BSI Analysis: Weak Incentives for Businesses and Local Government Compliance With Environmental Standards Contribute to Ongoing Pollution Threats in China
BSI has recently observed increased instances of businesses and local provincial governments failing to comply with environmental pollution standards, contributing to the significant, ongoing pollution threat in China. China’s Ministry of Environmental Protection (MEP) launched in April a 28-city inspection program, projected to involve 5,600 inspectors and run until March of 2018. This campaign, the largest the MEP has undertaken, has uncovered significant issues in provincial government enforcement, as well as significant issues in enterprise compliance. In a round of inspections which concluded last month, the MEP stated that 71 percent of Beijing facilities were not compliant with national environmental standards. Additionally, the Deputy Minister of the MEP recently publicly cited Langfang, Hebei city officials for failing to take action on a severe pollution warning issued on April 2, and called for a production halt at companies in Langfang that failed to meet emission control requirements or falsified emissions data. Furthermore, BSI has recorded at least seven instances from inspections in the previous two months, in which factory workers either attacked, blocked, or otherwise deliberately hampered inspectors in order to obstruct environmental inspections.
Multiple factors continue to plague the Chinese central government’s capacity to address its pollution problems. China’s government structure gives local governments a significant amount of enforcement power and autonomy, but it also rewards provincial economic success, often incentivizing local governments to focus on economic performance over environmental concerns. Additionally, China’s regulatory system does not properly discourage persistent polluters, nor does it assist polluters in the costly process of upgrading to meet standards. As a result, enterprises find paying for upgrades to be significantly more expensive than paying MEP fines for pollution violations, and will frequently opt to instead pay repeated but relatively small fines. As a result, though the increased push for improved environmental conditions and anti-pollution inspections marks a significant policy initiative, it remains to be seen how effective this new campaign will be with these regulation and enforcement issues persisting.