Market Forces Strengthen Environmental Protection in China
China’s new Environmental Protection Law came into effect on January 1, 2015, after a long and exhaustive process of revision in 2013. As has been widely reported, the overhauled law has introduced draconian penalties and more rigorous enforcement. Apart from these blunt elements of the new enforcement regime, however, the revised law also attempts to enhance enforcement by allowing the private sector to play an important role in environmental monitoring, including the preparation of independent environmental impact assessment reports, which are now compulsory for all projects.
We have invited Professor Zhou Ke, who participated in the drafting of the new Environmental Protection Law (“EPL”), to give us a rare insight into the drafting process and discuss the EPL’s key new provisions and the legislative policy behind them. His forthright commentary is both eye-opening and indicative of the sea change in China’s environmental policy in the 25 years since the EPL was first enacted.
Zhou Ke is Professor of Environmental Law at the Faculty of Law, Chinese Renmin University, Deputy Head of the China Environmental Resources Legal Research Society and Head of the Supreme Court’s Environmental Resources Judicial Theory Research Base. In 2014, he was recognized as an Outstanding Figure in China’s Rule of Law for his work in environmental law.
By Professor Zhou Ke, LL.B, LL.M., Ph.D.
Up to now, environmental protection work in China could be characterized as “soft, biased, narrow-focused and a vicious circle.” “Soft” means environmental protection lacked enforceability and accountability. The state’s environmental protection role was not fully set out in the EPL and the relevant government departments turned a blind eye to the breaches of the EPL, resulting in a failure to enjoin breaches effectively and causing the dilemma of “breaking the law at low cost, showing contempt for law and lax enforcement.”
“Biased” means that the erstwhile EPL was aimed at enterprises and the ordinary people, whilst government at various levels with environmental protection responsibilities did not in fact bear any legal liability, which made the EPL dispensable to the government.
“Narrow-focused” means the enforcement mechanism of old environmental laws was simple and inefficient because the environmental protection agency has been fighting alone with limited means, without the needed response from the market and public participation, which lead to increasingly low efficiency and an increasingly narrow path. The resulting vicious circle is far from satisfying the governance needed to address increasingly deep and complex environmental issues.
In the process of revising the EPL, the second draft added that “the state shall carry out the accountability system for environmental protection goals as well as the review and assessment system.” It expanded the scope of parties qualified to bring environmental public interest litigation and lay down the principle of “giving priority to environmental protection, focusing on prevention, comprehensive governance, public participation and ‘polluters’ pays.” It also provided that serious breaches of the EPL shall be subject to a fine calculated on a daily basis.
The third draft added the principles that “environmental protection is a fundamental state policy” and that there shall be “joint control by multiple parties,” and expanded enforcement measures to include sequestration and seizure.
The fourth draft added further provisions, including:
-
the concept of an ecological protection redline and the monitoring and early warning mechanism based on the load bearing capacity of environmental resources
-
a public warning mechanism for environmental pollution
-
legal status of environment monitoring NGOs
-
localities that fail to achieve environmental quality target shall be subject to “restricted approvals”
-
specific provisions concerning sequestration, seizure, pollutants discharge permits and daily fines
-
expanded scope of parties qualified for environmental public interest litigation
-
established “Environment Day” to strengthen publicity for environmental protection and improve citizens’ awareness of environmental protection
At the final drafting deliberations, the following important provisions were added to the EPL:
-
all projects shall be subject to environmental impact assessment
-
major environmental accidents shall be reported to the people’s congress
-
no pollutants shall be discharged without a permit
-
the system of environment and health monitoring, investigation and risk evaluation shall be established and perfected
-
green government procurement policy
-
criminal liability to be imposed on any enterprise if its breach of the EPL constitutes a crime
Media and mainstream commentary on the new EPL have included that it is “the most stringent law in history” and that “the EPL has grown teeth," but these comments have thus overemphasized its characteristics of strong governance and ignored the basic reform policy that “the market is the decisive means to allocate resources,” which was laid down by the Central Committee of the CPC in 2013. In fact, the new EPL embodies both strict administration and market maximization, and it is a philosophy combining “fundamental state policy” with “public governance.”
The correction of the old EPL’s bias towards administration first arose at the meeting of the State Council’s Standing Committee in October 2014, when Premier Li Keqiang proposed to “promote third party governance of environmental pollution and the government’s purchase of environment monitoring service from the private sector” by means of public-private contractual arrangements for the prevention and control of environmental pollution. This is completely different from the long-standing means of public administration and control by government fiat. Another important event was the feedback provided by the Central Circuit Discipline Inspection Group in February 2015 to the Ministry of Environmental Protection (“MEP”) that “the phenomenon of ‘red-hat brokers’ in the technical services market for environmental impact assessment is pronounced and tends to give rise to conflicts of interest and unjust transfer of benefit.”
As a result, the Minister of Environmental Protection stated that eight environmental assessment NGOs under government-sponsored institutions directly affiliated to the MEP will first be split off by the MEP this year and will be split off in batches in other places by stages, failing which any of them will be disqualified for environment impact assessment. This indicates that the state is employing political power to realize market forces in environmental impact assessment NGOs and advance the reform of the system, which is a rarely seen practice.
The dualism of law and market forces will improve the standard of governance in environmental protection. The new EPL stipulates various systems for environmental protection, including the monitoring and early warning mechanisms, the ecological protection redline system, the system for the control of the total quantity of pollutants, the pollutants discharge permit system, the environmental impact assessment system, the cross-administrative-area joint prevention and control system, etc., all of which provide a basic regime to improve environmental governance. It also strengthens accountability several ways:
-
the accountability of government at various levels for local environmental quality is emphasized in the general principles of the EPL
-
the government shall be subject to the system of accountability for environmental protection goals as well as the review and assessment system, and the review results shall be made public
-
local government at various levels is required to stipulate a plan to achieve environmental targets within a prescribed time frame
-
environmental protection agencies are authorized to impose “restricted approval” on areas failing to achieve environmental quality targets
-
government shall report to the people’s congress at the same level whether it has achieved its environmental protection targets and accept the supervision by the people’s congress
Finally, the new EPL pays particular attention to the application of market forces and methods, including establishing the system of enterprises’ good faith in environmental protection, employing market means and economic policies (ranging from fiscal policy, tax policy, pricing policy to government procurement policy), creating an ecological compensation system, imposing environmental protection tax and environmental pollution liability insurance, and creating the exit incentive system for heavily polluting enterprises.
Note: This article was translated from the original Chinese and any inaccuracies in the translation are the sole responsibility of Troutman Sanders.