Analysis & Reviews

Key Policies 2017-8

Key Water Policies 2017 – 2018

China has made huge strides in tackling water and environmental issues over the past 12 months.  On one front, President Xi is moving China away from its resource & pollution intensive growth model in his new political thought. On another front, the head of the MEP Li Ganjie has been stressing the need for “green development”. And more recently,  China’s “Two Sessions” signals key reforms in the march towards a Beautiful China (see our review here). We have predicted these developments in our 5 Trends For 2018 these trends will keep progressing.

And it is not just empty talk: behind China’s rhetoric lies a strong regulatory push. For a quick review, we look back on the key water-related policies China released in 2017-2018, just as we have done for the past 4 years. This time round, we have grouped the policies by the following eight categories: 1. Water; 2. Pollution; 3. Regional; 4. Green Finance & Market; 5. Industry & Tech; 6. Energy; 7. Rural Areas & Agriculture and 8. Circular Economy.

5 trends year of the dog 1 Xi's thought & Water Key Water Policies 2016-2017 2 sessions 5 water highlights

 

1. Water Focused Policies

Of the many water focused policies released over the last year, the most significant one is the revised “Water Pollution Prevention and Control Law”. This new “Water Ten Law” is the legal backbone for the “Water Ten Plan” and together they underline China’s seriousness in tackling its water issues. Read more about the plan here and the law here.

Another impactful new policy is the expansion of China’s water resource tax reform.  After a successful pilot in Hebei, the tax has expanded to 9 more pilot provinces including Beijing & Tianjin. Find out more about Hebei’s achievements and why additional provinces can benefit in our review here.

Water Ten - Comply or Else Environmental Law 2 Years On China's Water Tax Expansion China's river chiefs who are they v3

Elsewhere, China is also looking to implement a Lake Chief mechanism after encouraging results from its River Chief mechanism (which we review here). All these policies are supported by China’s amended Environmental Protection Law (see here). Water resource protection is clearly high on China’s list of priorities – but so is pollution control for the environment in general.

water policies

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Standard for Urban Flooding Prevention & Control Planning (Consultation Paper) Aug  2017 MoHURD -100-year return period for flood control planning in megacities
Measures for Expanding the Pilot Project of Water Resources Tax Reform Dec 2017 MoF, SAT, MWR -see CWR article
Revised ‘Water Pollution Prevention and Control Law’ Jan 2018 NPC -see CWR article
Implementing the Lake Chief Mechanism Jan 2018 General Office of the State Council, General Office of the CPC -Fully promote mechanism by end of 2018

 

2. Pollution Focused Policies

 
China 5 Laws For 2018 is cracking down on pollution, be it air, soil or water pollution. The new environmental protection tax law, implemented on 1 January 2018, replaces the outdated pollutant discharge fee system and is expected to be much larger in economic scale (amounting to RMB50 billion annually). With more than 260,000 enterprises set to pay the tax starting on 1 April 2018, see more about the tax in our review here.

Other key pollution focused developments include an upcoming second National Census of Pollution Sources, a planned environmental resource capacity monitoring mechanism with shutdown implications for enterprises, and further promotion of pollutant discharge permit trading. Naturally stronger enforcement for these laws and policies will help control and prevent pollution.

polln policies

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Key Points on Government Work for 2017 April  2017 State Council -Annual water quality rankings for cities & environ info of key polluting enterprises
Modifying Regulations on the Administration of Construction Projects for Environmental Protection Aug  2017 State Council -Tougher violation punishments & more disclosure
Implementation Opinions on Promoting Third-party Treatment of Environmental Pollution Sept 2017 MEP -Including trading pollutant discharge permits
Establishing a Long-term Monitoring & Alert Mechanism on Environmental & Resource Capacity Oct 2017 General Office of the CPC, General Office of the State Council -Red alert regions to stop production or shut down certain enterprises
Management of the Catalogue of Key Pollutant Discharge Entities Dec 2017 MEP -Make public & update annually
Regulation on the Implementation of the Environmental Protection Tax Law Jan 2018 State Council -See CWR article
Notice on Issuing National Environmental Protection Measures for Environment & Health (Trial) Feb 2018 MEP -Conduct environ & health risk monitoring
-Publish water quality standards based on public health

 

3. Regional Focused Policies

Water-nomics - Trade-offs Along the YangtzeSome of China’s water-related policies focus on certain regions. With the Yangtze River Economic Belt (YREB) accounting for over 42% of China’s population and GDP, it is no surprise that the Yangtze River Basin remains a key target region for these policies.

In August 2017, two major green development plans for the YREB were released. Among other key points, the plans set total and provincial water use caps for 2020 and 2030, singled out high water consumption sectors e.g. steel, textiles, power and others for stricter control and outlined a new industrial plan. Note that many of these sectors are polluting for both air and water. For more on why this is important see our joint report with MEP-FECO here. This sector-focused approach is also reinforced in Industry & Tech-focused policies. See below. 

Beyond the YREB, President Xi has also stressed the importance of developing the Greater Bay Area during the Two Sessions meeting. See what implications this could have in our review here.

test header4

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Opinions on Promoting Green Construction of One Belt One Road May 2017 MEP, MoFA, NDRC, MoC -conduct EIA’s
-promote environ disclosure
-strengthen finance green projects
Ecological & Environmental Protection Plan for the Yangtze River Economic Belt Aug 2017 MEP, NDRC, MWR -Total & provincial water use caps for 2020 & 2030
-see CWR report
Guiding Opinions on Strengthening Green Development of Industry in Yangtze River Economic Belt Aug 2017 MIIT, NDRC, MoST, MoF, MEP -Improve industrial planning of YREB
-Prohibit steel & cement expansion
-see CWR report
Plan for Prevention and Control of Water Pollution in Key River Basins (2016-2020) Nov 2017 MEP, NDRC, MWR -2020 targets for basins & tasks for 1,784 control units
-Shut down small polluting enterprises

 

4. Green Finance & Market Focused Policies

 
China’s Key Takeaways 5th China SIF push for green development requires green financing.  In 2017, China was the largest issuer of green bonds at RMB249 billion. However, it has far to go and there have been plenty of policies to help it along. Particularly of note are the five pilot green finance reform provinces and the issuance of special bonds for Public-Private-Partnership (PPP) projects. Catch up further on China’s progress in this space here.

finance and markets policies

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Notice on Further Implementing Innovation Work for PPP in Key Municipal Projects Mar 2017 NDRC & MoHURD -Publish list of cities to conduct work
Guiding Opinions on Supporting the Development of Green Bonds Mar 2017 CSRC -Credit rating institutions to consider environ credit
Guidelines for the Issuance of Public-Private-Partnership Special Bonds May 2017 NDRC -Simplify examination of qualified PPP bonds
-Encourage listed co’s to issue special bonds for PPP
Measures for Management of Environmental Pollution Mandatory Liability Insurance (Consultation Paper) Jun 2017 MEP, CIRC -Industries with high environ risk to have insurance
-Floating premium rate depending on risk
Establishment of Five Pilot Green Finance Reform & Innovation Provinces July 2017 State Council -Guangdong, Guizhou, Jiangxi, Zhejiang & Xinjiang
Development Plan for a Standardised Financial System (2016-2020) July 2017 PBoC, CBRC, CSRC, CIRC, SAC -Incls. research on disclosure standards for green finance
Reform Plan for Ecological Environmental Damage Compensation System Dec 2017 General Office of the CPC, General Office of the State Council -see CWR article

 

5. Industry & Technology Focused Policies

 
Revamping Insights From Chinas Textile Manufacturers resource and pollution intensive industries and upgrading to high tech manufacturing is a key aspect of “Xi’s Thought”. As such, clean production standards have been released for several industries essential to textiles. Plus, steel and cement industries now have standards on how to apply and receive pollutant discharge permits.

It is also worth noting that many standards issued previously have now been fully implemented and can have material impacts on operation costs. According to our survey of 85 textile manufacturers in China, 30% of respondents said their operating costs increased by 0-20% and 28% by 20-40%. See more on this here.

China's Power Sector Rise of ZLD

In addition, China is introducing water efficiency labels and wider adoption of centralised wastewater treatment tech. China may not be at the cutting edge yet but the signs are positive and improving technology can attract more investment. This is particularly important for the power industry. Read on…

Industry & tech

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Guideline on Available Technologies of Pollution Prevention & Control for Thermal Power Plants June 2017 MEP -New plants to adopt centralised wastewater treatment tech
Application & Issuance Standards for Pollutant Discharge Permit Steel Industry & Cement Industries Aug 2017 MEP -Provides standards for applying & issuing pollutant discharge permits in steel& cement industries
Notice about Issuing System of Appraisal Indicators of Clean Production for 5 Industries Aug 2017 NDRC, MEP, MIIT -Issues appraisal indicators for clean production of tanning, epoxy resin, organic silicon & reactive dyes
Measures for the Administration of Water Efficiency Labels Oct 2017 NDRC, MWR, AQSIQ -Publish catalogue for water efficiency labelling

 

6. Energy Focused Policies

China’s energy-focused policies have often been interpreted as a solution to its air pollution woes, but given the high water consumption of the power sector, these policies have an impact on water resources too.

Most impactful of them is probably the long-awaited “Construction Plan for the National Carbon Emissions Trading Market”. Finalised in January 2018, China’s carbon market is set to be the world’s largest and has already been piloted in five cities and two provinces including Beijing, Shanghai and Guangdong.  A carbon market starting with the power sector should hopefully both reduce coal dependence and boost the growing renewable energy industry.

This landmark policy is supported by a wide range of other energy-related policies, from promoting unconventional water use in coal processing to, capping coal-fired power capacity to solutions to renewable curtailment.

Energy

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Accelerating Capacity Replacement for Coal Mining Constructions May  2017 NDRC -Establish long-term mechanism for replacing coal
Opinions on Deepening Reform of Investment & Finance Scheme for Energy Sector May  2017 NEA -Encourage a more open financing scheme for the energy sector
Promoting the Structural Reform of the Supply Side to Prevent & Resolve the Risk of Over-capacity of Coal-fired Power Industry Sept 2017 NDRC, MIIT, MoF, MEP, MWR, PBoC, NEA etc. -Coal-fired power capacity to be <1.1TW by 2020
Plan for Resolving Curtailment of Hydro, Wind and Solar Power Dec 2017 NDRC, NEA -Effectively solve hydro, wind & solar curtailment by 2020
Comprehensively Deepening Price Mechanism Reform Dec 2017 NDRC -Promote green power certificates & pollutant discharge permits
-Wind energy price to be the same as coal
Construction Plan for the National Carbon Emissions Trading Market (Power Generation Industry) Jan 2018 NDRC -Carbon emission trading system to start with the energy sector

 

7. Rural & Agriculture Focused Policies

 
For 8 Reasons to Invest in Irrigation in China.jpg the 15th consecutive year, China’s No. 1 document has focused on rural issues and it states that China’s top priority for 2018 is to plan and start implementing a strategy to vitalise rural areas. This priority is likely to be pursued with protecting the environment and water resources in mind. For one an Opinion was released earlier in November 2017 calling for the green development of agriculture. Other policies have encouraged an agricultural water price reform and irrigation water savings. Read more about investing in irrigation in China here.

What’s more, market-based policies are being promoted for agriculture, with the “Opinion on the Innovation of Investment & Financing Scheme for Agricultural Infrastructurereleased in April 2017 promoting financial innovations and PPP schemes for the sector.

Agri rural

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Promoting Comprehensive Agricultural Water Price Reform July  2017 NDRC, MoF, MWR, MoA, MLR -Establish an evaluation mechanism
Opinions on Innovating Institutional Mechanism to Promote Green Development of Agriculture Nov  2017 General Office of the State Council, General Office of the CPC -Restrict groundwater over-exploitation
-Irrigation coefficient to be >0.55 by 2020
Opinions on Comprehensive Demonstration Work on Agricultural Water Saving in Large & Medium Irrigation Areas Dec 2017 NDRC, MWR -Improve agricultural water rights distribution & exchange
2018 No.1 Document Feb 2018 State Council -Charting a roadmap for rural vitalisation
Three-Year Action Plan on Rural Living Environment Improvement Feb 2018 General Office of the State Council, General Office of the CPC -Upgrade rural domestic wastewater

 

8. Circular Economy Focused Policies

As China shifts into a new paradigm of economic planning that considers water resources, certain resource intensive industries low down the value chain will face re-organisation and disruptions.

Circular economy has always been on the cards (see our review here) but there has been a lack of policies in place to encourage the transition. Last year has seen much more action and policies to buck this trend, from promoting recycling and re-use in various industries to banning foreign waste imports.

This is just the start: as we predicted in our 5 Trends For 2018, “old ways and business models won’t work and we will have to shift from a linear to circular economy for some sectors.”

Plastic, China & The Circular Economy Drink Responsibly Fashion's New Cycle Buying Electronics Can Pollute Our Future

CIRC ECON

Policy/Plan/Regulation/Standard Release Date Responsible Dept(s) Key Points
Plan of Circular Development May  2017 NDRC, MIIT, MoF MWR, MEP, MLR etc. -Resource recycling industry to be RMB3trn by 2020
-Target reclaimed water use rate in water scarce cities at 20%
Opinions on Promoting Waste Resource Utilization of Livestock June  2017 General Office of the State Council -Utilisation rate of livestock waste to reach 75% by 2020
Plan of Banning Foreign Trash Import & Promoting Administration System Reform of Solid Wastes Aug 2017 General Office of the State Council -Reduce imports of foreign trash
Notice on Jointly Carrying out the Clean Up & Rectification of Recycling Sectors Sept 2017 MEP, NDRC, MIIT, MPS, MoC, SAIC -Incl. e-waste, plastics & clothes
Opinions on Promoting the Construction of Resource Recycling Bases Dec 2017 NDRC, MoF, MoHURD -Increase reuse rate >30% by 2020

 
China is serious about cleaning up. There are even signs that the Soil Ten Law could be enacted this year to support the Soil Ten Plan and complete China’s triage of pollution control laws. It’s best to stay up-to-date in this rapidly shifting regulatory landscape.


Further Reading

  • Two Sessions, Five Highlights For Water - An ‘ecological civilisation’ is now embedded in China’s constitution and ministerial reform has been tabled. Find out what these mean for water in our review of this year’s Two Sessions. Pay attention or risk being blindsided
  • Is China Taking Over Global Leadership On The Environment? - Top experts, from the founder of TECONET to the Head of Asia-Pacific for Bloomberg New Energy Finance, share their thoughts at a high level panel in City University of Hong Kong. Their Sadhika Nanda reviews
  • China Steps Into Soft Power Vacuum - As the US retreats, Asit Biswas and Cecilia Tortajada explore how China is becoming the world’s leading soft power, from infrastructural development to research progress, and hurdles it faces ahead
  • Sustainable Finance – Hong Kong Is Ready! - Is Hong Kong ready to embrace sustainable finance? RS Group’s Leonie Kelly, Tze-wei Ng and Alicia Lui share findings from the Sustainable Finance Initiative’s first market-survey
  • Water Efficiency Policy: A Technological High-Water Mark? - From biomimicry to data analytics, Singapore is developing new technology to produce clean water without sinking the environment. Lee Kuan Yew School of Public Policy’s Tommy Kevin Lee and Cecilia Tortajada expand
  • Blue Skies & 13FYP Green Development – Air pollution and the battle on “blue skies” was by far the major environmental focus at China’s Two Sessions. Water and soil are no less important but yet softer and more general targets were set for them. See China Water Risk Hongqiao Liu’s review for the key takeaways
  • 5 Regulatory Trends: From Enforcement To Finance - Since 2016, China’s environmental policy landscape has undergone a series of important changes. CWR’s Xu summarises key regulations & 5 trends you need to know, from greater enforcement to green finance
  • Key Water Policies 2015 – 2016 - Over the last year China has released multiple of key water-related policies ranging from tackling the war on pollution, monitoring, food & energy security, green finance to promoting circular economies and more. Stay on top of them with China Water Risk’s review
  • 8 Game-Changing Policy Paths - There has been a fundamental shift in planning China’s future growth with changes in regulatory landscape due to multiple polices set & changes in law. Many come into full effect in 2015. Get on top of these policy shifts
  • 2016 State of Environment Report Review - The signs are positive for China’s environment in 2016. Groundwater quality improved after 5 years of decline though there is mixed news for rivers & lakes. Is the tide turning in China’s ‘war on pollution’?
Woody Chan

About Woody Chan

Born in Hong Kong, Woody graduated from the University of Cambridge in June 2016 with a BA in Geography. His travels across Eurasia pointed him towards the nexus between environmental risk and global business. In particular, he is concerned with the extent and effects of wastewater discharge in China – the topic of his dissertation. At China Water Risk, Woody undertakes multiple research streams ranging from water stress in the HKH region to water issues in China’s mining and data centre industries. Moreover, he assists in the publication of the monthly newsletter and will be responsible for future updating and revamping of China Water Risk’s website. Also proficient at GIS mapping, he hopes to embark on a career which helps tackle climate change from a business and financial perspective.

Read more from