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MEE Opinions aim to clarify application of laws, expand the scope of illegal behaviour, and introduce new administrative penalties.

By Paul A. Davies and R. Andrew Westgate

The Department of Laws, Regulations, and Standards of China’s Ministry of Ecology and Environment (MEE) recently issued a notice of Public Consultation for the Opinions on Several Issues on the Application of Laws concerning Administrative Penalties for the Illegal Activities of “Production before Final Acceptance” (the 2019 Public Consultation).

This blog will discuss the background to the 2019 Public Consultation, and the MEE Opinions that aim to clarify application of laws, expand the scope of illegal behavior, and introduce new Administrative Penalties.

China continues to implement an IT-based big data system of market regulation that rewards and punishes individuals and enterprises.

By Paul A. Davies and R. Andrew Westgate

China is currently implementing an innovative approach to monitoring, rating, and regulating the behaviour of market participants through a new “social credit system” (SCS) set forth in the Plan for Establishing a Social Credit System (the Plan). The Plan, first published in 2014, applies credit ratings across social, political, and environmental sectors. For example, a company breaching emissions targets will receive a lower rating (resulting in punitive measures, higher taxes, or other sanctions).

The Plan aims to implement a self-enforcing mechanism for regulation built on big data that monitors and evaluates economic and social behaviour using real-time feedback. The system is designed to incentivise companies to make decisions in line with laws, regulations, and governmental policy targets.

This blog will focus on the application of the SCS to environmental matters.

China’s NDRC will provide green subsidies to projects that address significant environmental problems.

By Paul A. Davies and R. Andrew Westgate

China’s National Development and Reform Commission (NDRC) has announced plans to provide subsidies of up to 60% for “green” investment projects in the Yangtze River Economic Belt (YREB) in China’s latest attempt to combat pollution while stimulating growth.

Yangtze River Economic Belt Development Plan 2016

The Chinese government announced the launch of the YREB in 2016. President Xi Jinping stated that the YREB should focus primarily on environmental protection rather than economic growth, due to rapid deterioration in the Yangtze River and the Yangtze Delta. Previously, steel mills and petrochemical factories lined the riverbanks to access cheap water transport, and in 2016, more than 45% of China’s sewerage was discharged into the Yangtze River.

The YREB Development Plan, published in March 2016 following approval by the Central Committee Political Bureau, outlined a “one axis, two wings, three poles and multiple points” pattern of improvement, focusing on ecological and green development.

The Green Industry Guidance Catalogue attempts to provide consistent nationwide guidelines for green industries and projects.

By Paul A. Davies and R. Andrew Westgate

Background

On 6 March 2019, seven Chinese regulatory agencies issued the Green Industry Guidance Catalogue (the Catalogue) listing “green industries” that are eligible for funding with green bonds. The seven agencies include the National Development and Reform Commission (NDRC), Ministry of Industry and Information Technology, Ministry of Natural Resources, Ministry of Ecology and Environment (MEE), Ministry of Housing and Urban-Rural Development, The People’s Bank of China, and the National Energy Board.

China’s environmental revolution not only entails implementing a robust, modern policy framework, but also a significant rearrangement of the economy itself — rendering the revolution a priority for both ecological and economic development reasons. As a result, in recent years, all provinces and directly-administered municipalities within China and departments within the Chinese government have introduced policies and measures to promote green industries. However, these policies and measures have been hampered by a lack of uniformity and the application of differing standards in different regions.

Reports suggest that China’s promising focus on environmental regulation may be slowing amid an economic downturn.

By Paul A. Davies and Andrew Westgate

Background

At the 2014 National People’s Congress, Chinese Premier Li Keqiang’s rhetoric adopting an “iron fist” approach in a “war against pollution” represented a stunning volte-face from China’s relaxed environmental oversight and prioritization of economic growth over the preceding four decades.

Building on pollution reduction targets set in 2013, the Environmental Protection Law of the People’s Republic of China (EPL) was adopted in 2014 and came into force in 2015. The EPL represented the first real revision to Chinese environmental law since 1989, and it took a modern, holistic approach to environmental legislation. The EPL declared environmental protection a fundamental national policy; obligated all entities and individuals to protect the environment; encouraged entities and individuals to use environmentally friendly and recycled products; adopted a total pollutants emission control system and public disclosure requirements; empowered citizens to report environmental pollution and bring public interest litigation; and imposed penalties, including daily fines and administrative detention for polluters and for government officials that fail to enforce environmental law.

The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.

By Paul A. Davies and R. Andrew Westgate

The Chinese Ministry of Ecology and Environment’s (MEE’s) draft Regulation on Environmental Risk Assessment and Control of Chemical Substances (Regulation) is likely to have broad implications for companies that manufacture, process, import, or export more than 100kg of any chemical substance in China. The framework represents China’s first comprehensive regulation of environmental risks from chemical substances.

Companies should be aware of MEE’s action plan for enforcing the Regulation, as well as those provisions that will impact their business activities.

China’s MEE is seeking comment on new chemical regulation framework, which includes a comprehensive environmental risk assessment.

Paul A. Davies, Ethan Prall, and R. Andrew Westgate

In January 2019, China’s Ministry of Ecology and Environment (MEE) issued a draft Regulation on Environmental Risk Assessment, and Control of Chemical Substances (the Chemical Substances Regulation or CSR) in conjunction with 20 other ministries and agencies, including the Supreme People’s Court, the National Development and Reform Commission, and the Ministry of Commerce. MEE is seeking comment on the draft regulation through February 20, 2019, which is available in Chinese only.

This draft regulation is significant because it represents China’s first comprehensive regulation of environmental risks from chemical substances, similar to the Toxic Substances Control Act in the United States or the Registration, Evaluation, Authorization, and Restriction of Chemicals Regulation (REACH) in the European Union. In the past, China’s chemical regulations, such as Order 7 issued by the former Ministry of Environmental Protection (also known as China REACH), have been more narrowly focused on requiring the registration of “new chemical substances” and on the import and export of toxic chemicals. As discussed below, the draft CSR incorporates not only most of the existing chemical registration requirements under Order 7, but would also introduce additional requirements creating a broader new chemical regulation framework.

The new department will assume broad oversight responsibilities as part of a broader government restructuring.

By Paul A. Davies and R. Andrew Westgate

China’s Ministry of Emergency Management (MEM) has announced the establishment of a new department responsible for the safety, supervision, and management of hazardous chemicals. The MEM replaced the former State Administration of Work Safety (SAWS), and took over responsibility for product safety relating to fireworks, pharmaceuticals, and the chemical industry.

The creation of the new department reflects increasing focus on chemical safety after the 2015 explosion at the Port of Tianjin, which killed 173 people and injured 797. More recently, an explosion at a chemical factory in the city of Yibin, Sichuan province in July killed 19 people. These incidents highlight that hazardous material storage remains a challenge in China.

Zhang Xingkai, the president of the China Academy of Safety Science and Technology noted that in the four years between 2011 and 2015, approximately US$89.4 billion was lost due to workplace accidents. The MEM was established in March 2018 in order to respond more effectively to crises like the Tianjin and Yibin explosions. With overall responsibility for safe chemical production and work environments, the MEM will provide a unified system focused on disaster prevention.

The proposed initiative will allow the provision of clean energy on a global scale by 2050.

By Paul A. Davies and R. Andrew Westgate

The Global Energy Interconnection (GEI) initiative, originally developed by Liu Zhenya, the chairman of the Chinese State Grid Corporation, is dedicated to promoting global energy interconnections in a sustainable manner.

The GEI is proposed to take the form of a backbone grid, first throughout Asia and then expanding globally. The first phase would consist of six ultra-high voltage grids that span the Asian continent, which GEI estimates will require a US$38 trillion investment.[1]

The GEI is part of the broader Belt and Road Initiative (BRI). The BRI is a Chinese state-backed program that intends to boost trade and economic growth across Asia through the development of infrastructure projects. China Development Bank, China’s primary policy-based lending institution, has already granted US$160 billion in loans to countries involved in the BRI process.