China’s Tougher Environmental Framework is Positive, but Will Result in Local Variations in Enforcement

In March 2015, the National People’s Congress and Chinese People’s Political Consultative Conference convened in Beijing for its annual two-week review of strategic national policies in China. The annual meeting provides contextual signals about upcoming policies in addition to the current Five Year Plan (2010-2015) and the upcoming Five Year Plan (2016-2020). While this year’s meeting is not the first to place emphasis on environmental, health and safety topics such as air pollution, it is likely to be recognized as the year that China begins to actively strengthen and enforce environmental regulations.

The first three months of 2015 have already allowed us to witness promising Chinese environmental law reforms. In January this year, the revised National Environmental Protection Law came into effect and restructured political incentives. It is the first revision since being introduced in 1989 and mandates that all government officials be evaluated on regional environmental protection records in addition to regional growth and social harmony. Other amendments include reducing restrictions limiting NGOs from taking legal action against polluters, removing the cap on environmental fines, and expanding the requirements for environmental impact assessments. To pave the way for regional implementation, theLegislation Law was also revised in March 2015 to increase the number of cities that can pass their own laws from 49 to 288 nationwide.

While regulations have been strengthened, the jury is still out on whether China can follow through with enforcement. Concern has been raised over weak accountability since multiple agencies oversee environmental activities and potential conflicts of interest still remain between national entities that introduce policy and local provinces that administer and impose penalties. Despite this, recent activities show promise. Within the first two months of 2015, 15 firms faced fines totaling RMB 7.23 million (US$1.14 million) and a further 258 were forced to shut down or suspend production.

As an indication of a new start, Chen Jining was appointed the new Minister of Environmental Protection in March 2015. Chen’s background in environmental systems science contrasts with his predecessor’s training in economics. Verdantix expects that China will proceed cautiously in advancing environmental progress to avoid spiraling EH&S concerns into social or political problems. Progress will likely occur in piecemeal form and depend on implementation and accountability at the local provincial levels. To remain ahead of regulations, firms active in China should focus on accurate EH&S information management and energy data collection to ensure reporting reflects performance realities.

To learn more about Chinese sustainability management practices and anticipated consulting spend, see our published report: Sustainability Consulting In China Requires Long-Term Commitment.