China’s Environmental Regime
China began the development of a modern legal regime devoted to environmental regulation and protection in 1989 when the Environmental Protection Law of the People’s Republic of China passed into law (after a 10 year "trial" implementation).
In the early 1990s, China was heavily influenced by American media-specific, end-of-pipe regulatory models. Thus, beginning in 1995 China enacted in quick succession a Clean Air Act (1995), Solid (and Hazardous) Waste Act (1995), and significant amendments to the Clean Water Act (1996).
It soon became clear, however, that China’s growth within the foreseeable future would outstrip both its resources and its ability to control pollutants at pipe end. It began, therefore, to shift its attention in the late 1990s towards "sustainable development" models of environmental regulation championed by several European Union countries and Japan.
This shift culminated in China’s Circular Economy Law, which came into effect on 1 January 2009. The "circular economy" is defined as one which adopts "reduction, reuse and recycling concepts in the process of production, circulation and consumption" and the law is formulated for the purposes of promoting the development of the circular economy, improving resource utilisation efficiency, protecting and improving the environment and realising sustainable development.
The law is a curious blend of the usual general policy pronouncements found in Chinese legislation and some unusually specific requirements. There is little in the law, however, that is new. Most of its provisions are already on the books in China in either previously enacted laws (most notably the Clean Production Law, the Energy Conservation Law and the Water Law) or regulations. Therefore, we will focus on some of the specific laws and regulations that impose real "sustainable economy" obligations.
China’s Clean Production Law (effective 2003) requires manufacturing enterprises to reduce pollution at its source, to utilise resources more efficiently, and to reduce pollution generated in the production and use of products and in the provision of services.
The two categories of "enterprises" required to conduct clean production audits are those that exceed national or local discharge standards and those that use toxic and hazardous materials in their production process or discharge toxic and hazardous substances. All other enterprises must "monitor resource consumption and generation of wastes during the course of production and provision of services, and conduct cleaner production audits with respect to production and service procedures according to need".
Basically an audit should analyse and assess the of use of raw materials, resource consumption, comprehensive utilisation of resources, as well as generation of pollutants and their treatment with an eye toward adopting cleaner production technologies, processes and equipment, which maximise the resource utilisation rate and generate the fewest pollutants.
Enterprises should adopt toxin-free, non-hazardous raw materials to replace toxic and hazardous raw materials; provide for the comprehensive use or recycling of materials such as waste products, waste water and heat generated from production procedures; and reduce excess packaging.
The regulatory agencies are encouraged to use the law to spur efforts to achieve national total quantity reduction goals for discharges of chemical oxygen demand (COD) and sulfur dioxide (SO2). Audit compliance efforts have so far focused primarily on by "key enterprises," especially those in the electric power, iron and steel, dye stuffs, electroplating, papermaking, building materials, petrochemical, chemical, drug manufacture, food, brewery, printing and other "heavy polluting" industries or those located in particularly sensitive environments.
The law permits local governments to publish a list of the names in the local media of heavily polluting enterprises whose pollutant discharges exceed the applicable standards, in order to provide the public with a basis for policing enterprise implementation of cleaner production.
Extended and Enhanced Product Requirements
China has become a world leader in the manufacture and consumption of electrical appliances and information products. The government now recognises that such products present serious environmental challenges at the end of their life cycle and has taken steps to address these challenges. As noted above, China has begun to rely more on European models for its environmental regulation than on US models. One area where this is most noticeable is in the area of product stewardship. The government has begun to formulate regulations that draw heavily upon European Union regulatory models particularly Directive (2002/95/EC) on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) and Directive (2002/96/EC) on Waste Electrical and Electronic Equipment (WEEE).
China’s Measures for the Administration & Control of Pollution by Electronic Information Products (usually referred to as China RoHS, although it is not an exact analogue of that European Directive) became effective on 1 March 2007, and is to be implemented in two phases.
The first phase applies to "producers and importers" of "electric information products" (a specific list of which has been provided by the Ministry of Industry and Information Technology) that are placed "on the market" in China after 1 March 2007. Such producers and importers must mark their products with the appropriate "recycling logo" and their "Environmental Friendly Use Period" (EFUP). The EFUP is, essentially, the period during which the product can be used without the release of any toxic or hazardous substances it may contain. In addition, the producer or importer must specify in the product instructions, the names and contents of toxic or hazardous substances (lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) and polybrominated diphenyl ether (PBDE, not including decabromodiphenyl ether)) contained in the product and identify the product parts where those substances are located. The product or product packaging must also contain the date on which the product was manufactured.
Additional requirements, or Phase 2 compliance, will only be imposed upon products set forth in the "Catalogue for Priority Prevention of Pollution from Electronic Information Products." This catalogue is currently empty, but will be subsequently populated with products with mature technologies where the control or elimination of hazardous substances has been demonstrated to be economically feasible. Products listed in this catalogue must either have completed the substitution for toxic and hazardous substances, or have met the restriction standard. They may enter the China market only after stringent 3C certification determines that they are qualified. The date of the issuance of the first catalogue list has been pushed back on several occasions.
The Regulation for the Administration of the Recovery and Disposal of Waste Electric and Electronic Products (China WEEE) was promulgated in March 2009. It was enacted pursuant to the Clean Production and Solid Waste Laws for the purpose of "regulating the recovery and disposal of waste electric and electronic products, facilitating comprehensive utilisation of resources and circular economy development, protecting the environment and safeguarding human health". The regulations establish the basic framework for the recovery and disposal of WEEE which is "recovery by multiple channels and centralised disposal".
A catalogue (different from the RoHS Phase 2 Catalogue) will be developed to designate the products that will be covered by the WEEE regulation. On the basis of several prior draft regulations and specifications, it is likely that the catalogue will list computer products, telecoms equipment, video and audio products, and radio and television equipment; household appliances, instruments and meters and measurement monitoring products; power tools and electric wires and cables; and all their components, parts and consumables.
The regulation primarily controls the activities of manufacturers and importers (and their consignees) and Disposing Entities. Manufacturers and importers of covered products must design their products so that any hazardous substances can be harmlessly recovered; utilise materials that are non-toxic, non-hazardous; or of low toxicity or low hazard, or that are convenient for recovery; and provide information concerning toxic or hazardous substance content, appropriate methods with respect to recovery and disposal, etc on the product or in product manuals.
Manufacturers are "encouraged" to "recover waste electric and electronic products independently or through their distributors, repair organs, after-sale service organs, or entities that engage in waste electric and electronic product recovery," with any waste products recovered being disposed of at qualified Disposing Enterprise sites. Their primary responsibility for product disposal, however, comes in the form of an obligation to contribute to the state fund, which will be used to pay for "the disposal of waste electric and electronic products." Details as to how the fund will be administered and structured and how the amount of the fund payment required by any given manufacturer or importer will be determined have not been announced.
There is plenty of time to develop the catalogue and sort out the necessary clarifications, standards, and implementing provisions; these regulation do not become effective until 1 January 2011.
China’s legal framework for addressing environmental issues has developed in tandem with its economy. On paper China’s environmental legal system is approaching developed nation status, although lax enforcement has made its environmental regime more of a "paper tiger". Whether China’s new crop of "sustainable economy" laws and regulations will be rigorously enforced remains to be seen. The responsible foreign investor in China, however, must comply with the laws on the books. Such investors need to stay abreast of the raft of new programmes and regulations China is adopting, in an attempt to stay ahead of the adverse environmental consequences of its economic growth engine.