China To Polluters: Get Insured!
As environmental "incidents" continue to pollute China at a rate of one every other day, the State Environmental Protection Agency (SEPA) this week announced a long awaited "green insurance" scheme to better monitor polluting industries and help victims of pollution get compensation. (We wrote about the proposal last year.) The system, which aims to insure all industries with pollution risks, will be implemented nationwide by 2015 after a trial period.
The scheme would be a victory not just for citizens, but for companies and the government alike. Typically in China, the cost of cleaning up and compensating victims of serious environmental incidents leads to bankruptcy for the responsible companies -- that is, if the companies are held responsible at all. Timely compensation and clean-up, if any are even undertaken, can be rare, leading to high government expenditure in some cases. In October, the State Council earmarked USD 14 billion for the clean-up of Lake Taihu, after an unprecedented algae outbreak last summer that poisoned local water supplies. Under the new scheme, companies would pay premiums in proportion to their pollution risks, which would be monitored by routine inspections. "Enterprises and industries having caused serious pollution accidents in recent years will be specially targeted," Pan Yue, SEPA's deputy chief, said. The scheme will begin this year with "enterprises that are prone to heavy and serious pollution accidents."
Pan noted that China is in a period of "high incidence of environmental pollution accidents." He said 108 cases of emergent environmental incidents were reported in 2007. SEPA says that 81 percent of the country's 7,555 large-scale heavy chemical projects are in environmentally-sensitive areas that are densely populated or adjacent to neighboring rivers; 45 percent are "sources with serious risks."
In October, SEPA proposed raising the maximum pollution fine five fold to 500,000 yuan (about US$ 67,600), an idea that has not yet passed review by central and local authorities. Another rule under consideration that would raise the cost of polluting to companies and protect environmental victims is a landmark legal amendment that would encourage class action lawsuits against polluters. Currently, such suits are prohibited or rare, often because local courts can earn more through individual (and weaker) cases.
And that local detail is the rub.
The big question, as always, with SEPA's new scheme is whether the environmental watchdog will actually be able to carry through with the plan in the face of uncooperative local governments and ministries eager for fast economic growth. The chances they will succeed are higher than ever. The central government has lately stepped up its push for energy efficiency and a harmonious society. And next month, at the National People's Congress, SEPA may gain long-awaited ministry status.
There is still reason for some skepticism. The insurance scheme is only the latest in a string of desperate, often inspired attempts to green the country. Pan Yue recently announced that SEPA's "green loan" system was on the rocks, facing derailment from local officials.
That's precisely what happened with SEPA's "Green GDP" system in 2006. While the green insurance plan targets polluting companies, the Green GDP scheme, now on hold, would target provincial governments by linking the costs of environmental protection to local officials' performance ratings. Until both companies and officials can be held accountable for pollution, SEPA will continue to wage an uphill battle.