Improving the Design and Implementation of China’s Environmental Legislation

Since the main rationale of clean coal technologies is to “enhance both the efficiency and the environmental acceptability of coal extraction, preparation and use” (WCI, 2002: 24), the quality and implementation of China’s environmental legislation has a high meaning for CCCT diffusion. We stressed in the previous chapter that market reforms have to be complemented by effective policies, which ensure a sustainable modernization of China’s

energy sector. However, at present, China’s environmental legislation does not function as a driver of CCCT deployment, which is mainly attributed to failures in the design and implementation of many environmental laws. Nevertheless, China’s environmental policy has become more progressive during the last decade, putting more emphasis on market-oriented instruments than on command-and-control approaches. The Chinese leadership is proposed to keep this course since economic and market-based instruments are more suitable to stimulate CCCT diffusion (Kemp, 1997: 324). However, the government should pursue a more integrated approach of environmental policy, incorporating environmental issues into other policy area’s legislation, for example financial, industrial and energy policies. Doing so, it could avoid policies inconsistencies, which impede the effects of environmental laws.

The political leadership is recommended to make strong efforts in the enhancement and enforcement of existing environmental laws rather than creating new, complex regulating systems. A properly designed and implemented SO2 Pollution Levy System could function as a catalyst for CCCT diffusion. In contrast to that, we consider the frequently demanded introduction of a national emission trading system as a long-term option since its implementation requires a high amount of bureaucratic capacities and is more complicated than optimizing China’s current Pollution Levy System.

Measures aiming at improving the enforcement of existing environmental regulations have to address both pollutants and public authorities, which are in charge of implementing environmental legislation. At the firm’s side, compliance with environmental legislation may be fostered by detailed implementation rules. China’s environmental laws should not only introduce limits to pollution or other requirements, but also detailed time limits, standards for environmental monitoring and sanctions for non-compliance. Regulations such as the U.S. Clean Air Act or national policies for air pollution in the EU may serve as examples for the formulation of effective implementation rules.

Apparently, China’s political leadership has realized the necessity of environmental enforcement rules. In 2003, it enacted the Cleaner Production Promotion Law, which contains progressive instructions on implementation. Enterprises are obligated to monitor their resource consumption and generation of waste during the course of production and have to report the results to the responsible public agency (Cleaner Production Promotion Law, 2002, art. 28). Furthermore, the law includes an incentive system to meet discharge standards. After an enterprise attains a national or local standard, the company may achieve an environmental

certificate and its name will be published in “the primary local media” (op. cit.: art. 29). Enterprises, which are not in compliance with environmental standards, have to pay a fine and are mandated to conduct “cleaner production audits with respect to production and service procedures according to need” (op. cit., art. 28).

The implementation rules of China’s Production Promotion Law should function as inspiration for other environmental laws, which affect the efficiency of China’s power sector. Particularly environmental auditing systems may induce the integration of environmental considerations into economic processes and decision-making. They could increase the environmental awareness of power companies and stimulate CCCT diffusion. Fines imposed on firms, which violate legislative rules, provide economic incentives to compliance and, therefore, may function as drivers of investments in efficient coal combustion equipment. In addition to setting up detailed implementation rules, the enforcement of environmental regulations by firms may be enhanced by providing them with necessary monitoring equipment. Jim Watson points out that many Chinese power companies cannot enforce environmental rules because no environmental equipment is fitted (Watson et al, 2001: 66). For instance, many firms are missing the equipment to measure the sulfur content in coal which is the typical measure used for applying the SO2 levy. One reason is that many environmental monitoring technologies are imported and very expensive. As a partial solution, the Chinese government could push the formation of joint-venture companies, which acquire the relevant technologies and manufacture the appropriate products in China (op. cit.). Regarding public authorities, enforcement of environmental legislation is mainly hampered by low capacities and environmental awareness at the local level. In order to foster and monitor compliance with environmental laws, the capacities and competencies of local environmental agencies should be increased. Especially provincial Environmental Protection Bureaus, which play a central role in enforcing national environmental legislation at the local level, are facing a continuous lack of political power and financial and personnel resources. Even though the national leadership has strengthened the EPB during the last two decades, their work is hampered by the priority of economic development at the provincial level. We recommend to intensifying efforts in increasing environmental awareness of provincial officials and educate them in the economic advantages of high-efficient technologies. Besides, there should be an intensified collaboration and communication among

environmental and economic agencies in order to combine and adapt economic and environmental considerations.