China set to elevate environment over development in new law

Published by MAC on 2014-04-20
Source: Reuters, Business Spectator

China set to elevate environment over development in new law

Sui-Lee Wee

Reuters

15 April 2014

Long-awaited amendments to China's 1989 Environmental Protection Law are expected to be finalised later this year, giving the Ministry of Environmental Protection (MEP) greater authority to take on polluters.

While some details of the fourth draft are still under discussion, it has been agreed that the principle of prioritising the environment above the economy will be enshrined in law, according to scholars who have been involved in the process. The fourth draft is due to be completed within weeks.

"(Upholding) environmental protection as the fundamental principle is a huge change, and emphasizes that the environment is a priority," said Cao Mingde, a law professor at the China University of Political Science and Law, who was involved in the drafting process.

The first change to the legislation in 25 years will give legal backing to Beijing's newly declared war on pollution and formalize a pledge made last year to abandon a decades-old growth-at-all-costs economic model that has spoiled much of China's water, skies and soil.

Cao cautioned that some of the details of the measures could be removed as a result of bureaucratic horsetrading. The MEP has called for the law to spell out how new powers can be implemented in practice, but the National Development and Reform Commission (NDRC), the country's top economic planning agency, prefers broader, more flexible principles.

"There is a usual practice when everyone is unable to come to a complete agreement - we first put an idea into the law and then draw up detailed administrative rules later," Cao said.

Local authorities' dependence on the taxes and employment provided by polluting industries is reflected by the priorities set out in China's growth-focused legal code, said Wang Canfa, an environment law professor who runs the Center for Pollution Victims in China and also took part in the drafting stage.

The environment ministry did not respond to detailed questions on its role in the drafting process and the specific content of the new amendments, but said the legislation was currently in the hands of the Legal Work Committee of the National People's Congress (NPC), China's legislature.

The protracted legal process usually kicks off with a number of drafts from academic institutions, which are then examined by ministries, local governments and industry groups. A new draft then goes to the legal affairs office of the State Council, China's cabinet, before being delivered to the NPC and opened up to members of the public to have their say.

New Powers

In the absence of legally enshrined powers, the environment ministry has often made do with one-off national inspection campaigns to name and shame offenders, as well as ad hoc arrangements with local courts and police authorities to make sure punishments are imposed and repeat offenders shut down. It has also stretched existing laws to its advantage.

Last year, it began to use its powers of approval over environmental impact assessments, which are mandatory for all new industrial projects, to force powerful industrial firms such as Sinopec and the China National Petroleum Corporation to cut emissions at some of their plants, threatening to veto all new approvals until the firms met their targets.

The new law would give the ministry the legal authority to take stronger punitive action.

"The environment ministry could only impose fines and management deadlines," Cao said. "Now we can close and confiscate them. It's an important right."

It will also set up a more comprehensive range of punishments, putting an end to a maximum fine system that allowed enterprises to continue polluting once they had paid a one-off fee normally much lower than the cost of compliance.

Cao said the final draft was also likely to impose an "ecological red line" that will declare certain protected regions off-limits to polluting industry, though detailed definitions are likely to come later.

The legislation also proposes to formalize a system by which local cadres are assessed according to their record on pollution issues, including meeting emissions targets.

Experts have welcomed commitments to improve transparency and compel polluters to provide comprehensive and real-time emissions data. Criminal penalties will also be imposed on those found guilty of trying to evade pollution monitoring systems.

"The provisions on transparency are probably the most positive step forward. These include the requirement that key polluters disclose real-time pollution data," said Alex Wang, expert in Chinese environmental law at UCLA. Wang said he had not seen the later, non-public drafts of the legislation.

Fiercely Contested

For nearly two years, scholars, ministries, local governments, companies and environment ministry officials have been debating the changes to the environmental protection law.

One of the most fiercely contested parts of the new draft was a clause designed to prevent most environmental non-governmental organizations (NGOs) from filing lawsuits against polluters.

The first draft said lawsuits could only be filed via the government-affiliated All-China Environmental Federation, though subsequent changes allowed other government-registered organizations that have been operating for at least five years to launch legal action.

Polluting industries have lobbied government officials not to relax the restrictions on the rights of NGOs to file suits, said Cao, who has attended numerous meetings with government officials on the new legislation.

UCLA's Wang said the ultimate success of China's war on pollution would be determined not by symbolic new legislation but by specific targets and guidelines that are now being imposed on local governments.

"Many people point to China's laws as a sign of the government's concern about the environment," he said. "But changes in bureaucratic targets are a more direct indication of changing priorities and can tell us whether Beijing means business."

(Additional reporting by Beijing Newsroom; Editing by Alex Richardson)

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China's genuine green energy revolution

John Matthews

Business Spectator

15 April 2014

China's emergence as the champion of green energy has taken the world by storm. Hardly a day goes by without some new revelation - China as the world's largest builder of wind turbines; the largest producer of solar photovoltaic cells; the most advanced proponent of smart grids and the upgrading of present grids; the largest market for energy efficiency.

And at the same time, China is the world's largest consumer of coal; the largest emitter of carbon dioxide and other greenhouse gases; and home to the world's most polluted cities.

Which is in fact the 'real China'? A lot hangs on how we answer this question.

For Australia, there is the issue of the future for coal exports to China. If China's green revolution is really going to overtake its black revolution, then there is not much future for the vast coal deposits like the Galilee in Queensland that are being opened up for exports to China.

And for the world as a whole, there is the issue of intensification of conflict over access to dwindling fossil fuels, and the species-extinction dangers of global warming. What China does is central to whether this issue will be resolved favourably or not.

The China story really begins in the year 2001, just over a decade ago, when the modernised Chinese economy entered the World Trade Organisation. The result was a vast and sudden increase in China's manufacturing activities, as it became the "workshop of the world". And as it did so, it ramped up its energy system at a furious rate.

The first and most accessible source of power was coal - and China reversed the long-standing global decline in coal production and consumption virtually overnight. Its rising dependence on coal, for industrial uses and particularly for power generation after 2001, is undeniable

[There has been a] clear inflection point in 2001 when China's manufacturing activity stepped up, and its consumption of coal began a steep rise. Australia has been a principal beneficiary of this rise, supplying much of this coal to China.

But...coal consumption is apparently 'capped' at a little over 3.5 billion tonnes per year. This signals a shift on the part of China's leadership, under duress because of the shocking pollution of air and water and the black smog created by coal burning, indicating action to rein in the rising coal consumption levels.

So there seems to be another inflection point, when China's already serious promotion of renewables is about to be ramped up even more strenuously - to deal with the shocking problems created by this decade-long dependence on coal.

China's backing of wind power, for example, has seen the country add 80 GW of capacity over the past eight years, taking it to world leadership, and generating a total of 140 TWh of clean electricity as a result

China's goal is, on good authority, now to reach 300 GW by 2020 - making the country by far the world's largest practitioner of this clean power source.

As the capacity factor for wind power rises (with the most recent Salkhit 50 MW wind farm in Mongolia reaching a capacity factor of 40 per cent) this would translate into just over 1000 TWh of electricity, or fully a fifth of China's current requirements.

This energy revolution is part of China's wider shift as it industrialises at breakneck speed. China is staging a 'Great Convergence' - a transformation that will reverse the past two centuries of the Great Divergence, which separated China (as well as the other BICs, Brazil and India) from the West. In the process, these countries are now lifting billions of people out of poverty.

But in this great transformation, there is a significant problem to contend with: The model of fossil-fuelled industrial capitalism that served the West so well - and which has been held out as a model for the BICs - will simply not "scale" to meet the aspirations of so many billions of people.

China, India and Brazil can have no confidence in a model that binds them to fossil fuel dependence indefinitely, even as the oil and coal supplies peak and then decline, and carbon emissions cumulate.

All of this boils down to a straightforward, yet widely inconvenient insight: A new model of industrial capitalism has to be developed. More inconvenient yet (especially from a US perspective) is that it is being developed - by China. It is China that is busily forging new institutional arrangements and new strategies of industrialisation.

This is the first part of a four-part series. The next article, to be published tomorrow, will discuss China's new strategies of
industrialisation.

John A. Mathews is a professor of competitive dynamics and global strategy at the Macquarie Graduate School of Management, Sydney.

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Exporting China's green growth to the world

John Mathews

Business Spectator

23 April 2014

The Chinese scholar Hu Angang, a member of the Chinese Academy of Social Sciences and highly influential with the Chinese leadership, has been arguing for several years that green development is "the inevitable choice for China". He argues that China is being forced to adopt an alternative to the model of industrialisation that the West was able to pursue because:

- China is a latecomer and faces an international energy situation that is already crowded,

- It is lagging in conventional fossil-fuelled technology, but can leapfrog to the lead with green technology,

- It has such a huge population for which the traditional model will not scale,

- It cannot pursue resources abroad through colonialism and armed conquest - unlike its Western predecessors, and

- Basing its development model on increasing resource intensity will come up against inevitable resource constraints (for example, the peaking of oil and coal supplies).

Any one of these reasons alone would suffice as a reason to search for a development alternative. Taken as a group - and combined with the prospect of facing increasing international pressure on carbon emissions - these reasons are overwhelming in their power.

Indeed, they make green development "an inevitable choice for China" - and, by extension, for Brazil and India as well. Green development has to be seen, then, as the necessary industrialisation path forward for the BICs.

The alternative is relentless resource wars, terrorism, increasing insecurity, and dependence on fuel imports whose price will inevitably rise. By contrast, a green development strategy offers several advantages, including:

- It taps into energy resources that are abundant, and calls for the development of sophisticated technologies that can then serve as the core of new export-oriented industries.

- Renewable energy resources are abundant and widely dispersed, so that the BICs cannot be held to ransom by fossil fuel powers and can generate abundant power to drive their industrial strategy without concern for fuel costs.

- The renewable resources are dispersed across all countries (but particularly tropical countries) and so international tensions are reduced.

- The possibilities for leapfrogging in renewable energies and low-carbon technologies are there to be captured, particularly if implemented with strategies that exploit indigenous standards and the domestic market.

- The development of green industries can generate rural employment and livelihood as much as urban, thus contributing to balanced development.

- Green development through circular economy initiatives (linking outputs to inputs) offers the best prospect for reducing dependence on resource imports and strains on the balance of payments.

This list does not even mention the advantages that green development offers in terms of reducing carbon emissions. In this sense, green development is a 'no regrets' strategy. It offers a range of tangible benefits apart from its savings in terms of carbon emissions.

When it comes to raising the profile of green development from a curiosity to a globally competitive new industry, China is a game changer. It is proof that this new industry is capable of powering a giant economy along a development trajectory that will 'scale' to needed dimensions - without costing the earth.

The only question is whether China - along with Brazil, India and other developing countries - can adopt the green development model comprehensively enough to keep carbon emissions and resource spoliation within acceptable limits.

Nevertheless, the green development model is an emergent entity whose character is best discerned in the strategies and initiatives being taken in China. The model is 'emergent' in the sense that its outlines are becoming clear, but its actual implementation is clouded by policies that favour fossil fuels and nuclear power, either through vested interests or through fresh initiatives mandated by these interests.

Advanced countries are already paying China the compliment of emulating its approach to seriously building up its renewable energy industries. Germany was the first, announcing in June 2011 an astonishing about-face with regard to its reliance on nuclear power, which had been retarding the renewable energy option for decades. (Germany's action was triggered by Japan's Fukushima disaster.) Its initial announcement was followed up by successive announcements of plans to build up its renewables industries.

Thus, Germany moves on from its heavy promotion of renewables markets, via its feed-in tariff system embodied in the Renewable Energy Sources Law of 2000 (and earlier incarnations), to the far more significant promotion of renewables industries themselves.

That is exactly what China has done. German wind-power systems and solar photovoltaic systems, as well as German backing for desert-based concentrated solar power systems in North Africa (such as the ambitious Desertec project), can all be expected to become stronger and offer real competition for the Chinese industries.

It might seem odd to say that Germany is "emulating" China - when clearly Germany was a leader in the field of solar PVs and wind power. Yes, it's true that China has adapted technologies developed elsewhere. That has been the key to China's success across the board, in one technology after another. It's called the latecomer effect, and it means that a smart country can draw technologies from the wider pool and utilise them with advantages such as lower costs and possibilities of leapfrogging to the most advanced versions, without being constrained by technological inertia. We now see China applying these well attested strategies to the new case of green technologies - with stunning success.

Germany certainly developed the market for solar PV, and to some extent wind power, earlier than other advanced industrial countries. But the mindset that is hostile to "industrial policy" constrained Germany from building a world-conquering industry producing solar PV and wind turbines. It was more or less assumed that if the market were there, the industry would follow.

China on the other hand built the industry first - rather than the market - in a quite conscious and deliberate exercise in 'industrial policy', to create export platforms well before it had a large domestic market for PV and wind power. The Chinese took advantage of others creating the markets and then invaded these markets with their low-price devices (capturing the latecomer effect).

The Chinese utilised the 100-year old mass production principles pioneered by Henry Ford: drive down the costs (in Ford's case, by standardisation) and the market will expand. This is what has happened with solar PV and wind: China has built the manufacturing industry, driving down the costs as the market has expanded, which enables further cost reduction in manufacturing, and so on in a virtuous circle known as circular and cumulative causation. Once the costs had come down far enough China embarked on expanding its own domestic market, which it is now doing.

Of course China's catch-up efforts have had mixed success. In wind power there has been slower Chinese build-up and dominance. But Rome wasn't built in a day. The Chinese wind power firms like Ming Yang and Goldwind are already formidable competitors, after only a decade of real engagement. They both employ the strategy of 'resource leverage' to target and acquire critical technologies needed for their continued expansion. GW in particular is becoming a world leader in the new technology of Permanent-Magnet Direct Drive, or PMDD, which is a gearless technology and promises major advantages, particularly in offshore wind power installations. Goldwind acquired the technology from its European developers, but is now (in typical Chinese fashion) scaling it up to world dimensions, and moving from being an imitator to an innovator as it pushes to make PMDD a new "dominant technology" in wind power.

* * *

It bears repeating that the world is currently involved in a vast "uncontrolled experiment" as we hurtle towards catastrophe with the fossil-fuelled industrial revolution and a new pathway based on renewables and resource recirculation as an alternative. Of course, success in this vast experiment is far from guaranteed. The forces of industrial inertia or of 'carbon lock-in' may well prevail and obstruct further greening initiatives. China may suffer a huge economic setback at some point and allow a less farsighted leadership to take over, scaling back investments in renewables and the circular economy.

Similar scenarios and processes might unfold in Brazil and India, or in Germany and Japan, bringing these countries to compete directly with the United States in the quest for more access to fossil fuels. If this were to come to pass, they would be drawn into uncontrollable resource wars in the Persian Gulf, the Caspian Sea basin and other fossil fuel theatres.

*This was the final part of a four-part series. Part one discussed China's genuine green revolution. Part two discussed China's new strategies of industrialisation. Part three discussed the realpolitik behind China's renewables push.

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Beijing says one third of its pollution comes from outside the city

• Of the smog generated in Beijing, 31 percent came from vehicles, 22.4 percent from coal burning and 18.1 percent from industry
• From 1998 to 2012, Beijing's economic output rose 6.5 times and energy consumption rose 90 percent
• The city plans to cut coal consumption by 13 million tonnes by 2017, down from about 23 million tonnes in 2013
• Hebei province used about 280 million tonnes of coal last year and aims to cut the total by 40 million tonnes over the same period

17 April 2014

David Stanway

Reuters

About a third of the air pollution in China's smog-hit capital comes from outside the city, official media reported on Wednesday, citing a pollution watchdog.

Chen Tian, chief of the Beijing Environmental Protection Bureau, said that about 28-36 percent of hazardous airborne particles known as PM2.5 came from surrounding provinces like Hebei, home to seven of China's 10 most polluted cities in 2013, according to official data.

The central government has identified the heavily industrialised Beijing-Hebei-Tianjin region as one of the main fronts in its war against pollution, and it is under pressure to cut coal consumption and industrial capacity.

Decades of unrestrained growth have hit China's environment hard and Beijing's often choking air has become a symbol of the pollution crisis.

Public anger over pollution in different places has sparked protests and while the government has announced plans to fight it, authorities often struggle to bring big polluting industries and growth-obsessed local authorities to heel.

Chen said that of the smog generated in Beijing, 31 percent came from vehicles, 22.4 percent from coal burning and 18.1 percent from industry, according to China Environmental News, a publication of the Ministry of Environmental Protection.

Wang Junling, the vice head of the Beijing Environmental Protection Research Institute, said that while pollution from outside Beijing was a main component of its smog, the rapid growth of the city's population, energy use and economic output were also to blame for worsening air quality.

He told China Environmental News last month that from 1998 to 2012, Beijing's economic output rose 6.5 times and the number of vehicles rose 2.8 times. Over the same period, the city's population soared 66 percent while energy consumption rose 90 percent.

The city plans to cut coal consumption by 13 million tonnes by 2017, down from about 23 million tonnes in 2013. Hebei province used about 280 million tonnes of coal last year and aims to cut the total by 40 million tonnes over the same period.

Beijing also plans to limit the number of cars on its roads to 5.6 million this year, with the number allowed to rise to 6 million by 2017. It is also trying to enforce a ban on old vehicles with lower fuel standards.

The city government said in a report last week it failed to meet national standards in four of the six major controlled pollutants in 2013. It said its PM2.5 concentrations stood at a daily average of 89.5 micrograms per cubic meter, 156 percent higher than national standards.

In 2013, PM2.5 concentrations in 74 cities monitored by authorities stood at an average of 72 micrograms per cubic meter (cu m), more than twice China's recommended national standard of 35 mg/cu m.

(Editing by Robert Birsel)

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China finds nearly 2,000 firms in breach of anti-pollution rules

David Stanway

Reuters

11 April 2014

BEIJING - Nearly 2,000 Chinese enterprises were found to be in violation of state pollution guidelines following a nationwide inspection campaign covering 25,000 industrial firms, the environment ministry said on Thursday.

With the environment identified as one of the government's top priorities after years of unfettered economic growth, Beijing has promised to enhance its powers to monitor and punish industries accused of ignoring state regulations.

Beijing has struggled to make local governments and industries comply with laws and has long been criticised for relying on national campaigns to bring industrial sectors like coal, steel or rare earth to heel. Illegal behaviour often resumes once government inspectors have departed.

The Ministry of Environmental Protection (MEP) has targeted firms that fail to install pollution control technology or provide fraudulent emissions data to try to avoid punishment.

In a notice posted on its website (www.mep.gov.cn) on Thursday, it said a three-month inspection campaign beginning last November revealed that 1,888 industrial enterprises had failed to comply with pollution rules. A total of 2,185 industrial sites had failed to meet required emission standards.

Another inspection was launched in February in six northern Chinese regions, the ministry said, and found environmental problems at 384 of 563 enterprises.

A March follow-up inspection of 198 offenders showed that 29 had stopped operations, while most of the remainder were rectifying their problems, the ministry said.

Several steel firms, including a unit of Hebei Iron and Steel Group, China's biggest steel producer, had failed for a time to install proper desulphurisation equipment, but had rectified the problems.

Past monitoring failures had allowed dozens of enterprises to provide fraudulent data to authorities in order to avoid punishment and obtain clean energy subsidies.

The ministry is trying to improve enforcement by establishing real-time monitoring systems that will give government regulators direct access to pollution data. It said it planned to invest 40 billion yuan ($6.45 billion) over the 2011-2015 period to boost monitoring capacity.

($1 = 6.2005 Chinese Yuan)

(Reporting by David Stanway; Editing by Ron Popeski)