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.
The pollution of Kunming’s Yangzonghai Lake provides an example where the Yunnan Chengjiang Jinye Corporation repeatedly paid fines for polluting local water resources rather than prevent pollution at source. Penalties were eventually handed out but only after a particularly serious incident. Similarly, in the example below, it is clearly advantageous to pay the fine levied, since this is significantly cheaper than the cost of wastewater treatment.
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.
The accident-focused system in place now is one that only responds forcefully once it is literally impossible to wait any longer. Only then do heavy penalties become available. But this approach to killing the chickens to scare the monkey is too weak and the consequences are too distant to really change enterprises’ behavior. The natural result has been a continuing cascade of environmental accidents around the country, like the recent Yancheng City accident. Not surprisingly, this sort of behavior is rampant throughout the country.
Alex Wang, Senior Attorney for Natural Resources Defense Council (NRDC), 2009.
weifachengben di, shoufachengben gao
Paying fines and continuing to pollute is a well-known phenomenon in China. There is even a catch phrase for it: weifachengben di, shoufachengben gao (“the cost of violations is low, the cost of compliance is high”). The example below shows how punishments can be meted out, but only after a catastrophic incident following a history of repeated violations.
In September of 2008, China Environmental Law reported on arsenic pollution in Kunming’s Yangzonghai Lake that led to a ban on fishing and swimming and loss of water supplies to 30,000 people. The pollution stemmed primarily from repeat offender Yunnan Chengjiang Jinye Corporation. The company had been fined six times between 2002 and 2008 for environmental pollution, but as a news report at the time noted ‘although the maximum fine of 100,000 yuan (US$14,653.52) has been imposed several times, the sum is trivial in comparison to the company’s profits.’ This is not a unique case study.
Justice was served, in part, in April 2009 when three executives from Chengjiang Jinye Industry and Trade Co. were brought to trial on criminal charges in the Chengjiang County Basic Level Court. But after-the-fact punishment for environmental offenses, typical in China, is often a day late and dollar short.