By Wu Zhong, China Editor – Asia Times Online
HONG KONG – The annual session of the National People’s Congress (NPC), which convenes on Wednesday, is likely to endorse the upgrading of the State Environmental Protection Administration (SEPA) into a mega-sized Ministry of Environment.
This is to highlight the greater importance the Chinese government attaches to environment protection. It is also a gesture to toe the new party line of “scientific development” based on President Hu Jintao’s concepts.
As if to boost its authority ahead of the anticipated upgrading, SEPA has been gearing up to launch one after another of what the Chinese media call “green whirlwinds”. So much so that the word “green” has become very fashionable in the country recently.
On February 25, SEPA unveiled a “green securities” policy. Pan Yue, vice director of SEPA, said the agency had issued a regulation stipulating that highly polluting companies must pass environmental inspections when applying for initial public offerings (IPO). Listed companies with high pollution emissions and energy are required to make environmental disclosures and pass environmental inspections for refinancing.
Pan said most domestically listed companies either do not report their environmental performance or submit “only qualitative descriptions” and “scantily useful facts”, according to a China Daily report. The regulation is designed to make environmental disclosure a key criterion for companies raising funds from the Chinese capital markets, according to Pan.
The regulation targeted companies engaged in power generation, steel, cement and aluminum production, and provincial companies classified as energy-intensive or highly polluting. That latter category covers 13 industries, including metallurgy, coal, textiles and paper.
Making environmental reporting compulsory is a joint program of SEPA and the China Securities Regulatory Commission (CSRC), China Daily said. The two agencies worked together in reviewing the information submitted by 37 companies applying for IPO last year.
The next day, SEPA blacklisted 141 products as being “highly polluting and environmentally dangerous”. It suggested that 39 such items should be ineligible for tax refunds, as well as processing and trading. The blacklist would protect public health and be a tangible step toward honoring China’s international commitments to safeguard the environment, Pan said.
Earlier, on February 18, SEPA issued a “green insurance” policy. The policy, supported by the China Insurance Regulatory Commission (CIRC) and aimed at insuring enterprises with pollution risks, will be implemented nationwide by 2015 after a trial period, state-run Xinhua News Agency reported. The goal would be to have insurers compensate victims of environmental accidents, avoid bankruptcy by the polluting company and lessen the government’s financial burden.
According to Pan, SEPA handled 108 emergency environmental pollution incidents across the country, one per two working days on average. Many polluting enterprises did not have funds to deal with the aftermath, victims could not be compensated and cleaning up could not be done in time. In the end, the government had to take up the responsibility, which is against the principle of “he who pollutes is held responsible”. This problem could be solved if enterprises were insured.
In July, 2007, with the support of China Banking Regulatory Commission (CBRC), SEPA launched the so-called “green credit” policy. It demands banks to restrict their loans to energy-intensive, polluting industries. Under this policy, companies with violations could be barred from getting loans and those with outstanding loans could have their loans called in.
Under this “green credit” policy, so far some 3.93 billion yuan (US$554 million) worth of credit has been called in from companies that failed to meet environment standards, a Xinhua report last week said quoting CBRC. CBRC also said that some 30 energy-intensive, high-polluting enterprises were denied credit from the top five banks last year after they were blacklisted by the environmental authorities. CBRC statistics showed major commercial banks have provided 1.7 trillion yuan in loans for energy-intensive, polluting industries including chemicals, iron and steel and thermal power generation.
On the other hand, China’s top five banks – the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China (BOC), Agricultural Bank of China (ABC), and Bank of Communications (BoCom) – offered loans of more than 100 billion yuan last year to support companies’ environmental plans, the top banking regulator said.
Meanwhile, China will get tough on corporate executives responsible for causing severe pollution by imposing hefty fines on them. Heads of Chinese enterprises which cause severe pollution incidents may face fines equivalent to half of their annual income, according to an amended law on water pollution, Xinhua said.
The NPC Standing Committee on February 29 passed an amendment to the Water Pollution Prevention and Control Law, which will take effect from June 1. “Enterprise heads directly responsible for causing severe water pollution incidents and others with direct responsibility will be fined up to half of their income in the previous year,” the revised law says. Previous punishment of responsible company heads stopped at administrative penalties.
All these are signs suggesting the new environment body will be empowered with greater authority, no longer remaining a “toothless tiger” as SEPA used to be called.
Nevertheless, as powerful as the new Ministry of Environment may be, it is still a ministry under the State Council, China’s cabinet. And under China’s administrative hierarchy, it is at the same ranking as other ministries or provinces or large state-owned enterprises such as PetroChina, Sinopec, or the State Grid. As such, it cannot really order the others to do as it says.
Therefore, whether the new environment authority can effectively exercise its function still largely depends on whether other government departments or provinces are willing to cooperate and coordinate. In the three “green” policies, for example, SEPA has the full support of the three financial regulators.
However, as departmentalism and regionalism run rampant in China, it remains uncertain whether other government departments and provinces will be as fully cooperative as the financial regulators, particularly when their own interests are infringed.
From the long-term perspective, therefore, China must build up a sounder rule of law if it wants to push for environment-friendly development. Empowering the environment watchdog with greater capacities, after all, is only an administrative measure. Its power can be properly exercised only when it is armed with proper laws and regulations.
