The Shanghai Municipal People’s Congress has released the revised Shanghai Environmental Protection Regulations (in Chinese only) for public comment. The revised Regulations, which first came into force in 1997, apply exclusively in Shanghai, one of China’s most prosperous and business-intensive regions and are an example of China’s continued commitment at a local level to transitioning towards a low carbon economy.

Significant provisions

In this post, we will comment on those provisions in the proposed Regulations that are particularly significant or interesting to note in the wider context of the development of Chinese environmental law. China’s National People’s Congress passed an amended version of China’s national Environmental Protection Law (EPL) in 2014 – the first amendments since the law’s initial passage in 1989. Whilst many of the proposed provisions in the Regulations track the revised EPL (for example, the establishment of pollution caps), others are potentially very different, including rewards for meeting pollution goals and the issuance of an industry-by-industry catalogue. Below are the provisions to consider as a multinational business operating in Shanghai.

Public Interest Litigation and Environmental NGOS (Articles 5 and 8) These provisions echo the EPL by stating that citizens shall have access to environmental information, and the right to report violations and to protect their rights through litigation. The Regulations also express support for public interest environmental litigation filed by environmental NGOs in compliance with the law. This is a topical issue as several high-profile lawsuits have been filed over the last year by NGOs in China using the EPL’s citizen-suit provisions. However, China also recently passed legislation that stipulates extra requirements on the standing of overseas NGOs, and it remains to be seen what effect this will have on future public interest litigation.

Pollution Caps (Article 27), Project Suspensions (Article 31) and Remediation Obligations (Article 53) Article 44 of the EPL introduced a cap on the total amount of key pollutants discharged, with specific limits to be set by local governments. Article 27 of the Regulations follows the same format by stipulating the basic principles and rules for establishing limits for key pollutants discharged in Shanghai. This continuity between national legislation and local-level response is critical to enforcement. To aid enforcement of these limits, Article 31 provides that if a county, township or industrial park exceeds total emissions targets or fails to phase-out high-polluting industries, approval for industrial and commercial projects in that area may be suspended. It will be interesting to see how this will work in practice: for example, what happens if one high-polluting business’s conduct materially impacts on a more sustainable business’s ability to expand its operations in the same industrial park? In addition, Article 53 provides that an assessment of soil and groundwater quality must be conducted prior to the sale, transfer, or lease of an industrial property, and any contamination identified in such assessment cleaned up. No further details are provided including, critically, the standard of clean-up that would be required.

Regional Co-operation (Article 10) The Shanghai government will work with neighbouring provincial governments to establish cooperative coordination mechanisms to address environmental issues. This is a codification of an ongoing regional initiative between the governments of the city of Shanghai and the provinces of Zhejiang and Jiangsu to address pollution and water issues.

Support for National Emissions Trading System (Article 33) This Article states that the municipality of Shanghai supports an emissions trading scheme and will develop rules to facilitate trading. Shanghai was one of seven jurisdictions in which China launched a pilot regional emissions trading program, and the central government is likely to look to Shanghai and the other cities and provinces with pilot programs to be at the forefront of implementing the national emissions trading system, set to launch in 2017.

Enforcement monitoring (Article 37) This Article provides some detail on how the Regulations will be enforced, specifically noting on-site inspections, remote sensing, and patrol vehicles with infrared cameras. It is vital that enforcement of the legislation is effective and consistent, and the Regulations provide visibility on the methods the Shanghai authorities will use to monitor enforcement.

Sanctions (Articles 63-78, 81 and 82) The Regulations lay out fines for violations by individuals, companies and third-party verifiers, ranging from RMB 10,000 to RMB 1,000,000.

Innovative provisions (Articles 19 and 36) Demonstrating a departure from the EPL, the Regulations include some innovative provisions. Article 19 grants the local authority the ability to make an industry-by-industry guideline catalogue to specifically highlight industries and businesses that are energy-intensive and significant polluters. Those highlighted will face additional penalties, such as higher electricity tariffs and pollutant fees in an attempt to improve their “green credentials”. Article 36, in turn, offers rewards for entities that meet pollutant reduction targets. It will be interesting to see how these provisions work in practice.

It remains to be seen what will be included in the final Regulations and how effective enforcement will be achieved. In the meantime, the draft Regulations provide a helpful illustration of what we can expect in the future and why it is important to engage with such proposals as early as possible to ensure that whatever is implemented is both fair and effective.

Read more on the development of China’s environmental policy:

China Cuts Down on Carbon as Coal Falls Out of Favour

New Chinese Soil Pollution Law Planned for 2017 Could Be Accelerated

China One of First Countries to Sign Paris Agreement

China’s 13th Five-Year Plan – Planning for a Greener Economy

China Revises Hazardous Substances Restriction Laws

China’s NDRC Issues New Carbon Trading Guidance

China Progresses with Increased Environmental Accountability for Industry and Government Authorities

China Gives Green Light for Green Bonds

What Multinationals Need to Know About China’s Amended Environmental Protection Law