REGULATIONS > Pollution Fines

Historically, pollution fines in China have been sufficiently low to make it financially expedient to pay penalties rather than to spend money on prevention, to the extent that some companies incorporate such expenditures into their budgets.

Recent amendments to the Water Pollution Prevention Control Law have, however, raised financial penalties for pollution incidents with no maximum limit specified for serious incidents. It remains to be seen whether such fines will be meted out and sufficiently substantial to deter would-be and existing polluters.

A case study of a chemical plant

The reality: a chemical plant discharges 1,000 m3/day of wastewater with a pH of 10.8, with average 750 mg/L COD, 180 mg/L anionic surfactants, 190mg/L BOD and 330mg/L suspended solids.

These pollutants exceed the Grade II wastewater discharge standards that the plant is required to meet. Based on the Collection and Management Provisions of Pollutants Discharge Fee (State Council, 2003 Order No. 31), the discharge fee for such noncompliant discharge should be 3.01 RMB/m3.

Should the enterprise choose to treat its wastewater prior to discharging, its investment is equivalent to a capital cost of 6.90 RMB/m3, not including operating costs, to which should be added a discharge fee of 0.17 RMB/m3 for the pollutants remaining in the treated and compliant wastewater. Clearly, the financial trade-offs faced by a chemical enterprise in China that is required to meet discharge standards illustrate the distorted economic incentive for pollution control. It is cheaper to pay the pollution fines than to build a wastewater treatment plant.

Source: Louis Berger Group (2007), Cited in “Addressing Water Scarcity,” World Bank, 2009.