Recent State Council reforms have pursued the parallel objectives of simplifying “green tape” associated with environmental permitting of new industrial developments while at the same time implementing supervision measures to promote operational compliance with environmental regulations for existing facilities. These changes mark a significant departure from the Ministry of Environmental Protection’s (MEP) long-standing policy of focusing on permitting and approvals for new facilities with minimal monitoring of environmental compliance over the operational life of industrial facilities.
Plant Managers at industrial facilities in China have long known that failing to abide by environmental standards set by MEP is unlikely to land them in hot water. With few resources available to monitor facilities themselves, local authorities have generally left industrial facilities to self-report discharges to the environment with minimal supervision. The result has been a steady deterioration in the environment that has accompanied China’s industrial development. That changed earlier this year. The Soil Pollution Prevention and Control Law of the PRC, 12 years in the making, approved on August 31, 2018, and effective as of January 1, 2019, is a game changing shift to a new era in China’s effort to environmental sustainability. Self-reporting is out and Central Government Inspections are in as China’s MEP gets tough on polluting facilities. In the first three quarters of 2017, almost 29,000 violations have been punished under the new Environmental Protection Law. Penalties and include plant shutdowns, confiscation of company property and fines. Local officials and managers (both at Chinese and foreign facilities) have been detained.
The numbers speak for themselves. Year to date, almost 6,500 industrial facilities have been ordered to suspend or shutdown operations across the country. Almost 6,300 administrative detentions have been ordered, a year-on-year increase of 170%. In Guangdong, over 300 companies are listed in EPB’s black list in 2017 and more than 9,400 inspections and penalties was conducted in 2018. For the first time under the new Soil Pollution Prevention Law, regulatory authorities have the legal power to enter suspected and non-compliant sites to investigate and, if necessary, take mitigating and/or corrective actions (Chapter 7, Article 77) and hold the responsible party liable costs and damages.
Water Pollution Prevention and Control Action Plans are in effect and a general improvement in water quality was reported in the first half of 2017. MEP Inspectors have been dispatched to those regions that fell behind annual water pollution control targets. Where violations are identified, MEP has the authority to suspend the power of local officials to grant approvals for new industrial projects (and this has been done in several cities).
The long-awaited Soil Pollution Prevention Law was gazetted for public comment over the summer months and a timetable has now been published for it to come into force. The law requires provincial agencies to create and maintain a publically available register of contaminated sites. Industrial facilities suspected of soil or groundwater contamination will be required by local environmental authorities to undertake environmental surveys and report these to the authorities who will in turn make the survey results publically available through a register of contaminated sites. Anecdotally, local authorities are already requiring soil and groundwater investigations for certain industries in advance of the law coming into effect.
The changing regulatory landscape creates new challenges for business and requires reassessment of the way in which environmental compliance is managed and monitored.
Suspension and closure of polluting facilities creates supply chain risks for manufacturers. Hi-tech manufacturing and technology industries with complex supply chains that operate lean inventory models are particularly exposed. Listed MNCs face another significant business risk because the new Law makes available to the public the identities of the polluters and the nature of non-compliance which can damage their brand name.
Additional investment in maintaining or improving pollution control equipment is an obvious implication. Multinational clients are rushing to implement EHS compliance audit programmes and reviewing the adequacy of systems, staff and resources in place at their facilities in China.
Companies investing in new facilities should take these regulatory and enforcement trends into account. Authorities are now much more selective about the type of facility that can be built in particular development zones. Projects that are incompatible with newly issued planning guidelines face the risk not being approved or, worse still, relocating once operational.
Agenda
9:00-9:15 Registration
9:15-9:35 General Topics on “Comply or Close” - By Piers
9:35-10:00 Wastewater and Compliance - By George
10:00-10:30 Q&A for Wastewater - By George
10:30-10:45 Coffee Break
10:45-11:10 Soil Contamination and Remediation - By Seong
11:10-11:40 Q&A for Soil Contamination - By Seong
11:40-11:45 Closing Remarks from EU Chamber
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