15 Feb 2015 China Raises Efforts to Tackle Pollution IssueNew Environmental Protection Law
The revised Environmental Protection Law has taken effect on January 1, 2015. The new law targets tougher control and stricter supervision of polluting activities.
1/ The new daily-fine system provides authorities with a powerful tool to deal with non-complying enterprises. While one-time fines under the previous regime were often so low that polluters preferred to pay them rather than take extensive anti-pollution measures, the new provisions may seriously threaten a company’s economic existence by increasing the extent of penalties.
2/ Increased importance of non-governmental surveillance of a company’s environmental performance (EIA, public interest litigation etc.) has the consequence of more public exposure when doing business. Thus, environmental compatibility of planned projects will in general be assessed as positive by public organizations, while disclosure of negative information may cause reputation damages in and outside China.
3/ the new law grants particular advantages to companies that comply particularly well with the new provisions. The government will adopt fiscal policies and measures to encourage and support enterprises to further reduce their discharge of pollutants.
China is nowadays facing severe ecological issues, seriously affecting its environment as well as human health. According to the annual report on air quality of the Ministry of Environmental Protection,[ PRC Ministry of Environmental Protection, only 3 of China’s biggest 74 cities in 2013 had air pollution within an acceptable range. Days with smog in the whole country averaged on 35.9 in 2013. Moreover, recent studies have shown that nearly 60% of China’s underground water was polluted; among 4’778 testing spots in 203 cities, the water quality has been classified as “relatively poor” in 44% of the cases and as “very poor” in another 15.7%.
For the last recent years, the media has been spilling a flood of information on health impacts of environmental pollution, including air, soil and water pollution. Fighting against pollution has become a major concern among the Chinese population and one of the most significant challenges for China.
For the first time in 25 years, the Standing Committee of the National People’s Congress adopted a revised version of the People’s Republic of China Environmental Protection Law (hereafter “EPL” or “new Law”)) on April 24, 2014. The EPL has turned into force on January 1, 2015.
To finally take up the long-known challenge, the government has introduced a series of remarkable changes in the new amendments. In comparison to the previous version, promulgated in 1989, the new EPL can in general be considered to have more teeth in order to prosecute illegal discharge of pollutants and efficiently enforce administrative orders.
Below we summarize the major changes in the revised EPL.
2. Daily Fines
The amended law stipulates a stricter penalty system in order to fine more effectively enterprises, public institutions and other emitters for illegal discharge of pollutants. If a polluter fails to cease the discharge of pollutants after having received a compliance order, the administrative organ that made the punishment decision may impose the fine on a daily and accumulating basis according to the original amount of the fine, beginning from the day after the date of the ordered correction. Furthermore, the penalty amount is not capped by a maximum limit and local authorities may also extend the scope of types of violation activities to be subject to the daily-based fine at their sole discretion. This new principle marks a significant innovation compared to the model under the previous version of the EPL. Up to now, authorities could only impose one-time fines after a polluter failed to comply with a corrective order. In practical terms, this meant that it was often more cost-effective to violate the law and pay the moderate fines rather than to comply with the law, which in recent years obviously led to paradox results.
In light of the above, companies must take into account that non-compliance with the law may cause serious business damages in the near future as the costs of causing environmental pollution will considerably increase.
3. Public interest litigation
Another noteworthy change to the previous law is the increased importance of public interest litigation. According to the amended law social organizations (NGO’s) are entitled to file claims to the People’s Court for activities that cause environmental pollution, ecological damage and public interest harm. In order to file a claim the NGO must
- be registered at the civil affair department at or above municipal level with sub-districts in accordance with the law;
- be specialized in environmental protection public interest activities for five consecutive years or more, and
- have no record of any law violation.
Recently, the Supreme People’s Court, the Ministry of Civil Affairs, and the Ministry of Environmental Protection have issued some documents aiming to further clarify or detail some related notions such as describe the procedure of civil-environmental lawsuits, the legal liabilities and definition of social organizations, as well as give a strong supervision power to social organizations.
Though, the closer involvement of social organizations can in general be considered as a significant improvement in comparison with the previous law, the practical impact of the amendment still remains to be seen. NGO’s that satisfy the aforementioned conditions are still only allowed to file lawsuits against polluters, while administrative authorities that fail to properly enforce the law cannot be held accountable. Moreover, the fact that individuals are not entitled to bring their own lawsuits against polluters also reduces the efficiency of the public surveillance intended by the lawmakers.
The EPL incorporates a series of provisions that provide higher transparency and publicity requirements granting citizens, legal persons and other organizations the right to obtain environmental information and to participate actively in combating pollution. In particular, the competent environmental departments are required to disclose data on environmental quality and monitoring, regulatory information and regulatory compliance records (such as imposed administrative punishments and use of discharge fees). The environmental behavior of enterprises, public institutions and other potential polluters may be incorporated into social credit archives system, in order to disclose a blacklist of lawbreakers to the public, which could significantly damage their reputations domestically and abroad.
Enterprises classified by the government as “key-pollutant discharging units” must disclose even more comprehensive and real-time datas, including the names of the major pollutants, their concentration and emission levels, and information on the construction and operation of their pollution prevention and control facilities.
Moreover, pollutant discharging units are obliged to prepare Environmental Impact Assessments (EIA), which is a process used to analyze and evaluate potential environmental impacts in connection with the implementation of a plan or a construction project, explain relevant situations to the potentially-affected public and propose countermeasures to reduce the adverse effects to a minimum. The regulatory authorities are required to disclose the full text of the EIA – with exception of commercial secrets and personal privacy information – submitted to them before approving the reports.
5. Administrative detention
Up to now, personal liabilities of the management of an enterprise could only be considered when the environmental violation constituted a criminal offence in accordance with the Criminal Code, which could lead to no more than three or five years of fixed-term imprisonment or criminal detention (Articles 338 and 339 of Criminal Law) depending of the criminal charge.
A notable provision under the new Law is that the management of a non-compliant enterprise may even face administrative detention up to 15 days where the enterprise commits a non-criminal violation, such as in particular:
- a construction project has not been subject to EIA as mentioned above, and the enterprise refuses to cease a construction project after it has been ordered to do so;
- the enterprise discharges pollutants without a pollutant discharge permit and refuses to stop discharging pollutants after it has been ordered to do so;
- the enterprise illegally discharges pollutants through concealed drains, seepage wells or pits, or falsifies monitoring data, abnormally operates pollution prevention equipment or otherwise evades regulation;
- the enterprise produces or uses pesticides that are expressly prohibited and refuses to make correction after it has been ordered to do so.
6. Government officials
China’s new EPL also introduces increased accountability for government bodies and officials to shut the door against corruption. Government officials at various levels will be subject to considerably heavier penalties, such as demerits, demotions, dismissal or criminal prosecution, for committing any unlawful acts as described below:
- Granting permits to applicants that fail to meet the requirements
- Covering up environmental-related illegalities
- Illegally failing to make decisions on suspension of production or closure
- Failing to promptly investigate acts of unlawful discharge of pollutants
- Violating the law and detaining facilities and equipment of enterprises
- Falsifying the monitoring data
- Failing to disclose relevant environmental information
- Misappropriate collection of pollutant discharge fees
- Committing other illegal acts
The new provisions of the EPL can certainly be considered as a strong sign by the government to establish a harsher regime against polluters and to lead the country towards a greener environmental policy. Though it still remains to be seen, in which way the authorities will implement the particular revisions of the law, enterprises are advised to consciously consider the negative effects of violating the law on one site, but also to take the chance to benefit from compliance on the other site.
In general, the new EPL sets out a number of encouraging innovations promising progress in dealing with China’s current environmental issues and taking responsibility as one of the world’s most influential economies more seriously. The government has at least created the basic conditions necessary for growing public awareness on environmental pollution and being a role model also for other emerging economies. It will therefore be worth observing the implementation of the law in the coming years.
On the perspective of foreign investment, Chinese government shall dedicate huge investments within the next decades to solve the problem. According to Dr Ma Jun, Chief Economist of China central bank, green economy sector will grow annually by 15% during the next 10 years. This should give great opportunities to companies that bring innovative solutions to pollution issues.
 PRC Ministry of Environmental Protection.
 Source: China Daily.
 Source: The Guardian.
 Notification about implementing the environmental-related civil public interest lawsuits system issued by the Supreme People’s Court, the Ministry of Civil Affairs, and the Ministry of Environmental Protection on December 26, 2014 ; Interpretations of the Supreme People’s Court Issues concerning the Application of Law in the Trial of Environment-related CivilPublic Interest Lawsuits system issued by the Supreme People’s Court on January 6, 2015