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Market-Based Policy Instruments for Water Pollution Control in China (Draft Final Report)

Market-Based Policy Instruments for Water Pollution Control in China (Draft Final Report)

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Market-Based Policy Instruments for Water Pollution Control in China (Draft Final Report)
Market-Based Policy Instruments for Water Pollution Control in China (Draft Final Report)

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04/06/2014

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The water pollution control system in the PRC consists of several integral elements,
including water environment management, water pollution control policies and
pollution abatement measures. It has undergone continuous improvement.

1.2.1 Improved Management of the Water Environment

According to the current institutional arrangements, management of the water
environment involves such agencies as the Ministry of Environmental Protection,
Ministry of Water Resources, National Development and Reform Commission,
Ministry of Finance and Ministry of Construction. MEP and MWR are the two
agencies with primary responsibility. MEP is supposed to be responsible for
coordinated management, but it does not have basin-based coordination organs
although the five regional environmental supervision centers for the eastern,
southern, north-western, south-western and north-eastern PRC perform the duty of
environmental supervision for the respective regions. The Ministry of Water
Resources is responsible for managing the water resources in the river basins.
Under the direct administration of MWR are the river basin management agencies
for the seven major watersheds of Yangtze, Yellow, Hai, Liao, Huai, Pearl, Songliao
and Tai Lake. As subsidiaries of the MWR, these river basin commissions exercise
administrative functions over the respective river basins on behalf of the MWR.

The National Development and Reform Commission (NDRC) is charged with the
responsibility for technological and economic policies for environmental protection. It
also reviews and approves water pollution control projects within the basins,
including urban sewage treatment plants and industrial pollution abatement projects.
The Ministry of Finance (MOF) is responsible for formulating environmental
protection-related fiscal policies. The Ministry of Construction (MOC) provides
guidance on urban water supply and water conservation, construction of wastewater
treatment plants and the development and protection of groundwater within urban
areas.

The existing management regime over the water environment has many problems

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needing improvements. They include: i) duplication of mandates among the various
agencies; ii) entangled relationship between water resource development and water
pollution control; and iii) ununified management systems between the river basins.

1.2.2 Improving Water Pollution Control Policies

Water pollution control policy landscape in the PRC has shown gradual
improvements with the use of common and specialized policy instruments. At the
center of the policy landscape are the “command and control” instruments such as
“three simultaneousnesses”, discharge standards, total pollutant discharges control
and discharge permits, characterized by administrative coercion. Tangible results
have been accomplished. A classification of China’s water pollution control policies
is summarized in Table 1-6.

Table 1-6: Classification of China Water Pollution Control Policies

Nature

Target Sectors

Industrial Sources of Pollution

Agricultural
Sources of
Pollution

Urban Residential and Tertiary
Industry Pollution Sources

Coercive
(Mandatory)
Policies

Basin water pollution control planning;
Environment impact assessment and the
“three simultaneousnesses”;
Total pollutant discharges control;
Discharge permits;
Plant closure and suspension of
production

Basin water
pollution control
planning

Basin water pollution control
planning;
Environment impact assessment
and “three simultaneousnesses”;
Discharge permits

Economic
Policies

Pollution levies;
Wastewater treatment tariffs;
Ecological compensation pilot programs;
Emission trading pilot programs

Pollution levies;
Wastewater treatment tariffs

Public
Participation
Policies

Public reporting and grievance hotlines

Public reporting and grievance
hotlines

Incentive
Policies

Centralized sewage treatment

Centralized sewage treatment

A review of the policies can easily reveal: i) China’s water pollution control policies
focus on the industrial sector; water pollution control for the agricultural and urban
sectors is the extension and application of the industrial pollution control policies and
has many gaps; ii) the existing water pollution control policies have a heavy reliance
on the role of government, with the heavy use of coercive instruments; there is a lack
of clear guidance and direction for enterprises and the general public to participate in
water pollution control, and hence inadequate use of effective economic,
participatory, incentive and voluntary policies; iii) from the stages of intervention,
preventive policies include river basin water pollution control planning, environmental
impact assessment and the “three simultaneousnesses”, total pollutant discharges
control; an example of the middle stage policies is discharge permits; the end-of-pipe
policies entail pollution levies, centralized wastewater treatment, plant closures and
suspension of production. It is apparent that the existing water pollution policies have

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placed heavy emphasis on pollution control in the industrial sector on the one hand,
and on the other hand on end-of-pipe measures, with inadequate attention to early
prevention and middle-stage management. With the release and strengthening of
river basin water pollution control plans and the effective implementation of the EIA
system, the situation is gradually improving.

1.2.3 Deepening Water Pollution Control Measures

Water pollution control in China is achieved through the implementation of total
pollutant discharges control, pollution control for key watersheds and special
campaigns.

A) Total Discharges Control for Major Pollutants

The 11th

FYP (2006-2010) put forth the target of reducing the total discharges and
emissions of major pollutants in the country as a whole by 10% over five-year period.
By 2010, the total amount of COD discharges will be reduced from 14.14 million tons
at the end of 2005 to 12.73 million tons by the end of 2010. The specific control
measures include the following:

Control at Entry

MEP requires that any proposed project will not be approved if it discharges heavy
metals and persistent organic pollutants (POPs) into a key lake or nitrogen and
phosphorus into a closed or semi-closed water body. The environmental
requirements for iron and steel, iron alloy, coking, calcium carbide, copper refinery
and automobile industries will be strengthened such that any proposed project will
be rejected if it does not confirm to the national industrial policy and environmental
protection requirements. Conditional approval will be given to a proposed project if
the region or proposing enterprise has any of the following problems: i) not meeting
the prescribed discharge targets; ii) not meeting exceeded the total pollutant
discharges control limits; iii) having salient environmental violations; iv) state-level
monitoring stations violating ambient water quality standards; v) not completing the
target of eliminating production capacities with outdated technologies. In the
meantime, newly constructed projects that do not comply with “three
simultaneousnesses” will be shut down. Strategic EIA is required for plans on
economic development, urban and rural development, resource development,
tourism development, cultivation and breeding, and navigational development.

Strengthening Industrial Pollution Control

One of the policy measures is to enforce water pollutant discharge standards and
total pollutant discharges control and to expand the use of pollution discharge
permits. Since 2008, all enterprises have been required to possess a valid pollutant
discharge permit. Those without a permit will not be allowed to operate. Others
exceeding the permitted discharges will be order to suspend or cease operation. The

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priority is to strengthen supervision of the key enterprises, who account for 65% of
the COD of the industrial sector, for meeting the discharge standards and for
reducing their discharges. Small-scale pulp and paper, brewery, chemical, textile
and dying factories (nicknames “five small’s”) have been phased out or closed down.
Enterprises that cannot meet the discharge standards of the prescribed key
pollutants within a specified period are ordered to cease operation for immediate
rectification.

Enterprises are required to adopt measures to conserve, recycle and reuse water.
Thresholds of wastewater discharge volumes for high-water-consuming enterprises
are released. Pollution abatement and technological transformation is promoted for
pulp and paper, brewing, chemical, textile and dying industries. Wastewater reuse
and recycling is encouraged for iron and steel, power, chemical and coal industries.
Stringent monitoring of the quantity and quality of industrial wastewater that is
discharged into urban wastewater treatment plants is carried out, in order to ensure
that proper operation of the urban wastewater treatment plants. Inspections are
conducted of chemical enterprises located along waterways for discharges of toxic
and hazardous wastes. The monitoring data are published on a regular basis, with
the aim to supervise the operation of the wastewater treatment facilities, prevent
pollution accidents and improve emergency preparedness and response.

Speeding Up Construction of Urban Wastewater Treatment Plants

According to a mandatory target of the 11th

FYP for environmental protection, all
cities are required to have operational sewage treatment plants by 2010 with a
minimum rate of 70% for centralized sewage treatment. By then, the total sewage
treatment capacity for the country as a whole will reach 100 million tons/day.
Supervision of urban wastewater treatment plants has been strengthened to ensure
that their discharges will meet the applicable standards. Sludge from sewage
treatment plants is required to be properly disposed in centrally planned facilities,
including the implementation of stabilization and detoxication measures. Water-short
cities are ordered to achieve a minimum of 20% for water reuse and recycling. All
cities within a watershed will begin the collection of wastewater tariffs if they have not
done so.

All sewage treatment plants are required to have facilities to remove nitrogen and
phosphorus. All operational sewage treatment plants in the Tai Lake basin were
ordered to retrofit nitrogen and phosphorus removal by the end of June 2008. The
deadline for sewage treatment plants in other watersheds is set for the end of 2010.

Controlling Rural Sewage and Non-Point Source Pollution

Organic and green agriculture will be promoted, along with balanced fertilizer
application and integrated pest management, to reduce the use of chemical
fertilizers and pesticides. Areas are delineated for banning livestock and poultry
breeding. Livestock and poultry farms that cannot meet the discharge standards

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within a specified timeframe will be closed. All urban centers and concentrated rural
settlements were required to put in place sewage treatment facilities by the end of
June 2008.

Ensuring Safety of Drinking Water

The environmental conditions of the water supply source areas will be investigated.
Drinking water safety plans and management guidelines as well as environmental
protection plans for drinking water supply source areas will be prepared. Soil erosion,
water resource restoration and non-point-source pollution control will be
strengthened. Construction of enterprises causing heavy water pollution, including
chemical, pulp and paper and dying, will be prohibited in drinking water supply
source areas. Wastewater discharge outlets into drinking water supply source with
class one protection will be eliminated. A deadline will be given to the closure of
projects newly built or expanded within drinking water supply source areas with class
two protection since 2000. No ports that load and unload toxic and hazardous
substances will be allowed within drinking water supply source areas with class two
protection. Drinking water supply safeguard and emergency response system and
interagency coordination mechanism will be established, along with increasing the
frequency of monitoring. Groundwater pollution survey will be carried out;
groundwater protection plan if used as drinking water supply source will be
formulated. Attention will be paid to the research and prevention of water pollution by
persistent organic pollutants (POPs).

B) Pollution Control for Key Watersheds

During the 11th

FYP, pollution control for key watersheds has progressed steadily.
With the approval by the State Council, the 11th

FYPs for water pollution for “three
rivers”, “three lakes”, Songhua, Three Gorges Reservoir on the Yangtze and its
upper reaches, and Xiolangdi Reservoir on the Yellow River and its upper reaches
are under active implementation. Land clearing for the Three Gorges Reservoir area
was completed for maintaining the water quality of the mainstream Yangtze in time
for reaching the 156-m storage level.

In January 2008, the then State Environmental Protection Administration (SEPA)
and National Development and Reform Commission (NDRC) jointly issued the
“Pollution Control Plan for Three Gorges Reservoir and Its Upper Reaches”
(Revised)”. In April 2008, MEP, NDRC, MWR and MHURD jointly released the
“Water Pollution Control Plan for Huai, Hai, Liao, Chao Lake, Dianchi Lake and
Upper and Middle Yellow (2006-2010)”. MEP, together with NDRC, formulated the
“Master Plan for Comprehensive Rehabilitation of Tai Lake Basin”, which was
approved by the State Council in May 2008.

C) Special Campaign for Water Pollution Control

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Since July 2008, a new round of “environmental protection storm” was initiated. It
has involved the joint action of eight central agencies, including the MEP, NDRC,
Ministry of Supervision, Ministry of Justice, MHURD, State Administration for
Industry and Commerce (SAIC), State Administration of Work Safety (SAWS) and
State Electricity Regulatory Bureau (SERB).

The eight ministries issued a joint announcement on “environmental protection
campaign to deepen violating enterprises and protect public health”. The priority is to
rectify pollution to the water quality of drinking water supply sources to ensure the
quality of all drinking water supply sources meeting applicable standards. Inspection
was carried out for 113 key cities for environmental protection. The long-term
violating pulp and paper enterprises will be closed down permanently. Outdated
technologies and equipment will be phased out and destroyed to prevent pollution
migration. An urban WWTP that cannot reach 60% of its design capacity more than
one year after completion will be given a probationary to rectify. During the
probationary period, approval of EIAs will be suspended for the project region.

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