, but let’s see how it works in practice.

One notable addition of the new amendments (also in Article 14) is that they specifically require grid companies to “expand the scope of distribution of power generated from renewable energies, develop and apply such technologies as smart power grids and energy storage, improve their management of power grid operation, enhance their capabilities for taking up electricity generated from renewable energies, and provide grid connection services for electricity generated from renewable energies”

Perhaps the most significant change is in the penalty section.  In the original law, electric grid companies, natural gas and heat pipeline companies, and gas-selling enterprises that fail to purchase or accommodate renewable sources of power or fuel are liable for compensation.  The “energy authorities of the State Council” or local people’s government at the provincial level shall order them to correct the situation within a stipulated period of time; if they refuse to correct the situation, a fine of up to double the amount of economic loss shall be imposed against them (Articles 29 to 31).  The original law limited the maximum fine to no more than the actual amount of the economic loss.

These amendments provide a great way to test the bona fides of the numerous consultants and commentators in this space.  Anyone who touts these amendments as establishing a new requirement that the grid companies purchase renewable power should be avoided in the future.

I will have a longer post on the Copenhagen Accord when the dust settles. It is pretty clear from the Chinese press reports that China doesn’t know what to make of the Accord or how to spin it yet. One thing is abundantly clear, however, unlike US commentators who have praised the Accord for moving beyond the binary developed/developing nation distinctions, China resolutely contends that these distinctions remain and the principle of “common, but differentiated” continues in full force and effect.

The accord upheld the principle of “common but differentiated responsibilities” set by the UN Framework Convention on Climate Change and the Kyoto Protocol, made arrangements for developed countries’ compulsory emissions cuts and developing countries’ voluntary mitigation actions, and included wide consensus on the key issues of long-term global emissions reduction objectives, funding and technology support, and transparency.

The language of the Accord certainly supports the Chinese reading, although some, albeit minor, lessening of the “differentiation” between the responsibilities of developed and the larger emitters among the “developing” countries is also in evidence.

One other thing is certain, China and the US still have a significant way to go to develop a level of trust that will allow them to discuss and negotiate these issues rationally. The events of last Friday bear more resemblance to a Keystone Kop feature than a functioning, working relationship between two superpowers on one of the most important issues of our age.

I’m going to avoid posting daily comments about what’s going on in Copenhagen, since I assume most readers know how to stay informed about the events.  You could have slept through the first three days, however, and not missed anything of substance.  My role is to bring your attention to the underreported stories that add color to the drab northern European winter days.

Today, therefore, I’m going to take a break from my cynical ploys to avoid U.S. action on climate change, lazy scholarship and reflexive “China bashing,” to feature a story that may help you appreciate how unwieldy such a large global convention can be from a logistics point of view.  It turns out that China’s chief negotiator, Xie Zhenhua was denied entry to the negotiation site, the Bella Exhibition Center, on three separate occasions.  It is unclear if this happened over the course of three days, which the Chinese version suggests, or involved three tries on the same day, which the Danish press reports.  In any event, what we have here is a situation where the chief negotiator for the country that currently emits more greenhouse gases than any other country into the atmosphere was denied entry into the negotiations.

That is what I call tight security!  The entrance control personnel at the Bella Center are apparently turning away everyone who does not have their picture on their conference issued ID badge.  Chinese sources say that all of the Chinese staff have their pictures on their badges, but the badge of the head of the delegation does not.  Who is responsible for this glitch is unclear.

Su Wei, deputy head of the Chinese delegation, reacted rather strongly with 事不过三 (which essentially means “you’ve screwed me over three times,” the implication is our relationship is over or I’m done playing nice), and reported “The first day of the General Assembly I was unhappy, the second day I was very unhappy, and today I am extremely unhappy.”

Here a photograph of Xie Zhenhua.  Please let this man into the negotiating sessions!

Now we know that China takes the Copenhagen round of climate change negotiations seriously.  It has developed one of those catchy (if often hard to translate) phrases with numbers to capture its core negotiating principles: “one target, two main channels, three principles, four consensus.” (一个目标，两个主渠道，三个原则，四个共识).

Oriental Outlook Weekly published an interview with Cao Rongxiang climate change researcher at the CPC Central Committee.  He is the author of the forthcoming book, “Climate change and the failure of democracy,” and he provides a primer on China’s core negotiating principles and the major issues it anticipates at Copenhagen.

The 10 items of the core negotiating principles are:

A. one target

A global temperature rise below 2 degrees Celsius, or atmospheric carbon dioxide concentration of less than 450ppm.

B. two main channels

The 1992 United Nations Framework Convention on Climate Change and the 1997 Kyoto Protocol.

C. three principles

• “common but differentiated responsibilities,”
• “fair” and
• “sustainable development.”

The “sustainable development” principle addresses the developing countries’ concerns that efforts to address climate change will not interfere with their economic development and poverty eradication efforts.

D. four consensus

• developed countries must commit to quantified mid-term emission reduction obligations because of their historical emissions and current high per capita emissions;
• developing countries should undertake efforts to reduce their greenhouse gas emissions and adapt to climate change in as aggressive manner as their national conditions and funding and technology transfers from developed countries permit;
• developed countries should provide financial support to developing countries;
• effective institutional arrangements should be devised to promote technology transfers to developing countries to enhance their capacity to address climate change.

As Cao Rongxiang notes, there really isn’t a consensus surrounding these last four items (but who wants to spoil a catchy phrase), indeed, there isn’t a consensus about any of the 10 points set forth above.  Therefore, he believes the negotiations will be very intense.

He predicts the major controversies will center around five items:

1. Whether the parties proceed inside or outside the framework established by the “two main channels.”  He spends a lot of time criticizing the US for its desire to scrap some of the basic features of these prior international agreements (which are basically set forth in his three principles and four consensus).

2. Appropriate emission reduction commitments from developed countries.

3. The amount of financial assistance provided by developed countries to developing ones.

4. The transfer of technology from developed countries to developing ones.

5. Whether the focus of future actions should on adaptation or mitigation.  Cao Rongxiang states that many small developing countries need help to adapt to rising sea-levels, impacts on agricultural production, etc., while developed countries tend to focus on capacity-building, the use of new energy sources, etc. to slow down the temperature increases.

He believes thet the two most important issues for China are to hold firm on negotiating within the existing framework and to pursue technology transfers over financial assistance because lack of technology is China’s most pressing need.

There is nothing new here, but it does make for a handy review of where China stands at the outset of negotiations.

A “competition for dominance in the greentech “war” is being quietly started;” our competitor has “launched a new ‘carbon-economic revolution’” and we have been left behind at the “starting gate.”

Is Tom Friedman having another China moment?  No, these words come from a Chinese columnist in the China Youth Daily (A new era of “the old carbon seller;” a new energy strategy of playing “catch up.” 新时代的”卖碳翁” 新能源战略要”迎头赶上”).   In comparison to the West which has developed a careful industrial strategy and accumulated significant technological advantages, the columnist says that China’s foray into the greentech economy has been a little naive. He asserts that the development of a Chinese greentech sector has been misguided, fuelled by dreams of “quick profits,” leading to crazy investments, excess capacity, and a greentech “bubble.”

While there may be some truth in what the columnist says, his rhetoric makes it clear that there are factions in both China and the US that believe they can benefit from greentech war and competition metaphors.  They seem quite stale, unreflective, and insincere to me.  They also exploit deep seated, if irrational, fears on both side.  I don’t recall any articles warning that the US was falling behind Germany in the greentech war (although that would have made more sense).  On the Chinese side, the war metaphors are pushed by those who believe that Western efforts to get China to limit its carbon emissions are simply ploys to contain China’s rise and put a “noose” around its economy.

Can we please retire this rhetoric?  Both countries have their strengths and can make unique contributions to our shared goal. Let’s stop fighting a war where both sides believe they are the losers.