China Begins Stiffening Environmental Standards
China's environmental controls, long criticized as weak and ineffective, are starting to have real economic bite. This year, officials have rejected billions of dollars worth of new factories and other investment projects for failing to meet standards. For local firms accustomed to ignoring standards, this could change the financial calculus.
'Our supervision is getting tougher, and environmental requirements are being raised,' said Wu Bo, a director at the State Environmental Protection Administration who is in charge of reviewing the environmental impact of new factories and infrastructure projects.
The clout of his agency, known as SEPA, has increased notably in the past couple of years as China's top leadership worked to contain the environmental damage caused by breakneck industrialization. In a major policy speech in October, President Hu Jintao said, 'Our economic growth is realized at an excessively high cost of resources and the environment,' and pledged to reverse the trend. Mr. Wu, a longtime worker at the agency, has seen that shift firsthand.
'From 1995 to 2005, in that 10-year period, there were only two projects that SEPA did not approve,' Mr. Wu said in an interview in his offices in northern Beijing. The agency handles the environmental-impact assessments that companies file as part of the approval process for major investments, like steel mills and power plants.
But in 2006, SEPA rejected about 110 of the projects submitted for its review because their environmental impact would be too great. And through October of this year, according to Mr. Wu, it had already rejected 187 -- representing 671.8 billion yuan, or about $91 billion, in spending that now won't happen.
In November, for instance, SEPA refused to approve a new steel mill planned by Anyang Iron & Steel Inc., citing concerns including inappropriate land use and possible water pollution. Local officials in Henan province, where the company is based, confirmed that Anyang withdrew its plans after SEPA's action, although they expect the company to propose changes in an attempt to revive the project. Anyang had no comment.
The Anyang rejection also reflects how China's government is using environmental regulation to achieve broader economic goals, like reining in corporate investment that threatens to lead to excess capacity. Official statistics recorded 6.67 trillion yuan of newly launched investment projects in the first 10 months of 2007, up 26.5% from a year earlier. The projects stopped by the tougher environmental-approval process would have contributed to even greater acceleration.
Tougher standards for new industrial projects have been coupled with a government effort to shut down industrial facilities that it believes shouldn't have been built in the first place. The National Development and Reform Commission, the economic-planning agency, says that in the first 11 months of 2007 it shuttered 365 coal-burning power plants totaling 11,000 megawatts of capacity, mostly small-scale operations that are less efficient and more polluting. As part of the same campaign, the government has closed steel mills totaling 8.7 million metric tons of annual production capacity.
But Mr. Wu's staff in Beijing has authority only over a relatively small proportion of what goes on in China, because local government agencies can approve many projects themselves. National-level environmental review is usually required only for projects with central-government funding and for local projects in certain industry sectors.
SEPA also has been working outside the customary bureaucratic process to toughen environmental enforcement, such as by publicly naming and shaming offenders. And it has started working with banks to deny polluters access to loans, though that remains a work in progress.
'There are some well-recognized limitations on the ability of SEPA to enforce the regulations,' says Scott Silverman, a lawyer with O'Melveny & Myers in Beijing. 'But they seem to be doing a lot with the resources they have. Transparency and disclosure is one of the most powerful weapons they have right now.'
Because fines for violating pollution standards remain low, SEPA's new practice of publicizing violators can be a more-effective deterrent. The environmental-impact-assessment process, an often-ignored bureaucratic procedure, also has become a way for SEPA to challenge projects before they are built.
This month, for instance, SEPA made an unusual public declaration that it had yet to receive the required assessment for a proposed nuclear-power plant in Rushan, Shandong province. It also noted that the Rushan plant's planners are required by law to consult public opinion on the plant. That process would give opponents, who have called the location too close to a scenic area, a chance to officially register their objections. A spokesman for Huadian Power International Corp., one of the backers of the proposed plant, said he expects the plant to go through a long approval process and that his company still hopes to participate.
Overall, Mr. Wu said he is now rejecting nearly 30% of the projects that submit an environmental-impact assessment. And most of the ones that clear the process do so only after making changes to satisfy SEPA's demands. 'We require them to increase spending on things like environmental protection and equipment,' Mr. Wu said. 'It's impossible for a project to have no environmental impact at all.'
SEPA appears to have high-level political backing for toughening its enforcement of environmental regulations, but that may not be enough. Critics say more profound changes are needed. Many economists argue that government policies like subsidized prices for fuels, electricity and land, by encouraging heavy industry, exacerbate the worsening in the nation's environment.
'The only way to get out of this situation is to reprice energy,' says Nicholas Lardy, a senior fellow at the Peterson Institute of International Economics in Washington. He argues that it will be hard to clean up the environment as long as the government encourages energy consumption by keeping domestic prices for fuels like gasoline significantly below international levels.
From: chinese.wjs.com
Andrew Batson
Dec 18th 2007 13:08
'Our supervision is getting tougher, and environmental requirements are being raised,' said Wu Bo, a director at the State Environmental Protection Administration who is in charge of reviewing the environmental impact of new factories and infrastructure projects.
The clout of his agency, known as SEPA, has increased notably in the past couple of years as China's top leadership worked to contain the environmental damage caused by breakneck industrialization. In a major policy speech in October, President Hu Jintao said, 'Our economic growth is realized at an excessively high cost of resources and the environment,' and pledged to reverse the trend. Mr. Wu, a longtime worker at the agency, has seen that shift firsthand.
'From 1995 to 2005, in that 10-year period, there were only two projects that SEPA did not approve,' Mr. Wu said in an interview in his offices in northern Beijing. The agency handles the environmental-impact assessments that companies file as part of the approval process for major investments, like steel mills and power plants.
But in 2006, SEPA rejected about 110 of the projects submitted for its review because their environmental impact would be too great. And through October of this year, according to Mr. Wu, it had already rejected 187 -- representing 671.8 billion yuan, or about $91 billion, in spending that now won't happen.
In November, for instance, SEPA refused to approve a new steel mill planned by Anyang Iron & Steel Inc., citing concerns including inappropriate land use and possible water pollution. Local officials in Henan province, where the company is based, confirmed that Anyang withdrew its plans after SEPA's action, although they expect the company to propose changes in an attempt to revive the project. Anyang had no comment.
The Anyang rejection also reflects how China's government is using environmental regulation to achieve broader economic goals, like reining in corporate investment that threatens to lead to excess capacity. Official statistics recorded 6.67 trillion yuan of newly launched investment projects in the first 10 months of 2007, up 26.5% from a year earlier. The projects stopped by the tougher environmental-approval process would have contributed to even greater acceleration.
Tougher standards for new industrial projects have been coupled with a government effort to shut down industrial facilities that it believes shouldn't have been built in the first place. The National Development and Reform Commission, the economic-planning agency, says that in the first 11 months of 2007 it shuttered 365 coal-burning power plants totaling 11,000 megawatts of capacity, mostly small-scale operations that are less efficient and more polluting. As part of the same campaign, the government has closed steel mills totaling 8.7 million metric tons of annual production capacity.
But Mr. Wu's staff in Beijing has authority only over a relatively small proportion of what goes on in China, because local government agencies can approve many projects themselves. National-level environmental review is usually required only for projects with central-government funding and for local projects in certain industry sectors.
SEPA also has been working outside the customary bureaucratic process to toughen environmental enforcement, such as by publicly naming and shaming offenders. And it has started working with banks to deny polluters access to loans, though that remains a work in progress.
'There are some well-recognized limitations on the ability of SEPA to enforce the regulations,' says Scott Silverman, a lawyer with O'Melveny & Myers in Beijing. 'But they seem to be doing a lot with the resources they have. Transparency and disclosure is one of the most powerful weapons they have right now.'
Because fines for violating pollution standards remain low, SEPA's new practice of publicizing violators can be a more-effective deterrent. The environmental-impact-assessment process, an often-ignored bureaucratic procedure, also has become a way for SEPA to challenge projects before they are built.
This month, for instance, SEPA made an unusual public declaration that it had yet to receive the required assessment for a proposed nuclear-power plant in Rushan, Shandong province. It also noted that the Rushan plant's planners are required by law to consult public opinion on the plant. That process would give opponents, who have called the location too close to a scenic area, a chance to officially register their objections. A spokesman for Huadian Power International Corp., one of the backers of the proposed plant, said he expects the plant to go through a long approval process and that his company still hopes to participate.
Overall, Mr. Wu said he is now rejecting nearly 30% of the projects that submit an environmental-impact assessment. And most of the ones that clear the process do so only after making changes to satisfy SEPA's demands. 'We require them to increase spending on things like environmental protection and equipment,' Mr. Wu said. 'It's impossible for a project to have no environmental impact at all.'
SEPA appears to have high-level political backing for toughening its enforcement of environmental regulations, but that may not be enough. Critics say more profound changes are needed. Many economists argue that government policies like subsidized prices for fuels, electricity and land, by encouraging heavy industry, exacerbate the worsening in the nation's environment.
'The only way to get out of this situation is to reprice energy,' says Nicholas Lardy, a senior fellow at the Peterson Institute of International Economics in Washington. He argues that it will be hard to clean up the environment as long as the government encourages energy consumption by keeping domestic prices for fuels like gasoline significantly below international levels.
From: chinese.wjs.com
Andrew Batson
Dec 18th 2007 13:08