By Linda Liang and Wu Xi King & Wood Mallesons’ Commercial & Regulatory group.

梁燕玲On November 10th 2016, the General Office of the State Council released the Implementation Plan for the Licensing System to Control Pollutant Emission (“the Plan”). The Plan is a top-layer design of a system to license pollutant emission in China. The plan has not only established a clear set of regulations, which establish such things  as one permit for one enterprise; pollutant emission in accordance with aa permit and information disclosure, but also made arrangements for the implementation of an emission trading system (ETS).

The characteristics and main content of the Plan

1.A top-layer design at national level

Since the late 1980s, China has launched pollutant emission permitting pilots. Today nearly 240,000 enterprises and public institutions have been granted pollutant emission permits and the system has achieved initial results. Generally, management of pollutant emission permits has turned out to be not effective enough in getting polluters to take responsibility for their emissions, and the supervision of environmental protection authorities has been inadequate. This top layer designed  Plan is the first national level  pollutant emission permits system.

2.One permit for one enterprise, comprehensive discharge permits, and the integration of various supporting systems

The Plan confirms that pollutant emission permits will be the only method by which an enterprise will be allowed to discharge pollutants. According to the principle of one enterprise one permit, an enterprise or public institution must only discharge pollutants in accordance with its emission permit.

The Plan also points out that one of the changes to the permitting system is the introduction of comprehensive discharge permits. This means that if an enterprise is discharging multiple pollutants, the emission behavior and management of all those pollutants must be documented in one permit. The reality of environmental protection nationwide is that authorities are expected to still focus on granting permits for air pollutants and water pollutants. Naturally, the reform of the pollutant permitting system will be more rigorous in areas with effective environmental management systems where noise, solid wastes and hazardous wastes are incorporated in comprehensive pollutant emission permits.

Accompanying the new emission permitting system, will be consequential adjustments to environmental impact assessments and the indicators for controlling the discharges  of major pollutants .

3.Self-reporting of discharges according to permits, and self-monitoring

The Plan requires enterprises to report their pollutant discharges and to be responsible for the truth, accuracy and completeness of their reports.

One of the Plan’s core requirements is that discharges must be in accordance with a permit. The category, concentration and total discharge volume of pollutants, as well as the facilities and technologies for the prevention and control of pollution must all be consistent with the permit documentation. Discharging pollutants according to a permit is not the same as meeting mandatory standards for the discharge of pollutants.  Failing to meet mandatory standards may result in administrative penalties such as the restriction of emissions, fines, etc., but enterprises that fail to discharge pollutants in accordance with permits may not be allowed to discharge pollutants at all.

The Plan requires enterprises to carry out self-monitoring by installing or using legitimate monitoring facilities and ensuring the normal operations of those facilities.  Original monitoring data must be kept, management accounts maintained with accurate and complete data, and those enterprises with online monitoring facilities must share their data with environmental authorities. To be in full compliance, enterprises must report to environmental protection authorities on the implementation of pollutant emission permits on a regular basis, disclose emission data to the public and be legally responsible for the authenticity of data.

4.Information disclosure, public opinion supervision

Under the Plan, the monitoring data submitted by emitters will be disclosed on the permitting management information platform along with enforcement information provided by the environmental protection authorities and a list of emitters that discharge pollutants in a manner inconsistent with their permits. Noncompliance will be considered in the credit rating of enterprise environmental behavior, and this will be displayed on the National Enterprise Credit Information System. Moreover, the information platform will share information on pollution sources with the reporting platform for environmental protection and encourage the public to report noncompliance such as the discharge of pollutants without permits or not in accordance with permits. This will promote the development of environmental public interest litigation and strengthen public opinion supervision.

The Plan effectively integrates existing emission protection resources , strengthens public opinion supervision and has established a relatively refined enterprise disclosure of information system. However, the publication of performance may be a double-edged sword for enterprises’ public image. Therefore, given the growing public interest in environmental protection, enterprises must be mindful of the influence of this information disclosure on their public image.

5.Regulation and law enforcement, responsibilities of the enterprises as polluters

The Plan confirms that the online monitoring data of emitters can be used as a legal basis for supervision and law enforcement by environmental protection authorities.  Supervision and law enforcement will be carried out on a regular basis following the principle of “issuers supervise”. The time, content, results and penalties of on-site inspections will be documented by the pollutant emission permitting management. Authorities will more frequently visit enterprises with any history of prior violations. The legal basis for environmental supervision and law enforcement is still on-site inspection data however it will be by online monitoring data when the new system of pollutant emission permits is implemented, . It is worth noting that there are two preconditions for online monitoring data to be used as the legal basis for environmental supervision and law enforcement: (1) online monitoring facilities must have passed regular examinations; (2) online monitoring data must be true and valid.

In addition, the Plan requires permit holders to explicitly identify the duties of responsible persons and related employees. As can be seen from most environmental legal cases, many enterprises do not have an environmental management system or specific officers responsible for environmental protection. Thus, when they apply for a permit, the Plan requires emitters to designate specific officers to take relevant responsibility.

6.The Emission Trading System

The Plan provides that a pollutant emission permit is a certificate of emission rights that can be used for emission trading. Permit holders which have met their own statutory obligations, may trade their reduced volume of pollutant emissions on the market. Permit holders may have generated emission reductions through eliminating waste or excessive production, employing cleaner production, pollution control methods and upgrading technologies.

Since 2007, departments of the State Council have launched pilots for paid use emission rights and emission trading in 11 provinces (autonomous regions or municipalities), including Tianjin, Hebei and Inner Mongolia. In 2014, the General Office of the State Council issued Guidelines on Further Promoting the Paid Use Emission Rights and Emission Trading Pilot Programs. The trading of emission rights has been carried out since then through these pilot programmes. Now the Plan has put in place institutional arrangements for national implementation of a trading system for emission rights.