PART 2. CHINA’S ENVIRONMENT AND DEVELOPMENT POLICY CHANGES (2007-2008)

　　The past year[2] witnessed a turning point in environment and development undertakings in China. In October 2007 the 17^th CPC Congress set out guiding principles for handling the relationship between the two, and for future policy making. The year 2008 represents a critical year of transition, in which action for the shift of the economic growth model, and building of an energy-saving, environmentally friendly and well-off society must speed up. Starting from the end of 2007, besides implementation of existing policies and targets in the 11^th Five Year Plan, the Chinese government has accelerated energy conservation, and emissions reduction, releasing a series of major policies and measures to address pressing issues.

 Guidelines for Development and Environmental Protection

　　The Communist Party of China (CPC) 17^th Congress Report serves as a guiding document for future development in China, including environmental protection. It is pointed out that future development in China needs to be guided by the concept of scientific development, sustainable development and a development approach featuring growth, prosperity and a sound ecological environment. It also stresses the need to build an energy-saving and environment-friendly society, to achieve both growth and structural readjustment, and harmony between people, resources and environment so that people can enjoy a sound and healthy ecological environment and achieve sustainable economic and social development.

　　The 17^th CPC Congress also has indicated that an Ecological Civilization is the new requirement for building an all-round well-off society: forming industrial structures and growth and consumption models that save energy and protect the ecological environment. Circular economy needs to be applied on a larger scale, and renewable energy needs to take up a significant proportion in the energy total. Emission of major pollutants needs to be under control, with considerable improvement of the ecological environment. The idea of building an ecologically sound society needs to be firmly established.

　　The Congress’ Report put environmental protection at an unprecedented level of attention, indicating that environmental protection has entered a historical transition period. The idea is to integrate environmental protection into the overall development planning, explore ways to achieve harmonious development and a sound ecological environment; address environmental problems at a macro level, promoting economic development and environmental protection at the same time; extend environmental protection into all aspects of production and establish a comprehensive pollution prevention and control system; and align environmental protection and improve living standards.[3]

 Framework and Thoughts for Environmental Protection

　　The State Council released the 11^th Five-Year Plan for National Environmental Protection (“the Plan”) on Nov 22, 2007. Based on principles of prioritizing, measurable counting, quantitative assessment, the major indicators are reduced from 27 in the 10^th Five-year Plan to 15 in the current Plan, including two indicators for aggregate control and three for environmental quality (see Table 1). The Plan centers on the solution to urgent environmental problems that hamper public health and sustainable economic and social development; emphasizes overall planning; targets 10% reduction of all pollutants; stresses pollution prevention and control as top priority; seeks safe drinking water for all residents; and develops overall planning. It proposes objectives, tasks and measures for 8 major concerns, including water, air, solid waste, ecological environment, rural pollution prevention and control, marine environment, nuclear and radiation-related environmental safety, and regulatory capacity.

　　According to the Plan, an investment of about 1.35% of the GDP is needed to attain the environmental objectives that have been set. The Plan identifies 10 major projects based in the 8 areas of concern: capacity building in environmental regulation, disposal of hazardous and medical waste, chromium residue treatment, urban sewage treatment, urban waste disposal, water pollution prevention and control in major rivers, sintering machine off-gas desulphurization in coal-burning power plants and steel industry, building of major ecological zones and nature reserves, rural environmental protection actions, nuclear safety and radiation.

　　The Plan requires improving monitoring and analyzing of greenhouse gas emissions, identities emission reduction targets and measures, and encourages adaptation to climate change. The Plan also proposes the following measures to support implementation: coordinating regional development and environmental protection; speeding up economic structural readjustment by institutional improvement, accountability and innovation; increasing investment; strengthening rule of law and regulation; developing environmental industries via technologies; mobilizing social support; and actively engaging in international environmental cooperation. It is also required in the Plan that governments at all levels fully perform their duties and make very real efforts to achieve accountability. Inter-departmental cooperation needs to be strengthened; assessment mechanisms shall be set up, with the information disclosure of major pollutant discharges every 6 months, for mid-term and final assessment of implementation of the Plan; stress shall be laid upon implementation and assessment.

　　

	Indicators	2005	2010	Increase during the 11th Five-year Plan
1	Total COD emission (10,000 tons)	1414	1270	-10%
2	Total SO2 emission (10,000 tons)	2549	2295	-10%
3	Ratio of surface water in state-controlled sections inferior to water quality Category V (%)	26.1	＜22	-4.1%
4	Ratio of state-controlled sections in 7 major rivers over water quality Category Ⅲ (%)	41	＞43	2%
5	Ratio of major cities with more than 292 days of air quality over Category II (%)	69.4	75	5.6%

　　

　　Table 1. Indicators of environmental progress in 11^th FYP.

　　The 2008 Government Work Report listed environmental priorities for the year, emphasizing that, in a year critical to attaining the binding reduction targets of the 11^th FYP, intensive efforts must be made for better results in the following areas:

　　(1)　 Phase out outdated technology/infrastructure in power generation, steel, coal, paper making, while also building advanced capacity in these industries.

　　(2)　 Pay special attention to energy conservation in major enterprises and development of major projects; speed up implementation of energy conservation in the 10 major projects; boost urban sewage treatment capacity with an aim to collect and treat all sewers in 36 major cities; raise discharge fees, sewage treatment fees and waste disposal fees; improve and strengthen construction standards, promoting innovation in materials for walls and energy conservation; steadily promote urban heating delivery system and utility reform.

　　(3)　 Develop and promote technologies in saving, substituting and re-using energies and controlling pollution; apply key technological breakthroughs and carry out demonstration projects; develop energy-saving service industry and environment-related industry; explore clean and renewable energy such as wind and solar energies.

　　(4)　 Improve the prevention and control of pollution in the Three Rivers and Three Lakes, water diversion source areas and downstream areas, the Three Gorges Dam region and the Songhua River region, among other major river basins; implement the Master Environmental Plan for the Bohai Sea; put in place more stringent national discharge standards for major rivers.

　　(5)　 Protect sources of drinking water in rural areas; promote control of pollution caused by households and industrial pollution in rural areas; and strengthen control of pollution from animal husbandry and aquatic farming.

　　(6)　 Encourage and support developing Circular Economy; promote recycling, reusing, and clean production.

　　(7)　 Protect and make intensive and economic use of resources such as land, water, grassland, forest, and minerals; rigorously penalize those illegally exploring mineral resources; protect and properly use marine resources to develop marine economy; invest more in basic research in meteorology, seismology and mapping, and strengthen capacity building in these areas.

　　(8)　 Implement national plans to respond to climate change and strengthen capacity building in this aspect.

　　(9)　 Improve the incentive system for energy conservation and environmental protection; enforce monitoring and accounting systems for energy conservation and emission reduction, improve auditing and inspection systems; strengthen law enforcement and accountability.

　　(10) Raise social awareness for preserving a sound ecological environment, and mobilize the public to commit to an energy-saving and environmentally friendly society; recognize the need to persist through generations in order to achieve a green and clean living environment.

　　　  On July 1,^, 2008, Premier Wen Jiabao presided over the State Council working group meeting for energy conservation and emission reduction, at which the following priorities were identified for the attainment of the targets:

　　(1)　 Strengthening assessment and appraisal of responsible parties in their accomplishment of targets; disclosing results for public supervision; and, for the parties who fail to attain targets, explaining the reason for failure and proposing corrective measures.

　　(2)　 Resolutely containing the rapid growth of industries featuring high energy consumption and emission; enforcing regulations on new projects and strengthening land use review and approval; energy conservation assessment and review and environmental impact assessment; implementing stricter EIA to restrict the number of projects in a given region; strengthening management of production permits; and continuing to restrict the export of products featuring high energy consumption and emissions, and heavy resource reliance.

　　(3)　 Accelerating the phase-out of outdated technology/infrastructure. Shutting down small heat and power plants with a total capacity of 13 million KW, and phasing out outdated capacity in such industries as cement, steel, iron, electrolyzed aluminum, iron alloy, small coking, calcium carbide, plate glass, paper making, etc.; implementing regular reporting and checking in the phase-out.

　　(4)　 Focusing on key projects on energy conservation and emission reduction. Allocating state funds to support the 10 major energy conservation projects, including the development of urban sewage treatment facilities and supporting drainage networks, treatment of industrial waste water in major rivers and capacity building in energy conservation.

　　(5)　 Stressing key areas to ensure that at least 80% of new construction projects meet the compulsory energy conservation standards by the end of 2008; establishing standards for limiting the fuel consumption of transportation vehicles and vessels.

　　(6)　 Speeding up the development and promotion of technologies in treatment and control of water pollution; promoting key technologies with great potential and wide application in major industries and areas.

　　(7)　 Facilitating development of circular economy and preparing plans for developing circular economy in key industries and areas; drafting incentive policies, and establishing and improving accounting systems in this area.

　　(8)　 Strengthening information management. Making public the list of flue gas desulfurization power plants to be built this year, and releasing information concerning their construction at year end; establishing as soon as possible an information system for urban sewage treatment management, an online monitoring system for urban waste water discharge and treatment facilities, a system for inspection and notification; strengthening the urban water discharge permit system and the waste water treatment licensing system; ensuring that the major 113 cities that adopt centralized supply of drinking water meet all the key requirements for the protection of surface water sources.

　　(9)　 Adopting economic policies helpful to energy conservation and emission reduction. Properly pricing resource-reliant products, improving regulations on pricing of power produced by biomass; carrying out discharge fee reform; initiating reform of a user fee in mineral resources.

　　(10) Further improving rules, regulations and standards regarding energy conservation and emission reduction.

　　(11) Strengthening supervision and administrative enforcement.

　　(12) Initiating a campaign of “everyone for energy conservation and emission reduction” throughout the nation.

 Major Environmental Policies and Supporting Measures

　　The first session of the 11^th National People’s Congress (NPC) in March 2008 adopted the reform proposal to establish the Ministry of Environmental Protection (MEP). On April 23, 2008, MEP released its Work Rules of MEP, positioning itself as a State Council agency responsible for environmental protection across the nation. These Work Rules focus on the shift of functions, strengthening macro-regulation, coordination, supervision, and public service. Its functions include planning and coordinating environmental efforts; drafting and implementing environmental plans, laws, regulations, policies and standards; preparing environmental functional zoning and conducting environmental quality monitoring and assessment in prevention and control of pollution, ecological preservation, nuclear and radiation safety; and addressing key environmental problems. On June 25, the Standing Committee of the State Council reviewed and adopted the Rules of Procedures, reorganization and staffing of the new ministry, based on which three new departments of environmental monitoring, aggregate control, and information and education are added, with a total new staff of 50 people.

　　To ensure the attainment of environmental objectives for the 11^th Five-Year Plan, the MEP prepared the Plan for National Environmental Regulatory Capacity Building in the 11^th Five-year Period. The Plan was jointly approved by NDRC and the Ministry of Finance and released as Development, Reform and Investment Document No.639 [2008]. The Plan sets aside an investment of RMB 14.959 billion, with 7.847 billion from central budget, for 50 major projects. It focuses on the development of a current environmental monitoring and early-warning system and a sound environmental enforcement and regulation system, coordinating efforts in monitoring and inspection of nuclear and radiation matters, research, information collection and analysis, and education.

　　The Capacity Building Plan identifies 13 tasks:

　　Improving environmental quality monitoring network; strengthening regulating capacity for source regulation; enhancing emergency monitoring capacity; stepping up monitoring capacity in nuclear and radiation matters; promoting standardization of environmental inspection agencies; developing automatic monitoring system for major state-controlled sources; improving nuclear and radiation regulation capacity; strengthening regulation capacity in solid waste treatment; enhancing stewardship of nature reserves; improving infrastructure and working conditions in national environmental agencies; developing a research platform; strengthening standardization of environmental information and education agencies; and stepping up capacity building in environmental information collection and analysis.　

 2. Developing Supporting Measures and Achieving Initial Results in Energy Conservation and Emission Reduction

　　Environmental protection during the 11^th Five--Year-Plan period is centred around energy conservation and emission reduction. In 2007, preliminary achievements were made in this regard, with a 3.27% cut in energy consumption per capita GDP, a reduction of 89.8 million tons of standard coal, and reductions of 4.66% and 3.14% in SO₂ emission and COD, the first time in recent decades.

　　On Nov 17, 2007, the State Council issued the Scheme for Implementation of Per Unit GDP Energy Consumption Indicator System, the Scheme for Implementation of Per Unit GDP Energy Consumption Monitoring System, and the Scheme for Implementation of Per Unit GDP Energy Consumption Evaluation System (referred to as the 3 Schemes), the Measure for Calculating Reduction in Aggregate Emission of Major Pollutants, the Measure for Monitoring Reduction in Aggregate Emission of Major Pollutants, and the Measure for Evaluating Reduction in Aggregate Emission of Major Pollutants (referred to as the 3 Measures); a joint effort by the NDRC, Bureau of Statistics, SEPA and other competent agencies. Energy conservation and emission reduction performances are integrated into the overall assessment system for social and economic development, as a major performance assessment indicator for government officials and enterprise executives. In combination with a stringent accountability system, this should serve as a major basis and institutional guarantee for achieving targets of energy conservation and emissions reduction in the 11^th Five-Year-Plan.

　　On July 7, 2008, in accordance with the State Council rules and regulations on the monitoring and assessment of energy conservation and emission reduction, MEP, together with NDRC, Bureau of Statistics, Ministry of Supervision, completed an assessment of reduction in total major pollutants in all provinces, autonomous regions, municipalities and five major power generation corporations, and made the following decisions: suspending EIA approval of new development projects with COD emissions in Yingtan of Jiangxi Province, Sanya of Hainan Province, Hechi of Guangxi Province and Yuxi of Yunan Province; suspending EIA approval of all thermal power generation projects of Huarun Power Holding Co. Ltd., Guizhou Jinyuan Co. Ltd., and Shanxi Power International; and issuing penalties to 7 power plants including Shajiao B power plant under Shenzhen Energy Group.

　　Nationwide, coal desulphurization facilities of a total capacity of 120 million kw were put into operation; urban daily sewage treatment capacity rose by 13 million tons; total COD emissions was down by 13.818 million tons, 3.2% lower than that of 2006; SO₂ emissions declined by 4.7% compared with 2006 to 24.681 million tons. SO₂ emissions from the power generation sector decreased by 9.1% from that of 2006, with a 13.2% cut in SO₂ emissions by the five major national power corporations. For the first time, China realized reduction in both emissions.

　　On July 27, 2008, NDRC released the notice on the assessment result of energy conservation target performance for 2007, disclosing information of 30 provinces, autonomous regions and municipalities: among good performers were Beijing, Tianjin, Liaoning, Shanghai, Jiangsu, Shandong; and poor performers included Shanxi, Inner Mongolia, Hainan, Guizhou, Ningxia and Xinjiang, with the rest in between. For the progress toward achieving conservation targets of the 11^th Five-Year-Plan, Beijing and Tianjin acheved 40%; 15 regions including Fujian, Shanghai, Shannxi 30%; 10 regions including Yunnan, Sichuan, Hunan, Chongqing, Hebei, Guizhou, Inner Mongolia, Shanxi, Jilin, Ningxia between 20% and 30%; and Xinjiang, Hainan and Qinghai less than 20%.

　　To enhance energy efficiency, mitigate pressure from oil and power supply, and promote sustainable development, on Aug 1, 2008 the State Council issued the Notice on Further Promoting Economy in Oil and Electricity Consumption (State Council No.2008[23] ). The Notice pointed out that to address China’s energy problems, the key lies in conservation, and development with conservation as priority. At present, importance shall be placed in major equipment and products with extensive application, huge potential and immediate results, such as automobiles, boilers, motor systems, air-conditioners, and illumination. Comprehensive supporting measures shall be adopted to form effective incentive and constraint mechanisms, with promotion of energy conserving products and technologies for higher efficiency in oil and electricity use.

　　Five major measures for motor vehicles have been established:

　　(1)　 Strictly enforcing the phase-out mechanism. All motor vehicles in operation shall meet fuel consumption limit standards by 2013;

　　(2)　 Encouraging the use of low-fuel-consumption autos and clean-energy autos; further expanding tax rate differences for vehicles of different emissions levels; listing fuel-efficient and environment-friendly vehicles and clean energy vehicles on government procurement list; 

　　(3)　 Improving standards for fuel economy of vehicles and enforcing compulsory reporting, disclosing and labeling systems for vehicle fuel consumption;

　　(4)　 Strengthening conservation management of the transport sector;

　　(5)　 Promoting public transit systems; speeding up development of express bus and rail transport, enhancing connection of public transport, intra-region transport and inter-region transport and boosting efficiency of the public transit system. City governments shall increase investment and subsidy for the public transit system, with lower charges so as to encourage the use of the system.

　　Fuel-efficient measures for boilers (furnaces) have been established.

　　All thermal power plants (including newly built ones) shall adopt minimum petrol ignition technology and low load stable combustion technology for coal-burning boilers. China will continue to shut down oil-fired units as a major means to close small capacity thermal power plants. In power generation, oil-fired units shall only be used as supporting units. Investment from central budget and central fiscal funds shall be more supportive of oil conservation projects and oil-alternative projects.

　　Power-efficient measures for electric motor systems are being promoted.

　　(1)　 Accelerating the phase-out of low-efficiency motor systems and motor-driven equipments.

　　(2)　 Promoting high-efficiency and energy-saving motor systems and related equipment; those in compliance with the provisions of the Catalogue of Preferential Income Taxes for Enterprises Manufacturing Energy and Water Conservation Equipment shall enjoy the prescribed preferential treatment. Projects involving energy conservation for motor system shall be rewarded.

　　(3)　 Strengthening management of power conservation in motor systems; Formulating high-efficiency motor product standards and improving the compulsory energy efficiency standards and operation standards for motors and motor-driven equipment. Establishing motor-testing agencies, and including energy efficiency indicator as a key part of quality control for motor systems and related equipment.

　　Power-saving measures for air-conditioners have been introduced.

　　(1)　 Promoting air-conditioners with high energy-efficiency performance. Strictly enforcing compulsory national energy efficiency standards for air-conditioners as well as energy efficiency labeling rules. Implementing fiscal and taxation policies encouraging purchase of high energy-efficiency products, encouraging development of non-electric air-conditioners.

　　(2)　 Strengthening management of air-conditioning use by strictly enforcing temperature control in public buildings.

　　(3)　 Improving renovation and maintenance of existing air-conditioning systems.

　　Power-saving measures for illumination purposes.

　　(1)　 Speeding up the phase-out of low-efficiency products.

　　(2)　 Cutting urban power use for illumination purposes; 

　　(3)　 Improving management.

　　(4)　 Optimizing lighting systems operation through improving wiring and control modes.

　　(5)　 Using natural light whenever and wherever possible, and gradually installing automatic switches in public places.

　　Power-saving measures for offices. The Notice also requires promoting management of oil and electric power conservation in assessment and review of fixed asset investment projects, strengthening management of major oil and power users, improving power demand prediction management, implementing pricing policies for oil and power conservation promotion; accelerating technological innovation and application; enhancing supervision, strengthening enforcement, conducting information exchange and education campaigns, etc.

　　In a bid to discourage the production and consumption of high-emission vehicles and eventually to achieve the national emission reduction targets, the Ministry of Finance and the State Taxation Administration decided to readjust the automobile consumption tax rates, The new policy prescribes that the tax rate for vehicles with an emission of above 4 liters will be raised from 20% to 40%; the rate for vehicles with an emission between 3 liters and 4 liters from 15% to 25%; and vehicles with an emission of no more than 1 liter will be lowered from 3% to 1%.

　　On Aug 1, 2008, the State Council released the Regulations on Energy Conservation in Public Organizations, prescribing management standards for state agencies, and not-for-profit organizations fully or partly funded by the state budget. The Regulations stipulate that:

　　(1)　 Departments in charge of intra-organizational matters within the State Council or governments at and above the county level shall enact energy conservation planning for public institutions at the corresponding level, in accordance with the longer-term conservation plan by the government.

　　(2)　 Public organizations shall adopt an energy consumption measurement mechanism, distinguishing energy use types and systems; energy use shall be measured by accounts, by types and by items, with monitoring to identify and halt energy wasting; public organizations shall designate a specific person to take charge of energy use calculation, keep original energy consumption records and maintain statistical ledgers.

　　(3)　 The organization shall adopt a quota system for energy use. Energy quotas shall be put in place for overall consumption levels of different sectors and public organizations, and for the Ministry of Finance to formulate energy use expenditure standards.

　　(4)　 Priority shall be given to energy-saving products in government purchase. Public organizations shall purchase products and equipment listed in the government procurement catalogues for energy conservation and environmental labelling according to regulations.

　　(5)　 Conservation management for development projects shall be strengthened. Renovation of newly built and existing structures of public organizations shall follow relevant requirements and standards for energy-conserving buildings. Departments within the State Council or governments at or above the county-level in charge of approving fixed asset investment projects shall control the scale and level of development projects by public organizations, with full consideration of energy conservation investment and returns, and conduct project energy conservation review and assessment.

　　(6)　 Public organizations shall undergo energy audit, conduct technical and economic assessment of their energy-using systems, operation of equipment and energy use. Measures shall be taken to boost energy efficiency in accordance with the audit results. The Regulations also provide accountability measures for non-compliance.

　　The State Council also released the Regulation on Energy Conservation for non-government buildings.

3. Attention of Top Officials to Climate Change, with Interests in Low Carbon Economy

　　On Nov 9, 2007, the China Clean Development Mechanism Fund and its management centre were put into operation. Approved by the State Council, the Fund is a not-for-profit state equity fund that is policy-development-based, public welfare-oriented, long-term and open-ended, with the Ministry of Finance as its supervisory authority. The development strategy and major operations are decided by a Fund Review Council composed of the National Development and Reform Commission, Ministries of Finance, Foreign Affairs, Science and Technology, Agriculture, Environmental Protection, and the China Bureau of Meteorology. The source of funding is the state gains the Fund derives from the international cooperation in clean development projects under the Kyoto Protocol. Meanwhile, the Fund is proactive in seeking cooperation with other sources of funding, and based on this, it promotes the participation and coordination of government input, international assistance and cooperation funding as well as private funding in response to climate change.

　　The Fund uses donations, preferential loans and other instruments to support the state in capacity building, public awareness campaigns, mitigation of and adaptation to climate change, as well as the implementation of China’s National Plan for Coping with Climate Change. The Fund bases its operations on extensive domestic and international cooperation and plays the role of a cooperation platform for resources, funding, programs, actions and information exchange.

　　On June 27, 2008, the CPC Central Politburo held its sixth workshop presided by CPC General Secretary Hu Jintao, focusing on global climate change and capacity building for responding to climate change. Hu stressed the necessity and importance of full recognition of the need to respond to climate change, commitment to sustainable development, more effective policy measures and capacity building. Party branches and governments at all levels shall integrate climate change into development plans, take appropriate measures to boost organization and implementation capacity in response to climate change.

　　China, upholding the common but differentiated responsibilities identified in UNFCCC and the Kyoto Protocol, maintains that developed countries should take the lead in committing to emission reductions and providing funding assistance and technology transfer to developing countries. China also believes that developing nations should contribute to reversing climate change by pursuing sustainable development.

　　It was also stated that, in its response to climate change, China should focus on economic development, with priorities in energy conservation, ecological protection and development, and technological advances as supporting tools. China needs to control and mitigate greenhouse gas emission, boost its response capacity, enhance sustainability, and achieve economic growth and environmental protection.

　　It was decided that the following measures should be taken to address climate change:

　　(1)　 Implement measures to cut greenhouse gas emissions, commit to the basic national policy of energy conservation and environmental protection, adopt industrialization patterns with Chinese characteristics, shift growth models, conserve energy and boost energy efficiency, develop Circular Economy and Low Carbon economy, and increase forestry coverage.　 

　　(2)　 Improve climate change response capacity, strengthen basic development of farm land, rationally develop and optimize water resources, continue major ecological projects, and improve overall climate change impact assessment.

　　(3)　 Apply technological innovations, invest in R&D and application of major technologies, strengthen basic research, and promote international exchange and cooperation.

　　(4)　 Improve systems, mechanisms, laws and regulations regarding climate change, promote reform in energy management system and pricing, improve monitoring, early warning and response systems for various disasters, enhance multi-department decision-making coordination mechanisms, public participation mechanisms, and in particular, the capacity in comprehensive monitoring and early warning, in responding to extreme meteorological disasters.

　　(5)　 Encourage public participation in dealing with climate change by raising awareness and capabilities.

　　Low Carbon Economy is receiving increasing attention in policy discussions. Wan Gang, Minister of Science and Technology, pointed out at the 11^th CPPCC (Chinese People's Political Consultative Conference) session that to fight global climate change, new technologies must be adopted to cut emissions and conserve energy, and to build a low-carbon and carbon sequestration economy. During the annual CPPCC and NPC sessions, Wu Xiaoqing, vice Minister of MEP, noted that with the new international developments, China must act promptly to meet the challenges raised by the low-carbon economy, based on low energy consumption and low pollution. Wu also said that how to reduce the reliance on resources and energy consumption has now become a major challenge for China. Low carbon undoubtedly provides a new approach to sustainable development for China. It may well be the future for social and economic development, thus becoming a strategic choice in achieving energy conservation and emissions reduction, as well as fighting climate change.

4. Increased Investment in Environment, with Fiscal and Taxation Policies as Leverage

　　The Ministry of Finance (MOF) is adopting a series of policies to conserve energy and cut emissions:

　　(1)　 Setting up special funds and increasing funding in conservation and allocating more money for research and development through various programs. According to the Temporary Rules on the Management of Incentive Funding for Energy Conservation Technologies, companies will receive state financial grants if they initiate programs that help to reduce energy use by 10,000 tons of standard coal.

　　(2)　 Adjusting tax systems to encourage conservation, proper exploration and use of energy.  The government will expand the consumption tax coverage, and will collect tax on products causing serious pollution or using large quantities of resources, in an effort to let taxation play a larger part in conservation and emissions reduction.

　　(3)　 Improving government procurement policies by encouraging government agencies to take the lead in conservation.

　　(4)　 Strengthening the user fee system for resources, environmental deposit system, urban sewage treatment system, and the discharge fee system; promoting full cost accounting in energy to reflect the full cost; tapping into market mechanisms for conservation and reduction, such as pay-for-discharge-right and discharge right trading system; setting up trans-river ecological compensation mechanism; fully promoting the “pay for mining rights” system, and environmental and ecological accountability system for mining companies; and establishing carbon trading systems.

　　(5)　 Improving fuel tax reform schemes and imposing fuel tax at an appropriate time; subsidizing special industries and grain-growing farmers to create a stable environment for rationalizing prices of refined oil and to create conditions for a pricing mechanism conducive to efficient and economic use of fuel.

　　(6)　 Establishing special funds for renewable energy to support the development of renewable energy and new energy sources and to reduce reliance on traditional fuel. Developing supporting financial and taxation policies for restricted biofuel sources, thus avoiding impact on food security and grain price; speeding up the development of financial policies to encourage the use of crop residues (stalks and straw) as energy sources.

　　In 2008, the MOF set aside RMB 27 billion as special fund for conservation and emission reduction, including 7.5 billion for 10 major projects, 7 billion for sewage pipe network development in cities in the central and western part of China, 4 billion for phasing out outdated infrastucture, 5 billion for cleanup of the three rivers and three lakes as well as the Songhuajiang River, 3.5 billion for environmental monitoring capacity building and basic conservation work. In addition to the 14.8 billion from the Central Development Investment, a total of 41.8 billion is allocated from the central budget for energy conservation and emission reduction.　　

　　China had never before so extensively and systematically proposed and applied market mechanisms to address environmental problems as it did in the past year. The newly released Law on Energy Conservation and Law on Promoting Circular Economy both explicitly recommend the use of market mechanisms and economic measures to promote relevant programs. In particular, the new conservation law includes a chapter on incentive policies, stating that the state should adopt fiscal, taxation, pricing, credit policies and government procurement to promote energy conservation and industrial upgrading in enterprises, and prescribing a series of compulsory measures to restrict the development of industries featuring high energy consumption and high pollution, including compulsory energy efficiency labelling.

　　Green Credit Policy

　　In July 2007, SEPA, the Bank of China, and the China Banking Regulatory Commission (CBRC) jointly released the Proposal on Implementation of Environmental Requirements to Ward off Credit Risks. Following this, CBRC released the Notice on Warding off and Controlling Risks of Loans to Corporations with High Energy Consumption and Pollution in July, and the Guide on Credit Granting for Energy Conservation and Emission Reduction in November 2007, requiring that financial institutions cooperate with environmental authorities, implement national industrial policies aimed at restricting development of projects with high energy consumption and high environmental risks. Financial institutions and environmental departments in most regions responded positively to these policies.

　　Green Insurance Policy

　　On 18 February 2008, SEPA and the China Insurance Regulatory Commission jointly released the Proposal on Environmental Pollution Liability Insurance, as an experiment on pollution liability insurance practices. According to the road map, the two agencies will conduct pilot programs of liability insurance in businesses involved in production, sales, storage, transportation and use of hazardous chemicals; and in petrochemical corporations and hazardous waste disposal facilities most susceptible to pollution accidents; and in particular, in the corporations and industries that have caused major pollution incidents in recent years. During the 11^th Five-Year-Plan period, the aim is to establish a pollution liability insurance system, conduct pilot projects in major industries and regions, and establish a catalogue of environmental risk-based insurable sources and pollution damage compensation standards. The goal for 2015 is to improve the insurance system to make it applicable nationwide, and to strengthen this mechanism for risk evaluation, loss assessment, liability identification, incident response, and damage control.

　　Green Securities Policy

　　In February 2008, SEPA released the Proposal on Stepping Up Environmental Regulation on Listed Companies. Green Securities is the third environmental economic policy following Green Credit and Green Insurance. The Proposal will focus on: developing an environmental verification system and information disclosure of listed companies; containing excessive expansion of industries with high energy consumption and pollution; curbing capital risk; and pressing listed companies to improve their environmental performance. It requires that companies in thermal power generation, iron and steel, cement, electrolyte aluminum, and trans-provincial industries with high energy consumption and pollution (13 categories of heavy polluting industries), when applying for IPO or refinancing in the capital market, shall conduct environmental verification in line with SEPA rules. In accordance with China Security Regulation Commission’s Notice on the IPO Application Documents of Companies in Heavy Pollution Industries, such companies, in the application for IPO, must secure MEP’s verification approval; otherwise, the application will be rejected.

　　Green Trade Policy

　　On Feb 26, 2008, SEPA made public the first Catalogue of ‘High Pollution, High Environmental Risk’ Products, covering 141 kinds of products in 6 industries. Among them, 39 products including pesticide, paint, battery, and organic arsenic still enjoy export tax rebate. SEPA made recommendations to the MOF and the State Taxation Administration for canceling the tax rebate, and to the MOC and the Customs to ban the trade of such products.

　　Emission Trading Policy

　　Emission trading has been in practice in China for some years. The Government conducted a series of pilot programs in this regard. The Decision to Implement the Scientific Development Concept and Strengthen Environmental Protection in 2006 proposed that emission trading such as SO₂ trading could be conducted in appropriate places. Despite the absence of a national normative document governing emission trading, local governments are active in exploring this market mechanism to promote local environmental protection. In 2007 and 2008, many parts of China made substantive progress in emissions trading. Jiaxing of Zhejiang province, Shanghai, Beijing, Tianjin, Lvliang of Shanxi province, and Taihu area in Jiangsu province have established environmental trading exchanges, with substantive trading cases. Other places like Hubei province, Changsha city and Chongqing also issued regulations for emission trading. Within the framework of Sino-US SED, MEP has initiated the Sino-US pilot program in SO₂ emission trading, with Heilongjiang province confirming its participation in this pilot effort.

6. Improving the ronmental Legal System and developing more Laws and Regulations

　　Currently, China has 28 laws governing the protection of resources and environment, and 66 regulations enacted by the State Council, all of which provide a legal basis for the protection work. However, with economic development and change of time, loopholes in those laws and regulations emerge, resulting in heavy demand for revision. In 2007 and 2008, 3 laws have been revised and more regulations released.

　　Environmental Laws

　　The Energy Conservation Law of China, revised on Oct 28, 2007, has been in force since 1 April 2008. This revision identifies energy conservation as the nation’s basic policy at legal level, explicitly prescribing that “the nation shall implement the basic state policy of practicing energy conservation, and the energy strategy of ‘conservation and development with priority to conservation’.” China now adopts a conservation target responsibility system and conservation assessment system, incorporating conservation targets into the overall assessment of local governments and officials. The revised energy conservation law expands scope and operability, further defines clauses governing energy conservation in the industrial sector, and adds provisions of energy conservation in construction, transportation and public institutions in response to weak areas for energy conservation.

　　The revised Law on Prevention and Control of Water Pollution, adopted on Feb 28, 2008, came into force on June 1, 2008. The revised law says that “governments at and above the county level shall integrate water protection into economic and social development plans”, forming a legal basis for environmental protection in economic and social development, with a more detailed and improved management system for prevention and control of water pollution. The new version establishes the legal status for building accountable management systems and mechanisms for water protection, assessment, ecological compensation, discharge permit, restricted regions, legal assistance for water pollution damage proceedings, thus making the water pollution management system more effective.

　　It defines the responsibilities of local governments in water protection, establishes the accountability system for governments at and above the county level with regard to the water quality within their jurisdiction, integrates water protection targets into assessment of local governments and the officials in charge, and institutes more stringent legal liabilities for violators. It also increases financial penalties for violations substantially, removing fine ceilings for some violations; it covers more punishable actions by establishing sanctions for failure to perform duties in a responsible and effective fashion. It expands the enforcement authorities of environmental agencies, and grants agencies the authority to impose administrative sanctions in cases of excessive discharge or failure to meet discharge requirements within the designated deadline.

　　The Law on Urban Planning, revised and adopted on Oct 28, 2007, has been in force since 1 January 2008. The old version stresses guiding development, while the new edition emphasizes resource protection, covering arable land, natural resources, cultural heritage, scenery spots and places of historical interests, and includes an implementation plan.

　　The National People’s Congress (NPC) adopted the Law on Promotion of Circular Economy on August 29, 2008, which will come into effect on 1 January 2009. Circular Economy refers to all the activities of reduction, reuse and recycling in production, circulation and consumption. The Law has established 6 primary systems: planning system for Circular Economy; aggregate control system for containing resource waste and emission of pollutants; circular economy assessment system; producer-centered accountability system; system for regulating enterprises of high energy and water use; and an economic statistical system.

　　To meet reduction requirements, the Law covers areas including information disclosure, reducing resource consumption and waste generation in the designing, adopting advanced or appropriate water saving technology, formulating and adopting water saving plans, strengthening water saving management, adoption of overall planning in development of mineral resources, using processes that are efficient in energy, water, space and materials, as well as small-sized, light and renewable products in the design, construction and building of architectural structures; promoting intensive land use, encouraging and supporting the use of advanced farming, animal husbandry and irrigation techniques that save water, fertilizer and pesticide, giving priority to eco-agriculture and promoting energy saving agricultural machinery. State agencies and state funded organizations shall take the lead in using environmentally friendly products, equipment and facilities that save energy, water, space and materials; service-oriented businesses such as catering, entertainment, and hotels shall use environmentally friendly products that save energy, water and materials, reduce or stop the use of waste-generating products; the state encourages and supports the use of recycled water and restrict the production and distribution of disposable products.

　　To meet reuse and recycling requirements, the Law states that the industrial sector will promote cooperation among enterprises in comprehensive use of resources in an efficient and circular fashion. Industrial solid wastes, waste water, excessive heat, building materials waste, byproducts in agriculture, used agricultural plastic films, and forestry wastes shall be recycled and reused, and an information system for waste exchange shall be set up. The state encourages and promotes the establishment of waste recovery systems; strengthening management of electronic products recovery; recovery and remaking of motor vehicle parts, engineering machinery, machine tools and tires. Governments at and above the county level shall put in place an overall planning of facilities for sorted collection and recycling of urban and rural domestic wastes to boost recycling.

　　Normative Documents: Other Environmental Laws, Regulations, Standards

　　To ensure full and timely collection of discharge fees and correct noncompliance in the collection process, SEPA released the Rules on Discharge Fee Collection Inspection which took effect on December 1, 2007. In 2008, MEP issued a notice concerning discharge fees on waste water and gas.

　　On 10 December 2007, SEPA, MOC and MOST jointly released the Interim Regulations on National Ecological Industrial Parks which sets rules for the application, construction, management, naming, and acceptance check. The parks are designed based on the theory of Circular Economy, industrial ecology and clean production. The development of such parks helps to improve ecological environment in industrial parks, and promote the shift of growth model and development of new and high technologies.

　　On 31 December 2007, the State Council Office released the Notice on the Restriction of Production, Sale and Use of Ultra-thin Plastic Bags (SCO DOC 72, 2007), requiring that, as of June 1, 2008, the production, sale and use of ultra-thin plastic shopping bags shall be restricted; the approach of pay-for-use shall be adopted; supervision and inspection shall be stepped up; used plastics shall be recycled to the greatest extent possible. With the implementation of the restriction, plastic shopping bag use in department stores and supermarkets has dropped by more than 80%.

　　In November 2007, SEPA released The Rules on Monitoring Reduction of Major Pollutants. On Apr. 9, 2008, MEP released The Measures for Administration of Automatic Monitoring Equipment at Sources, which has become effective since May 1, 2008. The Measure requires the installation of automatic monitoring equipment at sources, which feeds information to the network of environmental agencies.

　　With respect to electronic waste, hazardous waste, nuclear management, prevention and control of marine pollution, protection of bio-diversity, normative documents were also released. The State Council started the revision of The Regulation on Prevention and Control of Marine Pollution Caused by Marine Construction Projects on January 1, 2008. To prevent and control pollution caused by electronic waste and improve environmental management, The Measures on Prevention and Control of Electronic Waste Pollution came into force on February 1, 2008. The MEP and NDRC jointly released the revised National Catalogue of Hazardous Waste, based on the Law on Prevention and Control of Solid Waste Pollution. It became effective on 1 August 2008. The Catalogue covers solid and liquid wastes that are corrosive, toxic, combustible , radioactive, infectious, or potentially hazardous; and that need to be handled as hazardous waste. Medical waste is identified as hazardous waste. To regulate the export of hazardous waste and prevent environmental pollution pursuant to the Basel Convention, SEPA released the Measures on the Regulation of Hazardous Waste Export on March 1, 2008.

　　With respect to nuclear safety management, a series of documents have been released, including the Rules on the Regulation of Imported Civil Nuclear Safety Equipment (HAF604), the Rules on the Regulation of Welder Qualification for Civil Nuclear Safety Equipment (HAF603), the Rules on the Regulation of Design, Manufacturing, Installation and Non-Destructive Testing of Civil Nuclear Safety Equipment (HAF601), and the Rules on the Regulation of Qualifications of Non-Destructive Testers for Civil Nuclear Safety Equipment (HAF602).

　　In 2008, the National Standard Committee will focus on the 82 national standards pursuant to the Law on Resource Conservation and the Law on Circular Economy, and the revision and implementation of the General Rules on the Building Standard System of Corporate Energy Conservation. There is also the need to intensify research on market entry standards such as energy efficiency standards for energy-consuming products and equipment, and energy consumption ceilings for high energy-consuming products, in order to achieve targets for energy conservation and emissions reduction. The National Standards Committee and the NDRC prepared the Plan for the Development of Resource Conservation and Comprehensive Utilization Standards 2008-2010. The plan proposes 1121 standards to be developed or revised for 2008-2010, including 676 national standards and 445 industry standards. The year 2008 has also seen the implementation of standards concerning motor vehicle emission, pesticide use, pollution control in landfills, and technical requirements for environmental products.

7. Environmental Information Disclosure and Public Participation

　　SEPA released the Rules on the Disclosure of Environmental Information on Feb 8, 2007 in order to ensure disclosure of information and encourage public participation. This has been in effect from May 1, 2008. It requires that environmental authorities make public 17 categories of governmental environmental information including laws and regulations, policies, standards, administrative permissions and administrative approvals. It also demands that sources with excessive discharges of pollutants shall disclose four categories of environmental information which shall not be withheld on the ground of business confidentiality. In addition, it encourages voluntary information disclosure. The Rules represents the first normative document on information disclosure as well as the first comprehensive departmental rules on environmental information disclosure released by the government following the State Council’s Rules on Disclosure of Government Information.

　　On Jan 30, 2008, SEPA issued a notice on the applicability of the Rules to EIA reports (EC No. 50 2008).

　　On May 6, 2008, MEP released on its official website the first MEP Categories for Information Disclosure and MEP Guide on Information Disclosure. MEP will make public 17 categories of information, and will respond to any public application for disclosure of environmental information within 15 working days from the day of application.

8. Emerging Environmental Concerns and Problems

　　Some unprecedented environmental challenges are emerging in the wake of urbanization and industrialization in China. This trend forces China to deal with more new environmental problems, such as ecological degradation and rural pollution, while dealing with industrial pollution. In the past year, some efforts have been dedicated to the new challenges by promulgating new regulations, launching new initiatives on research and surveys, and investing more money and human resources for handling new problems.

　　Ecological Preservation

　　On Dec 7, 2007, SEPA released the General Plan for the Protection of Major National Ecological Protection Zones, and the General Plan for the Preservation and Exploration of Animal Species. The Plan identified major objectives for the coming 15 years, with three stages for implementation. It also identified 12 key areas, including animals, plants, microbes, traditional knowledge, import and export management, together with some others. The Plan listed 10 priority actions and 55 priority projects for the 11^th Five-Year-Plan period, which provides the direction for financial support.

　　The General Plan for the Protection of Major National Ecological Protection Zones sets forth the guidelines, principles and tasks for the development of ecological function zones. The Plan points out that development activities are restricted within the protection zones. Building of the zones shall follow the principles of overall planning; phased development; commitment and sound organization; protection over development; avoidance of duplication; and a search for complementarity. The Plan is the first of its kind explicitly designed for capacity building, and represents the efforts of the NDRC and MOF in implementing the scientific development concept. With its implementation, the environmental regulatory capacity across the country has been greatly improved, making a stride towards a modernized, standardized and informed regulatory system with Chinese features.

　　Environment and Public Health

　　On November 6, 2007, the Ministry of Health and SEPA, together with 16 other ministries and commissions jointly released the National Action Plan for Environment and Public Health 2007-2015 (the Action Plan for short), an indication of China’s commitment to protection of public health and implementation of environmental protection as a basic state policy. The 17^th CPC provided historical opportunities to environmental protection, creating favorable conditions for work in environment and health. The Action Plan, as the country’s first guideline on environment and health, points out development directions and major tasks for environment and health, identifies roles and responsibilities for different departments, creating cooperation and coordination opportunities in promoting environment and health work. On January 20, 2008, the Action Plan was formally initiated.

　　Environment in Rural Areas

　　On Nov 13, 2007, the NDRC, the Ministry of Agriculture, the Ministry of Construction, the Ministry of Water Conservation, the Ministry of Land and Resources, SEPA, and the Bureau of Forestry jointly released the Proposal on Strengthening Rural Environmental Protection (No.63, State Council Office, 2007). It is a directive document following the 17^th CPC, for implementing the scientific development concept, building a harmonious society, and achieving economic, social, and environmental benefits at the same time.

　　The Proposal identifies 7 major rural environmental problems in need of solutions:

　　(1)　 Protection of sources of drinking water and improvement of water quality.

　　(2)　 Treatment of pollution caused by daily life.

　　(3)　 Industrial pollution in rural areas.

　　(4)　 Prevention and control of pollution caused by animal husbandry and aquatic farming.

　　(5)　 Control of non-point source pollution.

　　(6)　 Soil pollution control.

　　(7)　 Ecological preservation.

　　The Proposal lists the following as main objectives for 2010:

　　Containing the worsening pollution trend; improving environmental quality in drinking water sources; obtaining knowledge about the nation’s soil pollution and agricultural pollution sources and making progress in controlling non-point source (NPS) pollution; raising application rate of the soil-test-based fertilizer technology and the use of pesticides featuring high effectiveness, low toxicity and low residue by over 10%; improving water supply; ensuring more than 65% of rural toilets meet set hygiene standards; controlling serious health hazards; achieving preliminary results in controlling industrial pollution and household waste pollution; improving environmental regulation in rural areas; raising environmental awareness; better production and stewardship of the living environment. 

　　The objectives for 2015 are:

　　Considerable improvement in living and ecological environment; containing the worsening trend in NPS pollution; enhanced regulatory capacity and environmental awareness; coordinated economic, social and environmental development. For those objectives, the Proposal suggests the following 6 measures: (1) improving policies, regulations and standard system; (2) establishing and improving rural environmental management institutions; (3) increasing investment; (4) wide application of technologies; (5) enhancing environmental monitoring and regulation; and (6) promoting information, education and training.

　　Soil Pollution

　　On January 8, 2008, SEPA convened in Beijing the first meeting on prevention and control of soil pollution. The year 2008 will see the preliminary completion of the setup of a database concerning soil pollution in China, an information system of rules and regulations as well as standards on prevention and control of soil pollution as preparation for the drafting of the Law on Prevention and Control of Soil Pollution and including it into the NPC’s legislative agenda as soon as possible. On June 6, 2008, MEP released the Directive of Strengthening Prevention and Control of Soil Pollution which identifies the following major objectives:

　　(1)　 By 2010, complete a survey of soil pollution across the nation, with a comprehensive understanding of soil quality situation in China; establish an environmental monitoring network for soil; draft national and local plans for controlling soil pollution, formulate administrative framework for policies, rules and regulations; complete an action plan for conducting soil safety campaigns, resulting in enhanced public awareness concerning soil pollution prevention and control.

　　(2)　 By 2015, establish an administrative and supervisory system for soil pollution control, with the release of a series of laws and regulations and improvement in the standard system for prevention and control of soil pollution with contingency plans for soil pollution emergencies, improve soil monitoring network; enhance regulatory capacity, with considerable improvement in public awareness; implement prevention and control plans, and conduct research.

9. International Cooperation in Environment, and Consensus Building in Key Areas

　　In 2007, Climate change was an important issue in China and received extensive international cooperation. China was increasingly active in international efforts to cope with climate change. In December 2007, China took a proactive stance at the UN Convention on Climate Change held in Bali, and contributed to the formation of the Bali roadmap.

　　On July 9, 2008, Chinese president Hu Jintao was invited to the G8 summit, at which he made a speech on energy security for economic powers and climate change. Hu presented the guidelines, principles and measures in China’s response to climate change, noting that climate change problems, fundamentally development problems, shall be addressed within the framework of sustainable development; international cooperation in climate change shall proceed in the context of economic growth, social development and environmental protection, with economic development as the focus; sustainability as the goal; energy conservation and ecological preservation as priorities; and technological advances as back-up support. Such a framework should improve the capability of the international community in mitigating and adapting to climate change. Countries, differing from one another in terms of economic development, technological achievements and national realities, shall make their own efforts to achieve positive results in coping with climate change on the principle of common but differentiated responsibilities.

　　President Hu Jintao noted that three factors should be taken into account when looking at China’s emission problems:

　　(1) China, as a developing country in the process of industrialization and modernization, with imbalances in urban and rural development, regional disparity in social development and economic development, still faces the major task of improving people’s livelihood and developing economy. (2) Per capita emission level in China is low, and cumulative emissions even lower. (3) Changes in international division of labor and shifting of manufacturing activities to China have posed greater pressure for China.

　　Hu also elaborated on the measures China adopted for emission cuts. The Chinese government, responsible for its own people and people of the world, has been attaching great importance to climate change:

　　(1) It has identified ecological development as a strategic mission, emphasized the basic state policy for resource conservation and environmental protection, and tried to build an industrial structure, growth model and consumption pattern that preserves energy and resources and protects the environment. (2) It has taken energy conservation and emission reduction as the entry point in responding to climate change, and achieved positive results by taking a series of measure such as conserving energy, improving energy mix, enhancing energy efficiency and forestation. (3) China has been improving its capacity in adapting to climate change in areas such as agriculture, natural ecological systems, and water resources, giving priority to disaster prevention and relief and reducing loss resulting from disastrous and extreme weather conditions.

　　China has sent delegations to a number of international climate change meetings, for instance, China attended UNEP’s 10^th Special Council and Global Ministerial Environment Forum on Feb 20-22, 2008 in Monaco; it also participated in the legislators’ forum on climate sponsored by GLOBE International in Tokyo on June 28, 2008.

　　China’s breakthrough progress in many environmental protection areas often starts in bilateral and multilateral cooperation. In the past year, China worked closely with the US and Japan in addressing some international environmental problems of common concern and pressing environmental problems in China.

　　On Dec 12 and 13, 2007, China and the US held their 3^rd Strategic Economic Dialogue (SED) in Beijing, signed an MOU on Strengthening Cooperation in the Area of Converting Biomass into Fuel, and discussed the possibility of signing an MOU in fighting illegal logging and related trade problems to promote sustainable exploration of forests. China will initiate SO₂ emission trading in the power generation sector nationwide. The US will provide technical support for water pollution management projects and adoption of clean energy and its use in motor vehicles. The two sides reiterated their commitment within the WTO framework on “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services”.

　　On June 17 and 18, 2008, the two countries met at the 4^th SED in the United States Naval Academy in Annapolis, Maryland, USA, with the release of a joint statement covering the following: signing of a framework for cooperation in energy and environment in the coming decade; discussing ways of fully exploring energy security principles through dialogue; agreeing to cooperate with international energy institutions and agencies in areas of common concern to address energy security problems facing both sides, including global energy market, strategic oil reserve, energy diversification, energy efficiency and clean energy technology; agreeing to share information and experience in the reuse, disposal and regulation of wastes; consenting to conduct bilateral exchange with regard to product range and modes of the reduction and, as appropriate, exemption of tariffs, so as to achieve a comprehensive WTO agreement on environmental products and services; agreeing to explore the establishment of a mechanism by which information concerning trade in timber and forest products as well as legality of timber can be exchanged on a regular basis, in an effort to promote trade of legal timber and forest products, as well as global forest enforcement and governance.

　　　　On Dec 27-30, 2007, Japanese Prime Minister Yasuo Fukuda paid an official visit to China. The two countries signed the Joint Communiqué of the two governments on the Promotion of Cooperation in Environment and Energy, a document reflecting many consensus, covering strengthening response to climate change, protection of forestry and wildlife, technology transfer in energy conservation and emission reduction, intellectual property right protection, funding and capacity building, personnel exchange and training programs. The two sides will support joint research and pilot programs in pollutant reduction and its synergy effects on the reduction of greenhouse gas emissions, and strengthen concrete collaboration in water, waste and 3R (reduce, reuse and recycle) areas. China and Japan will continue cooperation in water pollution prevention and control in major river basins such as the Yangtze River, in development of recycling-based cities, and conduct dialogue and technical cooperation for waste management and 3R topics as well as cooperation in the area of environment and health.

　　　　On May 7, 2008, Chinese President Hu Jintao signed the Joint Statement by the Government of China and the Government of Japan on Climate Change during his visit to Japan. The two sides will work together to respond to climate change and forge a partnership in doing so. In addition to reiterating their common commitment to international conventions on climate change and principles for addressing climate change, the two sides also expressed willingness to actively participate in negotiations aimed to strengthen the effective progress and framework, before 2012 and beyond, established in the Bali Roadmap, in order that positive results can be accomplished on the Meeting of Signatories to the Convention and Protocol to be held in Copenhagen in late 2009. The Joint Statement also points out that the two countries will strengthen cooperation in technology transfer and capacity building in coping with climate change, and conduct joint research in key areas, particularly research on the impact of measuring industry-specific emission reduction, enhancing technology and capacity for coping with climate change, research in financial input in climate change response, among others.

　　Conclusions on China’s Policies and Progress

　　Clearly this past year has been perhaps the most active ever for China in terms of the number of initiatives taken for improving the relationship of environment and development. It lends credence to the observations of CCICED in 2006 that China has entered a transformative era, or, as it is sometimes started, “a historic transition.” However, this listing of policy changes should not be taken as an assessment of implementation success. That is a more complex task.[4]

　　The long lists of policy innovations and the specific tasks to be accomplished in a very short time frame are daunting, and elicit a number of concerns that have been examined in the past by CCICED. These include:

　　(1)　 Coordination of actions horizontally and vertically within government. The level of inter-agency coordination, potential for duplication of effort, unclear lines of responsibility, and the need for accountability between levels of government remain as serious concerns.

　　(2)　 Unclear level of commitment to the “Three Transforms” intended to put environmental matters on an equal footing with economic decision-making. On-going subsidies in use of energy, for example, work against the level of conservation that is required.

　　(3)　 Strength of the new MEP, which is still under-staffed to deal with the coordination needs and responsibilities of its broad mandate.

　　(4)　 Funding levels for environment and development. The 1.35% of GDP may seem like a substantial investment—and it is—but this level is still below levels considered optimal in some other countries. There is also the major concern about how well this money will be used, especially with the limitations on capacity that need to be addressed.

　　(5)　 Need for a clear and coordinated approach to such key issues as environmental technology innovation, and a sufficiently strong approach to environment and health—both topics that will be dealt with at the CCICED 2008 AGM.

　　(6)　 An approach to capacity building for environment and development that is commensurate with the implementation needs, and that fully takes into account the limitations on small and medium-sized enterprises within China, and the need to ensure that poorer parts of China participate fully in environmental protection actions.

　　(7)　 Improving the quality of environmental justice in China, whether for ensuring sanctions against those damaging the environment are sufficient, for ensuring those who help to improve the environment are appropriately rewarded or compensated, and for removing the problems of corruption that can be as damaging to environmental protection as they are to social and economic development.

　　(8)　 China’s ability to influence international directions on environment and development policies is likely to increase substantially in coming years, and certainly the effort now being undertaken on energy and environment highlights China’s concern to be a responsible global citizen. But there is little doubt that on issues such as climate change, action by the international community is too slow. This will be damaging to China in the long run, and new ways of meeting such challenges need to be identified.

　　It will be important to continue strengthening monitoring and analysis of progress. This point certainly seems to be well recognized by China’s decision makers, who have taken a number of steps in this direction. But the perils of gathering good quality information are still considerable, and there is a need for better compatibility of data, and for independent analysis that provides the most accurate picture.

　　There have been many important milestones on environment and development in this past year which reflect the deepening and broadening of this subject matter in China. Three that stand out for their innovative quality are:

　　(1)　 The administrative measures taken towards greater openness with the public on environmental information. This is a most important step towards improved public participation in environment and development decision making.

　　(2)　 The comprehensive involvement of the financial sector in various ways related to credit, availability of insurance, sources of investment, etc.

　　(3)　 The growing interest in Low Carbon Economy as an organizing focus for planning on energy and environment, and, indeed, for action towards a Circular Economy.

　　These components of policy and strategy should be of growing significance to China in coming years.

　　There are certain topics that have not received full coverage in this report. Two that stand out are the policies and action on environment that China undertook during the Beijing Olympics. An example is the policy approach of odd and even numbered license plates for vehicle use. This is a policy that could be put in place elsewhere in the country. And the policies that have guided China successfully through the Wenchuan Earthquake and other disasters have been of considerable significance for setting new directions on natural disasters. This topic has been examined in the CCICED 2008 Issues Paper.

　　Finally, while it is somewhat early to determine what new policy directions are likely to emerge within China and in China’s international relations as a consequence of the global financial and credit crisis, there likely will be consequences for environment and development in the months and year ahead.

　　China deserves considerable credit for its significant efforts in 2007-2008 to position environment and development as a prominent and transformative component of national policy.

　　 

　　(This report is provided by Chief Advisors & Support Team)