Pollution took center stage at the ‘Two Sessions’ political gatherings in March earlier this year; a month later, the Chinese legislature adopted revisions to China’s Environmental Protection Law, which will come into effect on 1 January 2015.
The first revisions in 25 years will establish environmental protection as basic policy and mandate that economic and social development should be coordinated with this in mind. But are these changes enough? And will they be enforced?
Anson Wong, Assistant Director of the China Economy and Sustainable Development Centre at CKGSB, was featured in the most recent edition of the Association for Sustainable and Responsible Investment in Asia (ASrIA) quarterly newsletter, in which he discussed the revised Environmental Protection Law, both in terms of how it has been received in China and the progress the country is making. The following contains highlights of his interview:
Is it a realistic expectation that China will treat environmental protection and economic development on an equal footing?
AW: Let me be candid, before 2004 the Chinese Government looked at environmental issues superficially, without a coordinated or coherent approach or policy. After 2004, concepts like social responsibility and sustainable development became more mainstream, China started to “talk the talk” but moved more slowly towards “walking the walk.” Now I think the senior leadership seriously sees the problem and understands it is impacting Chinese economic development. As such, leaders have begun addressing how best to coordinate economic development with environmental protection. The level of implementation is important, can those policies get out of Beijing and be enforced at every level? It is still a challenge, but if you look back, it has only been 10 years, so it has actually been a drastic change for the Government and a long journey from writing ideas down to implementing them.
How has the revised Environmental Protection Law, in particular stricter penalties and pollution control, been received by Chinese industry?
AW: In public and the media, the business sector has openly and publicly supported the revised law. However, in reality, many of these businesses do not care. Not enough businesses see this as a real issue, and unless there is real and strict enforcement, they will not pay attention. It is always about cost. If compliance with regulation results in higher costs, and is without proper enforcement, the company is likely to ignore it, or happily pay a fine and get on with business. Enforcement is critically important, and the provisions in the revised Environmental Protection Law should help. At a local level, corruption is still prevalent, not necessarily cash-in-hand bribes, but the promise of future business.
Is this corruption being addressed?
AW: There is another set of laws in China that address corruption, and this regulation goes hand in hand with current regulations to address the problem. However the level of enforcement and understanding of the regulation itself is still poor. There is still progress to be made.
How would you describe the public response to the revised law?
AW: The amendments were adopted after four readings. It is rare for a law or amendments to go through three readings and not be passed, so I think this highlights the importance of the legislation. However, I believe that, the public still sees the law as weak – whilst improvements have been made, some still see the Government as being afraid of stepping on the toes of business.
Was there a great demand for the establishment of public access to company information?
AW: There is always a hunger from the general public in China to know more, and the laws in China are helping pave the way towards this. There are numerous public-private partnerships, and in these cases the business will always advise the restriction of information from the public, for example because of concern that the data could be misinterpreted. However, the landscape is changing. Customers and the public are demanding to know more, and as you can see in the media, there has been a lot of social unrest, not because of economic problems, but because of environmental issues such as polluting manufacturers or the construction of nuclear plants and other projects. However, if the businesses involved provided more transparent and balanced information, and opened a dialogue with the public, a dialogue going both ways, then I am sure there would be much less anger.
What opportunities have been created for businesses in China in the wake of the revised laws?
AW: There are always opportunities arising as a consequence of such revisions. I always like to look at it from a risk management perspective – if you pay attention to the issue and how the revisions affect your business, you can act to reduce liability and risk. Compliance with local and national legislation means no fines to pay, and at a reputational level, you will not be accused of polluting or harming the local environment or community. More proactively thinking of creating business opportunity, we need to consider how we achieve the targets set – this can come through growth in cleaner technologies, Clean Development Mechanisms… so we can make this a business case, and that is important to remember.
Is there enough support for businesses to create the innovation and growth required?
AW: In the past, no, but recently the Government has been spending more and more on this front. Last year, the 12th Five Year Plan placed important emphasis on transitioning to a low carbon and green economy, and the Government is supporting this and helping create more platforms through capital injections. It is a huge market, not just in China, around the world also. In China, the Government can say “I want to do this tomorrow,” and have the will and the power, without needing to jump over all the hurdles that other governments may face. On issues like carbon finance, CDM… the Government can leap frog the efforts of some other countries. China has the advantage in situations like this.
China is emerging as a regional leader in combatting pollution and addressing their GHG emissions. What influence do you feel this has had on their regional neighbors?
AW: China will sometimes elevate itself as a non-polluter, or blame the West, referencing the lack of such regulation before and during the industrial revolution in countries such as the UK. How heavily polluted London or Los Angeles have been in the past. Sometimes this is used to make the case for investing now as a preventive measure. If Chinese efforts are successful, they will certainly be, and are already becoming, a role model in the region. A role model for Vietnam, Cambodia, Malaysia, Thailand… all of these are emerging economies going through a significant transformation and economic change, very similar to the path of China. It can have a huge impact if China can do this successfully, and pollution is a cross-border and global issue so it is very important that China gets this right. Other countries can see China as a role model, see the opportunities in new technologies and industries, and avoid the mistakes and roadblocks that China encounters. There is great potential for cross-border collaboration.
Does the revised Environmental Protection Law go far enough?
AW: In my view, you can never go far enough to protect the environment. Of course at the same time, we need to balance economic development, but the whole issue here is not the legislation itself but how people perceive the importance of the environment for the next generation. If the people had such awareness, the legislation would not be necessary, and the people would become self-disciplined and self-regulated. In China, it is still a challenge – the current generation of business leaders are aware of some of the issues, but it is unlikely they will do anything. Now their children, they will be more aware, but will they do anything, no I think they will still largely be profit driven. The generation after next will be a significant change.
Isn’t that too little too late?
AW: I like that question, and have been saying the same to people – is it too late? Well then the bells are starting to ring – three generations later, the overall environment may be so polluted it cannot be reversed. For me, public education really is the key.