Environmental Policy and Reform in China 981166904X, 9789811669040

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Jinnan Wang Hongqiang Jiang Gang Yan   Editors

Environmental Policy and Reform in China

Environmental Policy and Reform in China

Jinnan Wang · Hongqiang Jiang · Gang Yan Editors

Environmental Policy and Reform in China

Editors Jinnan Wang Chinese Academy of Environmental Planning Beijing, China

Hongqiang Jiang Chinese Academy of Environmental Planning Beijing, China

Gang Yan Chinese Academy of Environmental Planning Beijing, China

ISBN 978-981-16-6904-0 ISBN 978-981-16-6905-7 (eBook) https://doi.org/10.1007/978-981-16-6905-7 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Celebrating the 20th Anniversary of Chinese Academy of Environmental Planning

Preface

The Chinese Academy of Environmental Planning (CAEP) was established in 2001 with four main lines: environmental plan-policy-project-risk. It is mainly responsible for the research and preparation of national medium and long-term ecological environment strategic planning and plans, national major development strategy ecological environment planning and policy technical support, ecological environment risk assessment and damage compensation research, ecological compensation and other environmental policy research, ecological and environmental protection special fund technical support and engineering project consulting, etc. Over the past 20 years, the institute has always adhered to the overall positioning of providing support for national ecological environment decision-making and management, constantly optimizing business segments, strengthening the construction of institutions and talent teams, improving the management system, and constantly strengthening its position as a leader in the field of national ecological civilization, ecological environment planning and strategic policy. CAEP successively undertaken over 60 national key important environmental plannings, more than 100 important environmental policies, more than 120 national scientific research projects and more than 60 international cooperation projects, of which more than 100 planning and policies have been adopted or approved by the State Council and relevant departments. In addition, CAEP has won more than 40 national, ministerial and provincial science and technology awards, and steadily increased its influence in the field of ecological environment at home and abroad. In 2020, it ranked 25th in the global top think tank of environmental affairs and ranked first in the Greater China region for 8 consecutive years. It has become a core think tank in the field of eco-environmental strategy, planning and policy research and formulation. On the occasion of the 20th anniversary of CAEP, the editorial board has carefully organized and compiled a book entitled Environmental Policy and Reform in China. The book is the collection of the latest research results for CAEP in environmental policy and reform during the past years, mainly related to ecological compensation, the emission trading, the environment audit, carbon tax, environment friendly city, environmental health, economic policy in medical waste, scattered coal treatment

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subsidies, environmental policy efficiency analysis, environmental industry statistics, environmental performance evaluation, green fiscal and taxation policy, etc., presenting the latest achievements, developments and research trends in this field. The study of environmental policy and reform is a complex, arduous and up-to-date systematic engineering. It should be said that China still faces many challenges in both theoretical methods and policy practice. Developed market economies such as the OECD and the EU are at the leading level and have accumulated rich experience. We should strengthen cooperation and exchanges with these countries and strengthen contacts with international organizations and institutions such as the World Bank, the United Nations Environment Programme, the World Resources Institute and the Asian Development Bank to fully draw on international experience. At the same time, it will show and publicize the latest achievements of China’s environmental policy research and reform to the world. We look forward to more and better achievements from CAEP for the construction of a beautiful China, the system and reform of ecological civilization, and the innovation of ecological and environmental protection systems and policies. I would like to thank the authors for their contributions and the Springer Publishing Group for their support. This book inevitably has various mistakes or improper places, welcoming the readers to give the criticism and correction. Beijing, China

Prof. Jinnan Wang President, Chinese Academy of Environmental Planning Academician, Chinese Academy of Engineering

Contents

Watershed Eco-Compensation in China: Practice and Review . . . . . . . . . Jinnan Wang, Rensheng Tian, Zhanfeng Dong, Guangming Shi, and Chaobo Hou Practices of Emission Trading in China: Exploration and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jinnan Wang, Zhanfeng Dong, Ying Qin, Qiong Wu, Chazhong Ge, Yueying Wu, and Jintian Yang Chinese Environmental Audit System for the Government . . . . . . . . . . . . . Jinnan Wang, Hongqiang Jiang, Xuetao Zhao, Jing Zhang, Jixiang Chen, Xiangang Zeng, Scott Vaughan, Robert Smith, Jan Bakkes, and Glenn-Marie Lange

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Developing Indicators and Monitoring Systems for Environmentally Livable Cities in China . . . . . . . . . . . . . . . . . . . . . . . . . 117 Fang Yu, Fei Peng, Weishan Yang, and Jinnan Wang An Analysis of Disease Burden Attributable to Urban Air Pollution in the Context of Population Ageing in China from 2010 to 2030 . . . . . . . 149 Fang Yu, Guoxia Ma, Weipan Xu, Yanshen Zhang, and Jinnan Wang Research on Economic Policies for Centralized Disposal of Medical Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Zheng Zhang, Liang Cheng, Ning Sun, Shunze Wu, and Yuantan Lu Study on Electricity Substitution Plan for Residential Scattered Coal in Beijing–Tianjin–Hebei Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Ling Jin, Zhen Yan, Xiaojun Chen, Qian Tang, and Yu Lei Cost–Benefit Analysis of Yellow-Label Vehicles Elimination Policy in the Beijing-Tianjin-Hebei Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Hongqiang Jiang, Jia Zhou, Xi Cheng, Yaling Lu, and Wei Zhang

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Indicators-Based Environmental Performance Assessment for China’s Total Emission Reduction Policy During the 11th FYP (2006–2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 Weishan Yang, Dong Cao, and Xuetao Zhao Feasibility on Establishment of EGSS-Based Environmental Industry Statistic Framework Under the Statistic System in China . . . . . 291 Zhanfeng Dong, Quan Zhou, Hongxiang Li, Yao Qin, and Chazhong Ge Progress Report on China’s Green Finance Policy 2018 . . . . . . . . . . . . . . . 351 Cuiyun Cheng, Yanchun Du, Chazhong Ge, Zhanfeng Dong, and Zhixiong Weng The Development and Challenges of Ecological and Environmental Think Tank in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Hongyu Zhang, Dong Cao, and Chutong Liu

Watershed Eco-Compensation in China: Practice and Review Jinnan Wang, Rensheng Tian, Zhanfeng Dong, Guangming Shi, and Chaobo Hou

Abstract This feature report falls into four parts: firstly, introduction, it introduces research background and objectives. Secondly, it has analyzed the practice patterns of watershed eco-compensation both at home and abroad, pointed out existing problems and analyzed the difference in watershed eco-compensation between China and foreign countries. Thirdly, case study of practice of watershed eco-compensation in China; it has analyzed the mode and effect, use of fund during the practice of eco-compensation in Xin’anjiang River and Huaihe River and expounded existing problems. Fourthly, it has put forward suggestions for legislation for watershed eco-compensation after streamlining problems in practice of watershed eco-compensation and the legislative demand. Keywords Watershed eco-compensation · Implementation mechanisms · Cross-border watershed · Water quality

1 Introduction During 2001–2005, China witnessed rapid urbanization and industrialization and meanwhile, suffered shortage of water resources and deterioration of water environment [1]. As indicated by related surveys, currently, about 2/3 of cities in China have been troubled with shortage of water (110 cities severely troubled), and the yearly deficiency of water for irrigation is about 30 billion m3 [2]. Especially in East China and North China, water shortage is intensified due to severe contamination and continuous destruction of the surface water environment from discharge of industrial and domestic sewage and the agriculture non-point source waste water into rivers and lakes. Besides, excessive water resource development has resulted in such environmental problems as surface subsidence and land [3]. Continuous deterioration of water quality and shortage of water resources have threatened food health and public security in China [4, 9]. Under this background, during 2006–2010, China issued a J. Wang · R. Tian · Z. Dong (B) · G. Shi · C. Hou Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_1

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succession of environmental policies and implemented administrative measures, in hope of improving the surface water environmental quality. Among such policies, one was a policy on watershed eco-compensation [5]. A watershed is an area where environmental elements relate to and influence each other. In a watershed, water environments in the upstream, the midstream and the downstream and in the mainstream and branch influence each other significantly [6]. On one hand, in the upstream area, the ecological environment is vulnerable, so it requires substantive input of labor, material and finance [7]. As a result, the protection of the watershed water environment will result in the lagging economic development compared with the downstream area. Plus, the protection of watershed water environment cannot get corresponding compensation and earning, which has discouraged the upstream areas to protect the watershed water environment, but to develop economy. On the other, during economic development of upstream areas, pollutants discharged into the watershed in a period will directly influence the water environment in the downstream areas [7–9]. Watershed eco-compensation is an environmental and economic policy designed for converting the external cost of ecological damage and water pollution in the watershed into internal cost. It conforms to the principle of “destroyer pays” and “polluter pays” [5, 6]. Under this policy, pollution producers will balance the pollution treatment cost and economic compensation, so that water pollution treatment measures can be carried out. Establishment of a watershed eco-compensation system can require the benefited parties of protection of the watershed environment to bear some cost caused to the protector of the water environment, which can protect enthusiasm of treating water environment in the upstream areas and thereby ensure the right of the benefited parties to share the watershed water resources [10]. After the pollution accident in Songhua River on November 13, 2005, the State Council on December 3, 2005, issued the Decision of the State Council on Implementing the Scientific Development View and Strengthening the Environmental Protection, which stated to “build an ecological compensation mechanism.” The Decision on Some Major Issues Concerning Building a Socialist Harmonious Society by the 16th CPC Central Committee at the Six Plenary Session further clarified to build an ecological environment appraisal system and compensation mechanism and promote harmonious development between human and nature. The report of the 17th CPC Central Committee stated to build a perfect ecological compensation mechanism. During 2006–2010, the Report on the Work of the Government of each year had also discussed about constructing the ecological compensation systems. Many important documents issued by the State Council like the notice of main work priorities, the notice of deepening the reform of the economic system, the Decision on Implementing the Scientific Development View and Strengthening the Environmental Protection and the Notice of the State Council on Printing and Issuing the Comprehensive Working Scheme on the Energy Conservation and Reduction of Pollutant Emissions all put forward to promote the implementation of the ecological compensation mechanism.

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On August 24, 2007, the former State Environmental Protection Administration issued Guiding Opinion of Experimental Work about Implementing Ecological Compensation, to embark on make experiments of ecological compensation in the nature reserves, important ecological function areas, mineral resource development, and watershed water environment protection. After summarizing experience, on May 7, 2008, the Environmental Protection Department issued Notice of First Batch of Pilot Areas for Ecological Compensation, which selected seven representative provinces and cities to as pilot areas for ecological compensation. To be detailed, Shanxi Province was a pilot area for ecological compensation for coal resource development, Liaoning Province a pilot area for ecological compensation for the headwater conservation area, Zhejiang Province a pilot area for provincial ecological compensation, Minjiang River and Jiulong River of Fujian Province pilot areas for watershed eco-compensation, Dongjiang River of Jiangxi Province a pilot area for ecological compensation for important ecological function areas, Yellow River at South Gansu a pilot area for ecological compensation for watershed supply ecological function areas. In 2009, Hebei Province was named to be a pilot area for full watershed ecocompensation by the Environmental Protection Department. In December, 2011, the 12th Five-year Plan on Environmental Protection (2010–2015) by the State Council specified to “build ecological compensation mechanisms for watershed and major ecological function areas.” Notwithstanding China highlighted ecological compensation systems and policies, it hasn’t issued a specialized and guiding ecological compensation law since commencement of pilot work of watershed eco-compensation policies in 2007 [11]. Legislation for ecological compensation can only be found in the fundamental law on environmental protection, some laws on preventing and controlling pollution of natural resources and environmental elements as well as some laws enacted by some departments. Among many laws and rules, ecological compensation is not the subject. They have set many principles, but are not operable; they have specified authorities and benefits of different roles of management, but fail to define rights, obligations and responsibilities of the benefit related parties in the ecological compensation, or the content, procedures, standard, monitoring, evaluation of compensation and the property right system of the environmental resources. Most compensation is voluntary, which has produced little effect. In practice, administrative departments concerned aren’t willing to coordinate, or even some departments have conflict of interest, which has influenced the effect of laws and rules. For lack of lower-level laws, such policies cannot be carried out. Also, the messy and disorderly legislative situation makes it hard to find high-level laws, which hampers legislation and practice in local areas [12]. In some administrative regulations and rules, there are provisions on ecological compensation, but they are of lower-level and generalized, principle-oriented and simple, so they have little meaning for guiding the practice and experimental study and are adverse for building a long-term and steady watershed eco-compensation mechanism. According to surveys, in the practice of watershed eco-compensation in Beijing, Zhejiang, Henan, Shanxi and Guangdong, it is agreed that for lack of support from higher-level laws, local legislation cannot be brought forward; it has restrained the

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practice and experimental work of watershed eco-compensation. In particular, for the moment, there is no specification or guidance at national level regarding the crossborder ecological compensation, so it will be impossible for local areas to make breakthroughs in ecological compensation practice. Accordingly, to facilitate the building and perfection of watershed eco-compensation mechanism, it is imperative to establish a specific law to define watershed eco-compensation. Under this background, to boost the establishment of an ecological compensation legal system, laws on ecological compensation for different areas shall be stipulated. In March, 2011, ADB initiated its technical assistance project (Project No.: ADB TA7699 (PRC)) and set up a special team for this project. The team composes of experts in wetland, watershed, area, ocean, forestry, mineral products, fiscal levy, economic analysis and laws and also invites international experts from the ecological compensation field to provide assistance. This is a feature report on legislation for watershed eco-compensation and designed for analyzing problems existing in the practice of watershed eco-compensation, aiming to provide suggestions for the legislation for watershed eco-compensation under Regulations on Ecological Compensation. This feature report falls into four parts: firstly, introduction, it introduces research background and objectives. Secondly, it has analyzed the practice patterns of watershed eco-compensation both at home and abroad, pointed out existing problems and analyzed the difference in watershed eco-compensation between China and foreign countries. Thirdly, case study of practice of watershed eco-compensation in China; it has analyzed the mode and effect, use of fund during the practice of eco-compensation in Xin’anjiang River and Huaihe River and expounded existing problems. Fourthly, it has put forward suggestions for legislation for watershed eco-compensation after streamlining problems in practice of watershed eco-compensation and the legislative demand.

2 Practice of Watershed Eco-Compensation Both at Home and Abroad 2.1 Practice and Experience of Watershed Eco-Compensation in Foreign Countries In foreign countries, one may purchase the watershed ecosystem services by means of market trade, one-to-one compensation, ecological label and public payment. Among them, the former three fall into the category of market compensation and the last one the category of policy compensation.

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Market Trade

Market trade, also called open trade, takes place when the ecosystem services are measurable and divisible. It is commonly found when the buyer and the seller have trade in a large quantity or full of uncertainties in the ecosystem service market. (1)

Costa Rica: market compensation for watershed ecological protection

Background: Energía Global (EG), located in Sarapiqui watershed, is a private hydropower company serving 40,000 people. It occupies a water source area composed of two branch watersheds of 5,800 h m2 . EG cannot carry out regular production owing to insufficient water resource. Accordingly, to maintain and repair forest cover in the upstream and ensure stable water source of its hydropower station, it has initiated the market compensation for the watershed ecological protection. Form: EG submits USD 18/ha to the National Forestry Fund, which will allocate another USD 30/ha. Then, the fund will be paid in cash to the private land owners in the upstream, with the precondition that the private land owners must use their land for forestation, carry out continuous forestry production or protect wooded areas. Those who have just cut the trees or plan to substitute the wild wood with the manmade forests will be disqualified for the compensation. Besides, Compania de Fuerzay Luz and CNFL, both public hydropower companies, and Hidroelectrica Platannar, a private company, also provide compensation for land through the National Forestry Fund. (2)

Australia Murray-Darling: loan for watershed water evapotranspiration (ET)

Background: in Murray-Darling watershed, Australia, the large-scale land clearing and cutting of local trees and vegetative cover have increased replenishment of ground water and raised the water table to the surface, which has led to severe soil salinization and downstream water deterioration. To deal with this situation, Australia started to provide loan for water ET. Form: farmers in the downstream buy a loan at AUD 17/1 million liter transpiration water, or make compensation of AUD 85/ha per year and for 10 years successively. The State Forest Service in possession of land ownership in the upstream can get loan for ET or desalinization through planting trees or other plants, to ultimately improve soil quality.

2.1.2

One-to-One Compensation

One-to-one compensation, also called private trade, is self-organized market compensation. Under this pattern, the benefited party of ecological services will transact directly with the payer. In such transactions, the quantity is small and stable and both parties can reach agreement on transaction conditions and price through negotiation or via the intermediate.

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Clean water supply transactionbetween New York City, the US and the Catskills watershed in the upstream

Background: in New York City, about 90% water consumed comes from Catskills and Delaware River in the upstream. In 1989, the US Environmental Protection Agency requested that all municipal water supplies from the surface water shall, unless the water quality was qualified, be treated with filtering and clearing facilities. The total cost for such action, as estimated, would reach at least USD 6.3 billion (USD 6 billion for new filtering and clearing facilities and USD 0.3–0.5 billion for the yearly operation). If, however, it could input USD 1–1.5 billion into Catskills watershed to improve land utilization and production mode in the watershed for a decade, the water quality would be qualified. Form: the New York City provides ecological compensation to Catskills watershed. The compensation standard is determined by the Water Service. Compensation means include levying surcharge to users, issuing government bond and trust fund of New York City. (2)

Payment mechanism of Perrier MineralWater, France

Background: in 1980s, water quality of Rhin-Meuse watershed in Northeast France was threatened by agricultural activities locally. Under such circumstances, natural mineral water companies, who were dependent on the clean water source, had to make a choice, setting up filtering plants, or moving to new water sources, or protecting water source locally. Form: Perrier Mineral Water Company, the largest natural mineral water manufacturer locally, deemed that protecting water source was the most cost-effective means. Then, it invested about USD 9 million to purchase 1500 h m2 agricultural land in the upstream and return the land use right to farmers who were willing to improve their land management mode for free. Besides, it entered into contracts of 18–30 years with farmers who agree to use their hand for dairy husbandry. As stated in the contract, Perrier would pay USD 320/ha per year, for seven years successively.

2.1.3

Public Payment

Public payment is a compensation payment provided by the government in the form of project fund or direct investment. Ecosystem services are public goods, which makes public payment the most common compensation means. (1)

Colombia: collecting ecological service tax

Background: in late 1980s, in face of increasingly severe water resource shortage and tightness of public financial fund, planters of rice and sugarcane in Cauca watershed, Colombia, sponsored 12 water user associations to put money into protecting upstream areas of the watershed. Later, they successively set up 11 water resource utilization associations, 3 water resource management funds and 3 river companies. Their initiative involved in 1 million hectare of land and 97,000 families. Form: a charge for use of water resources is levied. Members of the associations voluntarily pay an extra USD 1.5–2 to the Cauca River watershed management

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company to set up an independent fund for improving watershed water quality and ecological environment. In 1998, the charge for use collected by all water resource associations reached as high as USD 600,000/year. (2)

The ecological compensation fundcollected by Parana State Congress, Brazil

Background: in Brazil, 75% of the State level tax ICMS is allocated according to the financial added value of economic activities. Under this allocation mode, areas having faster economic development and more population will gain more fund than the large-area protected areas. As a result, it has exerted negative impact on the protection of forests. Form: the Parana Stage Congress passed a law, prescribing that 5% of ICMS would work as “Ecological ICMS”, which shall be re-allocated according to the environmental standard. To be detailed, 2.5% will be assigned to areas having protected units or protected zones and the rest 2.5% to regions having watershed, in hope of encouraging protection of forests.

2.1.4

Ecological Label

Ecological label is an indirect payment pattern for ecological environment services. When consumers are willing to pay more for ratified and environmentally-friendly products, such consumers have indirectly purchased the ecological environment services. In 2000, the volume of trade of organic agricultural products ratified reached USD 21 billion. As estimated, the US consumers are willing to pay an extra USD 0.5–1/pound to buy the ratified and environmentally-friendly coffee. In Sweden, electricity having the green label is 5% higher than that without the label. Consumers buy the ecological environment services through a trustworthy certification system.

2.2 Practice of Watershed Eco-Compensation in China 2.2.1

(1)

Withholding Policy on Watershed Eco-Compensation in Ziya River, Hebei Province Background

Ziya River water system is one of the five largest water systems in Haihe River for the moment, watershed eco-compensation in China is enforced primarily through the pattern of examining water quality objectives of the cross-border sections, the drinking water source ecological compensation pattern, and the ecological compensation for the headstream headwater conservation areas. Under the first pattern,

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monitoring is carried out on the administrative cross border section of the watershed. If the water quality from the upstream is qualified, then the downstream area must provide ecological compensation for the upstream; otherwise, the upstream area must provide pollution compensation for the downstream. Currently, practice of this pattern mainly focuses on compensation inside a province. The cross province compensation only happens in the pilot area Xin’anjiang River watershed, which is on the border between Anhui Province and Zhejiang Province. Watershed. It runs 730 km and covers 78,700 km2 . The Ziya River runs through the most cities in Hebei Province, and covers 27,000 km2 , including Shijiazhuang, Handan, Xingtai, Hengshui, Cangzhou, more than 50 counties, and more than 30 million people. Ziya River watershed is the most developed and its per capita GDP takes up 60% of Hebei Province. It also has full-featured industries and the most enterprises, making Ziya River branches the sewage gutter of towns and industries. According to monitoring data in 2007, among the 32 sections under monitoring, 22 are below grade-V; Ziya River water system has the most severe pollution in Hebei Province. Accordingly, Ziya River watershed is typical among water systems in Hebei Province and its successful experience may be used for reference by other water systems. (2)

Solution

Ziya River water system in Hebei Province has adopted the pattern of withholding fund for limit-exceeding sections. Compensation factors include COD and ammonia nitrogen. If limits are exceeded, the ecological compensation fund will be withheld. The standard for withholding the ecological compensation includes. Firstly, when the inbound water quality has met the standard (or no inbound current), but during the examination over the cross city outbound section, if the concentration of COD in water exceeds the limit by less than 0.5 time, then RMB 100,000 will be withheld; by 0.5–1.0 time, RMB 500,000; by 1.0–2.0 times, RMB 1 million; by above 2.0 times, RMB 1.5 million. In the same city, withholding will be accumulative for all sections exceeding the limit. Secondly, when the inbound water quality has exceeded the limit and during the examination over the outbound section, the concentration of COD continues to rise, then if the concentration exceeds the limit by below 0.5 time, RMB 200,000 will be withheld; by 0.5–1.0 time, RMB 1 million; by 1.0–2.0 times, RMB 2 million; by above 2.0 times, RMB 3 million. In the same city, withholding will be accumulative for all sections exceeding the limit. Every month, the environmental protection department will directly withhold the compensation fund from the expenditure of the fiscal year according to the limit exceeding time (s) of the water quality of sections. The ecological compensation fund can only be used for the deep-well drinking water security projects of the Ziya River water system and the water pollution treatment project of the Ziya River watershed.

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(1)

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Cross-Border Section Examination Method of Liaohe River Watershed, Liaoning Province Background

Currently, the water quality of four mainstreams of Liaohe River watershed in Liaoning Province is below grade-V. Liaohe River has the most severe pollution, followed by Great Liaohe River, Hunhe River and Taizi River. The water quality of the upstream of branches of Liaohe River watershed in Liaoning Province is favorable. The water quality of the upstream of Hunhe River and Taizi River, and some branches of Liaohe River is grade II/III. Water quality from the upstream to the downstream declined due to the domestic sewage and industrial wastewater discharged by urban districts on the way. In October, 2008, Tentative Measures for Examining Water Quality of Outbound Sections of Cross-administrative-area Rivers in Liaoning Province was distributed, specifying examination bases and methods of the 27 cross-district river outbound sections; Notice of Distributing Examination Target Values for Outbound River Sections in 2008 and the Notice of Distributing Examination Target Values for Outbound River Sections in 2009 were issued by the Environmental Protection Department, defining the examination target values for 9 mainstreams of the Liaohe River in Liaoning Province and outbound sections of 18 rivers. The watershed eco-compensation and pollution compensation mechanism was tried out. Sections abovementioned include 2 outbound sections of Shenyang, 2 outbound sections of Anshan, 1 outbound section of Fushun, 2 outbound sections of Benxi, 2 outbound sections of Yingkou, 1 outbound section respectively of Liaoyang, Tieling, Panjin, Dalian, Dandong, Jinzhou, Fuxin, Chaoyang, and Huludao. Among them, 10 run to the sea. (2)

Solution

According to requirements on prevention and treatment of water pollution and the treatment cost, if the mainstreams (including Liaohe River, Hunhe River, Taizi River, Great Liaohe River) of Liaohe River exceed the limit by below 0.5 time, RMB 500,000 will be withheld; for per increase by less than 0.5 time (included), an extra RMB 500,000 will be collected. For other rivers, if they exceed the limit by below 0.5 times (included), RMB 250,000 will be withheld; for per increase by less than 0.5 times (included), an extra RMB 250,000 will be collected.

2.2.3

(1)

Ecological Compensation Mechanism for Major Watersheds in Shandong Province Background

In the South-North Water Transfer Project, the southern section of Yellow River, the Huaihe River watershed, and the Xiaoqinghe River watershed involve in 12 cities and 69 counties in Shandong Province. In this sense, Shandong Province is a major area in the Project and the Two Lakes and One River (Nansi Lake, Dongping Lake, and

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Xiaoqinghe River) watersheds. In 2006, the discharge amounts of key pollutants in Shandong Province fell by some degree, but still failed to meet the goal of reducing COD by 3.5% set at the year beginning. Worse, Shandong Province is in great shortage of water resources, has vulnerable ecosystem, and is still suffering water pollution. Currently, 28.6% of sections of Huaihe River watershed in Shandong are unable to meet the goal set in the national plan; 95.8% of the sections along the South-North Water Transfer line fail to meet requirements of water transfer; only 4% of the Xiaoqinghe River watershed can meet the standard. Obviously, Shandong still has a long way to go in water pollution prevention and treatment. (2)

Solution

Firstly, compensation will be provided according to the actual loss to farmers (fishermen) that have returned the arable land (fishing land) to wetland before the wetland produces economic benefit. In enforcement, in the first year, the compensation shall be equal to 100% of the net income of the land of the previous year; in the second year, 60%; in the third year, no compensation. Secondly, for enterprises that have met the national emission standard have to be shut down or move out of the province due to the industrial structural adjustment, some part of the compensation fund, plus other fund, will be provided to them as subsidy. Thirdly, for municipal sewage pipe networks that have carried out the further treatment projects, the compensation shall be equivalent to the sewage treatment fee collected every year. For network that has carried out “the re-improvement project”, the compensation shall be equal to 50% of the pollutant treatment cost cut. Fourthly, for those that have built new sewage garbage treatment facilities according to the pollution treatment plan, compensation will be provided by means of discounted interest of loan, or providing award for the finished work, so as to strengthen construction of environmental infrastructure in the watershed. Fifthly, support will be given to enterprises that have adopted advanced and applicable new technologies and new processes to prevent pollution, to further reduce the total emission of pollutants.

2.2.4

(1)

Watershed Eco-Compensation Pattern Based on Water Source Area Protection Ecological compensation for watersource areas in Fujian Province

To improve water quality of the water source area and stop water loss and soil erosion, in 2003, Fujian Province carried out ecological construction in 10 pilot water source areas, including Putian Dongzhen Reservoir, according to the concept of “who that benefits shall pay”. To be detailed, QuanzhouShanmei, Longmentan, and NanpingDongfeng reservoirs take a portion from the hydropower income as the ecological construction expenditure. Putian Dongzhen and QuanzhouShibi reservoirs take a portion from the raised water rate as the ecological compensation. Sanming takes

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RMB 0.02 from per unit of water rate as the ecological construction expenditure of Dongyaxi reservoir. On this basis, in April, 2007, Fujian again issued Compensation Solutions by Downstream Areas for Forest Ecological Benefit of the Upstream Areas, aiming to build a compensation mechanism for forest ecological benefit in the upstream areas by the downstream areas and promote coordinate development of mountainous areas and coastal areas. The compensation standard is based on the industrial and domestic water consumption in 2005 and gives comprehensive consideration to the ecological zone and its contribution to watershed as well as the local economic development level. After calculation, the yearly compensation for some cities is as follows: RMB 27 million for Fuzhou, RMB 21 million for Xiamen, RMB 20 million for Quanzhou, RMB 2.2 million for Nanping, RMB 4.2 million for Sanming, RMB 1.6 million for Longyan, RMB 3 million for Zhangzhou, RMB 4.6 million for Putian, and RMB 2.3 million for Ningde. The compensation fund shall be raised by the government inside its administrative region, but cannot be imputed to other departments, units or individuals by means of fee charging or withdrawing compensation fund. It shall beturned over to the provincial financial account at the annual closing. The provincial finance shall, according to the major ecological forest area and the unified compensation standard, calculate the compensation fund of related cities and counties. The compensation fund shall be delivered to cities concerned by means of “special fund for special allocation.” Cities concerned, after receiving the special fund document from the province, shall deliver such fund to counties concerned through the farming-support account or by means of “special fund for special allocation”, to ensure the timeliness and sufficiency of such fund. Compensation shall be made to farmers who have contributed to protecting ecological functions and water and soil resources of the upstream areas according to a unified standard. Through implementation of this system, a compensation fund of RMB 85.90 million for the ecological forests can be increased, with the annual compensation fund reaching more than RMB 300 million and the compensation standard for ecological forests raised to RMB 7/µ (1 µ = 667 m2 ). Regarding the time limit of the policy, the limit of bearing compensation fund of each city shall be determined once every three years. The policy shall be carried out since 2007. Furthermore, 35% of the water resource fee will be used for compensation of ecological forests. Seeing from the effect of the policy, the ecological compensation mechanism has improved the ecological environment of the watershed in Fujian Province. In the ecological forest areas, 800,000 µ open woodland and shrub forests have been converted to wooded areas. The average degree of closeness of standing forests is raised to 0.51 from 0.42, and the unit area standing crop to 5.24 m3 from 4.42 m3 . Study of the ecological compensation mechanisms of these pilot areas has expanded the fund channels for local water source ecological construction, increased input and driven construction of the water source areas. (2)

Ecological compensation for watersource area protection in Deqing County, Zhejiang Province

Zhejiang Province has dug into the ecological compensation for drinking water source areas. Deqing County, Huzhou, Zhejiang Province, is a representative, since

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its western part is the headwater conservation area of the county. In order to return investors for protecting ecology in the west and further encourage people to protect ecology, Deqing County has set up an ecological compensation mechanism. In February, 2005, Deqing County People’s Government issued Opinions on Building Ecological Compensation Mechanism in Western Villages and Towns by Deqing County People’s Government, defining the scope (west of No. 104 national highway in Deqing County) and measures for raising ecological compensation fund. Such measures include: firstly, carrying out the compensation fund of the ecological forests; secondly, building a mechanism that the village and town finance works as guarantee, and for Moganshan Town and Huatouxiang Town, the basic guarantee by finance shall be exercised so that the disposable financial income of staff supported by the finance can reach the mean level in villages and towns of the county; thirdly, setting up ecological compensation fund of the county and allocating RMB 1 million within the fiscal budget of the county, and taking 10% of the water resource fee, raising RMB 0.1/ton for the raw water resource fee of the reservoirs, taking 1% of land remise fund, 10% of water pollution charge and 5% of agricultural development fund. Opinions have specified that the ecological compensation fund will be brought under the financial account of the county and used specially for protecting ecological environment in the west and building ecological projects. The ecological compensation fund shall be used for specific purpose. The implementation of the ecological compensation of Deqing County has greatly improved the ecological protection work in the west and has generated ecological protection “benefits”: firstly, pollution sources have been treated, with 85 small bamboo shoot plants shutdown, 3 fluorite ores shut down, and 10 chemical bamboo shoot plants rectified; secondly, infrastructures for environmental protection are constructed gradually; thirdly, natural ecological environment has been protected and ameliorated effectively. For the moment, the water quality of the reservoirs maintain grade II–III.

2.2.5

Major Problems in Practice

Seeing from practice of ecological compensation of major watersheds, some problems have been observed. (1)

Lack of legal support

For the moment, legislation on ecological compensation of the country-level is in great shortage and incapable of providing legal basis for the practice of ecological compensation. Despite the Law of the People’s Republic of China on Prevention and Control of Water Pollution (revised in 2008) has specified, “the state will, by means of financial transfer payment, build and perfect the compensation mechanism for protecting the water environment of the drinking water conservation areas, and the upstream areas of rivers, lakes and water reservoirs”, it fails to state the crossadministrative are a watershed eco-compensation issue, define the labor division of central and local governments in the compensation, the compensation body, or

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the compensation object. For the moment, there is no policy on implementation measures and technical guide of ecological compensation. Thus the local practice of watershed eco-compensation is full of administrative features, mainly shown in the governmental documents. Also, in the process, problems of insufficient compensation or failed connection between the benefited party and the compensation-needing party pop up. (2)

Insufficient study of theories andtechnical methods

Practice of watershed eco-compensation, insufficient theoretical basis is an outstanding problem, especially the problem of how to rationally set the compensation standard. For the moment, the standard is set under the lead of the government. It is decided through discussions by departments or even directly by the leader. It has adopted no scientific method, nor formed through bargaining between the upstream and the downstream governments. As a result, the compensation standard is inconvincible. In some places, the watershed compensation means is irrational, because the examination is taken from the perspective of the watershed administrative section, instead of considering influences from the high-water season and the low-water season. Besides, the compensation means are mainly punitive, rather than encouraging. Seeing from examination criteria, in some watersheds, COD is a main concern, but ammonia nitrogen, total phosphorus, and some other typical pollutants haven’t been considered, which disagrees with the situation of the watershed pollution. From the examination scope, for the moment, the examination of water quality of watershed sections targets at mainstreams and primary branches, but not the small branches, this may cause some error to the examination results. In addition, compensation for the watershed water source area hasn’t been highlighted. Also, responsibilities and duties haven’t been defined for the country, watershed water source areas and the downstream governments. Moreover, policies are unavailable. (1)

Great gap with the stable and long-term ecological compensation mechanism

For the moment, the ecological compensation for watershed water quality adopted in local governments is, strictly speaking, not ecological compensation, but a pollution compensation system of “penalty for limit-exceeding parties” based on the water quality agreement. Main players for such compensation are the government platform. Even if the damaged party and the benefited party are easy to determine the ecological compensation of the water source area, there is basically no market mechanism. Besides, compensation means are single, mainly in cash, and whether the ecological compensation fund is paid by the finance is legal is pending. Insufficient consideration has been given to policy compensation, material compensation, technical compensation or intelligent compensation. The responsibilities of interested parties haven’t been defined. Responsibilities of treating pollution and protecting water quality haven’t been determined between the upstream and the downstream. The watershed water quality and water flow agreement based on the “environment responsibility agreement” between the upstream and the downstream hasn’t been formed. Accordingly, the practice of ecological compensation foregoing still has a large gap with the ecological compensation mechanism of the ecological meaning.

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2.3 Contrasts Between Ecological Compensation Means Both at Home and Abroad To sum up from the foregoing practice, there are two compensation patterns in the world, namely the market compensation and the government compensation. Foreign countries mainly adopt the market compensation and China, the government compensation, due to its immature market economy. The two compensation patterns have their respective merits. Government compensation has powerful guarantee for the allocation of the fund, but is restricted by the administrative area. The market compensation is easy to be realized, but limited by the water right and can only be implemented with the defined water right and low transaction cost. Main differences in the practice of ecological compensation both at home and abroad are shown in Table 1 Table 1 Difference in practice of watershed eco-compensation both at home and abroad Country

Connotation

Scope

Standard

Means

Effect

Foreign

Voluntary transaction

Fewer Interested Parties, Smaller scope

The Mainly market Better compensation compensation standard is settled through negotiation between both parties, so the compensation effect is good. It can stimulate enthusiasm of protecting environment

China

Non-voluntary Transaction, Wider scope

Wide compensation Scope, many Compensation objects

The Mainly compensation government standard is set compensation by the government, so the compensation is usually low. The economic development difference between the upstream and downstream of the watershed is still a major problem

Sometimes, difficult to reach the intended effect

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3 Case Study of Watershed Eco-Compensation in China For the moment, the ecological compensation pattern based on examination of water quality of cross-border sections is usually carried out in one province, but Xin’anjiangRiver is an exception. The watershed eco-compensation for Xin’anjiang River has crossed Anhui Province and Zhejiang Province.

3.1 Case Study of Xin’anjiang River Watershed Eco-Compensation 3.1.1

Basic Information of Xin’anjiang River Watershed, Huangshan, Anhui Province

The section in Huangshan of Xin’anjiang River covers 5,545 km2 and its mainstream runs 242 km, taking up 47.5 and 62.9% of their respective total. It has only one cross province section, at Jiekou. For many years, its outbound flow yearly on average is 6.32 billion m3 , taking up more than 68% of the annual water flow into reservoirs of Qiandao Lake. It involves in 1.22 million people in 7 counties of Huangshan. This section has rich water resources. Its maximum outbound water flow was found to be 11.889 billion m3 in 1999 and minimum 3.228 billion in 1978. On average, its outbound water flow is 6.32 billion m3 . Its water quality is stable since 1993. For the moment, 8 sections of Xin’anjiang River watershed are under monitoring, covering mainstreams and major branches. Among these sections, Jiekou is a crossprovince section managed according to the grade-III surface water standard. The surface water is monitored once per month to check 25 indices. In 2010, the 8 sections of Xin’anjiang River in Huangshan reached or exceeded the grade-III standard and 7 of them reached the excellent level. The water quality of outbound sections reached grade-III, to be detailed, the annual mean value of permanganate was 2.08 mg/L (for grade-II, ≤4 mg/L), COD 7.0 mg/L (for grade-II, ≤20 mg/L), ammonia nitrogen 0.25 mg/L (for grade-II, ≤0.5 mg/L). In 2010, in Huangshan, the discharge amount of COD was 18,294 t, of which, 1,904 t was from industries (taking up 10.4%), 11,717 t from daily life (taking up 64%) and 5,673 t from agriculture (taking up 31%). Its total discharge of ammonia nitrogen was 2,472 t, of which, 329 t from industries (taking up 13.3%), 1,332 t from the daily life (taking up 53.9%), and 830 t from agriculture (taking up 33.6%).

3.1.2

Environmental Protection Conditions in Qiandao Lake, Zhejiang Province

Qiandao Lake is the largest artificial fresh water lake in China due to the building of Xin’anjiang River Hydropower Station. The power station was commenced in

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April, 1957 and put into service on September 21, 1959. On April 22, 1960, its first water turbine unit started to generate electricity. Its initial installed gross capacity was 662,500 KW and expanded to 845,000 KW during 2000–2005. The designed total reservoir capacity is 21.633. Case Study of Watershed Eco-compensation in China 15 billion m3 . The watershed area of Qiandao Lake is about 580 km2 , 98% of which is in Chun’an County, Zhejiang Province. Its raincollecting area above the dam is 10,442 km2 , among which, 6,201 km2 , taking up 59% of the total, is in Anhui Province. The average reservoir inflow per annum is 10.2 billion m3 , among which, the inbound flow in Anhui Province is 6.32 billion m3 . Besides the mainstreams in the upstream of Xin’anjiang River, the reservoir inflowrivers include Suian River, Lianjiang River and Dongxi River. (1)

Pollutant discharge from industries

Industries in Chun’an County are mainly the textile, foodstuff and building material industries. According to surveys on 59 major and non-major enterprises in the county in 2010, the discharge amount of industrial wastewater was 6.9329 million tons, COD 561.4 t (20% of the total discharge), and ammonia nitrogen, 44.6 t (13% of the total discharge). Industrial pollution sources are distributed unevenly. Qiandaohu Town, as a major industrial development zone, has diversified industries and a great number of enterprises, making it a major discharger of industrial pollutants. It contributed to 60% of the discharged industrial waste water and 47% of COD in the county. (2)

Pollutant discharge from life source

The life source pollutants mainly come from urban residents, hotels, restaurants, car washing, bathing centers, hospitals and schools. In 2010, the discharge amount of wastewater from living in Chun’an County was 5.9268 million tons, taking up 54% of the total; COD 1,441.95 t, taking up 50% of the total; ammonia nitrogen 116.64 t, taking up 33% of the total. (3)

Pollutant discharge from agriculturalsource

Non-point pollution of agriculture mainly comes from agricultural activities like cultivating of livestock and poultries, aquiculture and farming. According to survey, in Chun’an County, there are 13 large-scale (breeding stock ≥500) and 100 more small farms. For the moment, only several of them have carried out the zero discharge project. Some cultivation farms, however, have a large scale, but insufficient treatment facilities. Even worse, most small farms discharge or stockpile excrements after simple treatment. This has great influence on the water environment. As indicated by data of 2010, the discharge amount of COD of the agricultural source was 834.2 t, taking up 30% of the total in the county; ammonia nitrogen, 189.4 t, taking up 54%. Moreover, pesticides, fertilizers, agricultural films left in the farmland and unscientific aquiculture can all cause water pollution. (4)

Pollutant discharge from pleasure boats

In recent years, tourism in Chun’an County has been developing fast and has made the mainstay industry of the county. The booming tourism requires more boats and

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such boats have become a major pollution source of Qiandao Lake. Today, there are 100 more pleasure boats on the Lake; also, there are powerboats, freighters, dredges and self-owned boats. Such boats can produce waste oil, waste water from dining and meal as well as excrements of passengers, which have caused pollution to water. (5)

Garbage flowing into the Lake

Currently, the county has carried out projects of “clean village” and garbage collection and treatment, but still substantive garbage swarms into Qiandao Lake during the flood season, only to pollute the water. According to statistics, the yearly garbage retrieval amount is about 250,000 m3 . Yet, garbage from Jiekou to Qiandao Lake is more than 100,000 t. In the near three years, the expense on retrieving garbage is more than RMB 5 million every year. Seeing from the five points above, it can be seen that the discharge of COD and ammonia nitrogen from the life source and the agricultural source takes a major proportion. The 12th Five-year Plan for National Economy and Social Development of Chun’an County (2011–2015) still makes the protection of Qiandao Lake a top priority. It requires strictly controlling industrial pollution sources and mainly developing foodstuff and beverages, textile garments and mechanical manufacturing as well as high-tech industries. In addition, with the enforcement of discharge under certain standard and control over the discharge amount, discharge of industrial pollutants will be stabilized, while discharge of life and agricultural pollutants will rise. Rise in population and development of tourism will increase discharge amount of pollutants. In this sense, the agricultural non-point pollution and life pollution will be subject of future pollution control in Chun’an County.

3.1.3

Progress and Effect of Watershed Eco-Compensation

Mechanism in Xin’anjiang River In recent years, eutrophication of water in Qiandao Lake is severer and severer. As monitored by departments concerned in Zhejiang Province, among the 24 indices of quality standard of surface water environment, except the total nitrogen (gradeIII; grade-IV in 2008) and total phosphorus (grade-II), the rest 22 meet the gradeI standard. Monitored values of many indices are below the detection limit. This indicates that water quality in Qiandao Lake is good on the whole, but the water environment security situation is pessimistic. Evaluated by the 24 indices, from 2001 to 2011, water quality of Qiandao Lake was grade IIIIV (only in 2008, grade-IV). Every year, the index exceeding the limit was the total nitrogen. The eutrophication index range was 28–34. During 2001–2005, the Lake was in an oligotrophic state and during 2006–2011 mesotrophic. The nutritional index is rising year by year. According to monitoring data, quality of water inflow from the inbound section (Jiekou) of Huangshan, Anhui Province, was deteriorated and during 2001–2010, mainly grade-IV. In 2010, the water quality was grade-IV, with the total nitrogen 1.11 mg/L, total phosphorus 0.025 mg/L and permanganate 1.89 mg/L.

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Seeing from the monitoring data above, it can be observed that water environmental security of Qiandao Lake was pessimistic. It is imperative to treat water from the upstream of Xin’anjiang River so that it cannot influence the water quality of Qiandao Lake. To meet that end, from 2009, the Environmental Protection Department and the Ministry of Finance worked together to make experiments on the watershed eco-compensation mechanism in Xin’anjiang River in Anhui Province and Zhejiang Province. In 2011, the Environmental Protection Department and the Ministry of Finance issued Implementation Plan on Making Experiments on Watershed Water Environment Compensation in Xin’anjiang River and initiated the first cross-province watershed eco-compensation project. The roles of compensation subject and object are shifted between Anhui Province in the upstream and Zhejiang Province in the downstream. Currently, this ecocompensation mechanism only considers water quality (4 indices), rather than water flow. Regarding the monitoring scheme, the eco-compensation section is set on the border between Anhui Province and Zhejiang Province. Monitoring data from the automatic water quality monitoring station are taken as reference. Water is monitored manually once per month and six times per day automatically. The average of monitoring data obtained manually from two provinces is taken as evaluation basis. Regarding compensation fund, the central finance will allocate RMB 300 million, and Anhui Province and Zhejiang Province provide RMB 100 million respectively to work as the compensation fund. If the composite index of water quality is greater than 1, RMB 100 million from Anhui Province will be transferred to Zhejiang Province and vice versa. Regardless of the composite index, RMB 300 million from the central finance will be transferred to Anhui Province as the special fund for protecting water environment in the upstream. The detailed compensation method is as follows. In the Environmental Quality Standards for Surface Water (GB3838-2002), it has specified four indices, namely, permanganate index, ammonia nitrogen, total nitrogen and total phosphorus. The four indices are used to calculate the comprehensive water quality index according to formula (1). During calculation, the average of these indices for years shall be taken as the basic limit. P = k0

4  i−1

ki

Ci Ci0

(1)

In formula (1), P is the comprehensive index, and k0 water quality stable coefficient, which is 0.8 considering changes in natural conditions like rainfall runoff; ki index weight coefficient, which is calculated according the average of the 4 indices; Ci the average concentration of an index; Ci the basic concentration limit of an index. (1)

Progress of implementing watershedeco-compensation pilot project in Xin’anjiang River, Huangshan

In 2011, the first cross-province eco-compensation pilot work was initiated in Xin’anjiang watershed under the support of the Ministry of Finance and the Ministry of Environmental Protection. This project involved in a cross-border section (Jiekou

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section) between Anhui Province in the upstream and Zhejiang Province in the downstream. In the following we will analyze the use of expenditure for this first pilot work and the implementation effect in Huangshan. In 2010, the Ministry of Finance and the Ministry of Environmental Protection allocated RMB 46.20 million for ecological compensation to Huangshan, which has started 5 projects using such fund. Huangshan has: (1) built cleaning squads in 418 villages along the Xin’anjiang River watershed, purchased cleaning vehicles, and trained people concerned; (2) organized garbage retrieving teams responsible for collecting garbage on the river surface from TunxiLaoda Bridge to Jiekou section (outbound section); (3) built garbage treatment facilities in villages and towns, selected 10 villages and towns to build garbage transfer station, and provided cleaning and transporting vehicles; also, it is building a garbage treatment system, under which, garbage is collected by the teams and villages, and then transferred or treated by villages and towns; (4) finished the primary-stage work of water and soil conservation in Hengjiang River section, and the river water source protection in Fengle section; (5) built automatic water quality monitoring station at Jiekou; (6) prepared the outline for plans. In 2011, according to fund allocation plan of the Ministry of Finance and the Ministry of Environmental Protection, the fund for the pilot project was RMB 300 million, among which, RMB 200 million from the central government and RMB 100 million from Zhejiang Province. RMB 200 million from the central government will be used in the first batch of projects and RMB 100 million from Zhejiang Province for the second batch. For the moment, there are 46 projects (covering 8 sections) are listed in the first batch of 2011.They consume RMB 1.44 billion totally and applied for RMB 186 million. These projects involve in prevention and treatment of nonpoint pollution in the countryside (including treatment of pollution from raising livestock and poultry, pollution-interception project, construction of garbage treatment facilities, prevention and treatment of industrial pollution, construction of industrial parks, and treatment of environmental pollution and repair of ecology. (2)

Implementation effect of the pilotproject in Xin’anjiang River, Huangshan

The pilot project has: (1)

(2)

(3)

Improved the wastewater collection and treatment efficiency of Huangshan. Seeing from construction of projects, Huangshan has input a lot into building sewage treatment facilities and mating pipe networks in economic parks, towns, major villages and towns. It plans to build 6 new sewage treatment facilities, which will increase the daily sewage treatment capacity by 30,000 t. It will build and expand sewage mating pipe networks by 402 km. Reduced discharge of pollutants in Huangshan and decreased key pollutant discharge indices like COD. It is predicted that the pilot project can cut COD by 11,800 t. Strengthened garbage treatment capacity of Huangshan. Huangshan has built 22 garbage treatment facilities, capable of disposing 146,000 t garbage in 22 villages and towns, which has taken the first step in dealing with non-point source garbage pollution in the countryside.

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(4)

(5)

3.1.4 (1)

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Regulated environmental pollution from livestock and poultry breeding farms. During the implementation process, it plans to regulate 10 farms. After that, it is predicted to cut discharge of COD by 967 t, thereby to ameliorate the water environment quality of the watershed. Repaired ecological shore protection along the river, enhanced soil moisture content on both banks of the watercourse, effectively prevented water loss and soil erosion as well as reservoir deposition and raised the yearly water runoff and guaranteed water quality improvement in the downstream. Analysis of Existing Problems No applicable law

Both Zhejiang Province and Anhui Province have insufficient legal basis in implementing watershed eco-compensation. They are still exploring and have to find applicable laws to solve problems. Zhejiang Province has relatively. sufficient legal basis, mainly shown in Several Opinions on Further Improving Ecological Compensation Mechanism (ZHEZHENGFA [2005] No. 44), Several Opinions on Building and Perfecting Ecological Compensation Mechanism of Hangzhou Province (HANGSHIWEIBAN [2005] No. 8) and Notice of Administrative Measures for Collecting Reserve Fund for Treating Mine Ecological Environment by Zhejiang Provincial People’s Government (ZHEZHEGNFA [2001] No. 81), Notice of Problems in Administrative Measures for Collecting Reserve Fund for Treating Mine Ecological Environment by the General Office of Zhejiang Provincial People’s Government (ZHEZHENGBANFA [2002] No. 48), and Notice of Strengthening Mine Ecological Environmental Protection and Treatment by the General Office of Zhejiang Provincial People’s Government (ZHEZHENGBANFA [2003] No. 75). In Anhui Province, except Administrative Measures for Collecting and Using Fund for Mine Environment Recovery and Treatment of Anhui Province, there is no guiding document regarding ecological compensation. As a whole, during implementation of watershed eco-compensation, the imperfect legal system and mechanism have been a problem. No systematic framework has been built to organize and integrate policies concerning the watershed eco-compensation, so that the existing watershed eco-compensation measures cannot be taken according to laws. As a result, ecological compensation between the upstream and the downstream of the area and watershed cannot be carried out substantially. Furthermore, departments carry out measures administratively, which has resulted in insufficient compensation, or the mismatching between those getting the compensation and those in need of compensation. (2)

Disputes from compensation standard

So far, under coordination of the Ministry of Finance and the Environmental Protection Department, Zhejiang Province and Anhui Province have taken several discussions and studies on the watershed eco-compensation mechanism for Xin’anjiang River and reached common understanding in the general thinking and framework of

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implementation measures. They agree that the central finance shall allocate RMB 300 million as the compensation fund for Xin’anjiang River watershed environmental protection (the fund is allocated to Anhui Province for the environment protection of Xin’anjiang watershed) and that Zhejiang and Anhui shall each provide RMB 100 million as the reward/punishment fund in the examination of water environment. In practice, the mean value of primary indices of the water environment quality of the cross-province section of the recent three years is taken as the baseline value. When this value falls within a range, there will be no reward or punishment. If such indices are better than a certain value, RMB 100 million from Zhejiang Province will be transferred to Anhui and on the contrary, RMB 100 million from Anhui Province to Zhejiang Province. Yet, they still have to negotiate regarding what to do if the water quality of the cross-border section is deteriorating year by year. (3)

Simple use of compensation fund

Seeing from implementation of the pilot project, when the upstream has got the compensation fund from the State, it only uses it for environmental protection. The ecological environmental protection of watershed, however, is a many-sided and systematic project and requires combined action and efforts of many parties. If this fund is only used for environmental protection, it will degrade use efficiency of the fund.

3.2 Case Study of Huaihe River Watershed Eco-Compensation 3.2.1

(1)

Socioeconomic Conditions of Huaihe River Watershed in Henan Province Overview of water resources

Surface water resources of Huaihe River watershed in Henan Province are distributed unevenly due to the terrain and physiognomy. Their distribution agrees with that of rainfall. The high/low runoff areas match the rich/less-rain areas. On the whole, water resources in the south are richer than those in the north, mountainous areas greater than the plain and the west greater than the east. Up to the end of 2009, 1,401 water reservoirs have been built in the watershed, with the total capacity of 13 billion m3 . The construction of gate dams, to some degree, has caused the uneven distribution of water resources. In 2009, the average precipitation in the watershed was 784.9 mm, 6.8% less than the multi-year average. The surface water resource was 10.77 billi on m3 , the underground water resource 10.95 billion m3 , the repeated resource of surface water and underground water 3.03 billion m3 and total water resource 18.69 billion m3 , 24.1% less than the multiyear average. The water-producing coefficient was 0.28, average water-producing modulus 212,000 m3 /km2 , and the per capita

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water resource was 314 m3 , less than that (330 m3 ) in Henan Province and taking up 14.3% of the national average. The mainstream of Huaihe River originated from Taibaiding Peak, Tongbai Mountain, Tongbai County, Henan province. In the south bank, its branches include Shihe River, Zhugan River, Huanghe River, Shiguan River and Bailu River, with Shiguan River the largest one. These branches are short, have large bed slope and rich water flow. In the north bank, branches include Hongru River, Shaying River, Wohui River, Baokuai River and Tuohe River. Most branches originate from mountainous regions in west Henan Province and several from the near-level land in the south of Yellow River. They flow into Huaihe River from northwest to southeast. (2)

Economic and social situation

In 2009, population on the Huaihe River watershed in Henan Province was 59.56 million, taking up 59.8% of the provincial total, with the density of 675/km2 . Urban people were 22.33 million, with the urbanization ratio of 37.5%, matching that (37.7%) of the province. Compared with 2005, the population growth was 1.16 million, with the annual average natural increase of 4.9‰. In 2009, GDP in the watershed was 1.08279 trillion, taking up 55.6% of that of the provincial total. The structure of the three industries was 15.3:53.0:31.7. The total industrial output value reached 514.52 billion, taking up 47.5% of GDP. Compared with 2005, GDP increased by 537.18 billion, with the annual average growth of 18.7%. Huaihe River watershed in Henan Province is a major food producing area and energy source base in China. In 2009, its tillable land area and grain output respectively took up 60% and 62% of the total provincial scope. It has 48.43 million µ (1 µ = 667 m2 ) effective irrigation area.

3.2.2

Pollutant Discharge in Huaihe River Watershed in Henan Province and Analysis of Pressure Faced by This Region

According to the Plan on Preventing and Controlling Water Pollution in Huaihe River Watershed (2006–2010), in 2005 in the watershed, total discharge of COD was 298,000 t and of ammonia nitrogen, 46,000 t. In 2010, the total discharge of COD was controlled to be 255,000 t, down by 14.45%, and of ammonia nitrogen, 39,000 t, down by 15.2%. In 2009 in the watershed, the total discharge of COD was 254,900 t and of ammonia nitrogen, 37,900 t, down by 14.5% and 17.6% respectively compared with that in 2005. It can be seen that the discharge of COD and ammonia nitrogen fulfilled the control objectives set in the Plan. For the total discharge of COD and ammonia nitrogen of the watershed during 2006–2010, please refer to Table 2.

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Table 2 Total controlled discharge of COD and ammonia nitrogen in the Huaihe river watershed in Henan province during 2006–2010 Index COD (10000 t) Ammonia nitrogen (10000 t)

3.2.3

Planned goal

Progress

2005

2010

2006

2007

2008

2009

2009 versus 2005 (%)

29.8

25.5

29.9

29.1

26.96

25.49

−14.50

4.6

3.9

3.76

3.79

−17.60

4.37

4.38

Implementation Progress of Eco-compensation of Huaihe River Watershed in Henan Province

(1)

Eco-compensation framework ofHuaihe River watershed in Henan Province

(1)

General thinking

The ecological compensation and pollution compensation mechanism of Henan Province aims to: based on analysis of features of the water environment of the watershed, define the ecological compensation and pollution compensation types of different watersheds and different administrative areas; according to the principle of “the one who has caused pollution shall make the compensation, the one who has benefited shall make the compensation and the one who has provided protection shall be benefited”, further define the relation between bodies responsible for ecological compensation and pollution compensation; under the guide of local government, interested enterprises and industries of the upstream and the downstream share the eco-compensation and water environment protection responsibilities, which has effectively solved contradiction between the economic development and water ecological environment of the watershed and ensured sustainable use of water resources, thereby to maintain sustainable development of the society and economy in the upstream and downstream of the watershed. After defining bodies responsible for ecological compensation and pollution compensation, the next step is to establish a scientific and reasonable ecological compensation and pollution compensation standard, to lay basis for interested parties to share responsibilities of protecting the water environment of the watershed. In the pilot area in Henan Province, socioeconomic development varies region by region. As a result, in preparation of such standard, responsibilities and economic capability of interested parties shall be given full consideration. Different compensation methods shall be decided according to the local conditions during the implementation of the compensation mechanism. (2)

Selection of indices of pollutants inecological compensation

Water pollution of the watershed in Henan Province mainly comes from domestic and industrial sewage, in which, COD and ammonia nitrogen are main pollution factors. Accordingly, in control of pollutants and total discharge, COD and ammonia

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nitrogen shall be primary factors. According to the task assignment between Henan Provincial People’s Government and cities concerned, during 2006–2010, COD and ammonia nitrogen were key examination indices, without considering heavy metals or phosphorus. This is the same case in the current pilot plan for Henan Province. (3)

Watershed eco-compensation standard

For the moment, the watershed eco-compensation standard in Henan Province is carried out by two means: one is based on the pollution treatment cost and the other, based on ecological protection of the drinking water source area. a.

b.

Watershed eco-compensation standard based on pollution treatment cost The pollution treatment cost characterization method based on cluster analysis is used for deciding the compensation standard. Then according to the situation of Henan Province, the operating data of urban sewage treatment plants in Henan Province are taken as the research subject. Using principles of cluster analysis, the curve relation between COD concentration and the sewage treatment cost are studied. Then, according to the water quality of Henan Province and analysis of data from sewage treatment plants (the curve relation between COD concentration and the sewage treatment cost), the sewage treatment cost of Henan Province is decided. Finally, using the concept of pollutant treatment benefit, the ratio between COD/ammonia nitrogen and the sewage treatment cost is decided, thereby to decide the compensation standard for each factor. Ecological compensation standard based on ecological protection of drinking water source area. In light of characteristics of ecological compensation and functions of the drinking water source areas in Henan Province, the ecological compensation standard can be decided through the following four methods: Firstly, the cost calculation method according to the net cost input by the upstream; the drinking-water source protected zones are important protective screens to ensure security of drinking water. The water source contributing region in the upstream can ensure quality of drinking water environment and the total amount of water resources. To increase fund and policies support for the drinking water resource protected zones and to construct many ecological projects have both conserved water source and generated ecological effect. If in the upstream the ecological construction cost is greater than the ecological benefit, the downstream shall compensate the difference to the upstream as the ecological compensation fund. Accordingly, the difference between the ecological construction cost and the ecological benefit can be used as the compensation standard based on the ecological protection of drinking water source regions.

Secondly, the cost analysis method according to water quality difference of the cross-border examination section; under the cost analysis method, water quality difference between the inbound section and outbound section of the upstream water source contributing region of the drinking water source is used to estimate the treatment cost required for improving water quality, which then will be used for calculating the treatment cost as the compensation standard by the downstream to the water source contributing region.

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Thirdly, the maximum willingness-to pay method according to the willingness of inhabitants in the intake area to pay for the value of the water resources; under this method, direct surveys will be done to learn about willingness to pay of consumers, or their choice of products or services to evaluate the value of consumer goods. The compensation standard based on ecological protection of the drinking water source area can adopt this method, to find the maximum per capita willingness to pay of drinking water consumers in the intake area and then multiply the willingness to pay by the pollution to estimate the value of drinking water resources. Finally, the compensation fund provided by the downstream to the upstream can be decided. According to hypothesis of economic men, consumers usually select a lower compensation standard, so the compensation standard based on the willingness to pay shall be taken as the lower limit. Fourth, the agreed compensation method through friendly negotiation between the upstream and the downstream; this method starts from the concept of impartiality. In this method, the compensation standard is decided impartially and reasonably through negotiation and coordination between interested parties, to realize a win–win result between both parties. (4)

Watershed eco-compensation fundmanagement mechanism

Currently, the Huaihe River watershed eco-compensation mechanism in Henan Province mainly adopts a compensation fund withholding bulletin mechanism. Under this mechanism, the provincial environmental monitoring station summarizes the withholding amount of the ecological compensation fund monthly, and then the provincial environmental protection department and the financial department together report the withholding information of the ecological compensation fund by city to the provincial people’s government and its financial bureau and environmental protection bureau. The monitoring station collects the withholding limit of the compensation fund quarterly and the provincial environmental protection department publishes such on press conference also quarterly. This mechanism can remind cities in the province of highlighting the ecological compensation work, which is good for carrying out the ecological compensation work. (5)

Laws and codes on watershedeco-compensation

Today, main laws on watershed eco-compensation in Henan Province include: Tentative Method for Ecological Compensation for Water Environment of Shaying River Watershed in Henan Province (YUZHENGBANWEN [2008] No. 36) issued by General Office of Henan Provincial People’s Government in 2008, Measures for Ecological Compensation for Water environment of Huaihe River Watershed in Henan Province (trial) (YHUANWEN [2009] No. 222) issued by the provincial environmental protection department and the provincial financial department in 2009, and the Tentative Method for Ecological Compensation for Water Environment in Henan Province (YUZHENGBAN [2010] No. 9) issued by the General Office of Henan Provincial People’s Government in 2010.

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3.2.4

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Analysis of Results of the Pilot Work in Huaihe River Watershed Eco-Compensation Improvement in surface water quality

Since the enforcement of Tentative Method for Ecological Compensation for Water Environment of Shaying River Watershed in Henan Province on December 16, 2008, water environment quality in Shaying River has been improved. The water quality in 2009 versus in 2008 is shown in Table 3. Compared with that in 2008, in 2009, the mean concentration of COD of Shaying River reduced by 7.97% and of ammonia nitrogen, by 42.85%, indicating improved water quality. For the Shahe River, the COD concentration in Mawan and Wuyang sections reduced the greatest by 16%. For the Jialu River, the concentration of ammonia nitrogen in Dawang Village and Xihua sections reduced the greatest by 52.54%. Among the six rivers, Jialu River, Shuangji River and Qingyi River saw improvement in water quality. To be detailed, in Shuangji River, the concentration of COD and ammonia nitrogen reduced by 10.81% and 11.91% respectively; for Jialu River, the two figures were 3.51% and 49.46% respectively; for Qingyi River, 2.49% and 12.22% respectively. It can be seen that among the three rivers, concentration of COD in Shuangji River reduced the greatest and in Jialu River, the concentration of ammonia nitrogen reduced the most evidently. (2)

Analysis of social effect

With implementation of the watershed eco-compensation policies in Henan Province, an upsurge of improving water environment was initiated. Also, the local government promoted the force and progress of preventing and controlling water pollution. On succession of implementation of tentative method for ecological compensation for water environment of Shaying River, Zhengzhou prepared 15 projects for environmental treatment of Jialu River watershed and 6 projects for environmental treatment of the Shuangji River watershed. Execution of the foregoing projects has collected and treated sewage from Jialu River and Shuangji River, continuously promoted water quality in Shuangji River and Jialu River, to ensure the outbound water meets requirements of the provincial government. Xuchang has regulated Henan Yilin Paper Industry Co., Ltd., which pollutes the outbound water, and built the shallow-layer and high-efficiency air-flotation project. Pingdingshan will upgrade and rebuild its existing sewage treatment plants, to improve the sewage treatment capacity by 70,000 t/day. The foregoing work has expedited the centralized sewage treatment capacity of Henan Province and reduced discharge of key pollutants.

3.2.5

Analysis of Existing Problems

Implementation of Huaihe River watershed eco-compensation policies in Henan Province has generated notable environmental and social effect, but still has some problems and insufficiency:

Jialu River

Shahe River

Lihe River

Qingyi River

Baidukou, Fugou

Mawan, Wuyang

Yewu Highway Bridge

Gaocun Bridge, Linying

Shahe River

Qingyi River

Jialu River

Yinghe River

31.19

Chengwan, Xihua

Taochengzha, Yanling

Dawang Village, Xihua

Zhidian, Shenqi

average

Yinghe River

Shuangji river

Huangpu Village, xinzheng

Yinghe River

Yinghe River

Baisha water Reservoir

Zhifang, Xihua

Jialu river

Chenqiao, zhongmou

Wuliuzha, Linying

River

Section

5.59

Zhoukou

Zhoukou

Luohe

Luohe

Luohe

Xuchang

Xuchang

Pingdingshan

Pingdingshan

Kaifeng

Zhengzhou

Zhengzhou

Zhengzhou

City

28.7

22.06

33.27

–

–

22.56

–

65.74

5.81

18.22

34.04

45.18

13.67

3.19

2.96

13.35

–

–

3.93

0

4.29

0.16

1.69

13.54

4.46

0.23

16.86

2.17 −42.85

−7.97

6.33

3.66

0.82

3.18

0.22

3.25

0.19

1.72

7.05

3.93

0.22

8.78

Ammonia nitrogen

23.03

30.98

42.3

17

21.06

17.7

62.48

5.42

15.31

33.3

40.29

13.7

50.55

COD

51.32

2009 Ammonia nitrogen

2008 COD

–

–

−26.93

−52.54

−6.86 implePara> 4.39

–

–

–

−19.26 –

0 −6.63

24.44

−4.97 –

1.99 18.49

−47.95

−2.17 −6.65

−11.91

−10.81

−16

−0.84

−47.9

0.25

−1.5

Variation in water quality (%)

Table 3 Monitoring data of examination section of section of Huaihe River Watershed (Shaving River watershed) in Henan Province (mg/I)

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(1)

(2)

(3)

(4)

(5)

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Imperfect legal system; even if Henan Province has issued a series of laws for the pilot work, such policies are temporary for lack of support from the higher-level laws, so such policies cannot effectively stimulate watershed environmental protection in a long term. Insufficient promotion and education; water environment ecological compensation is a rising economic policy in Henan Province. Some lower-level governments haven’t mastered the meaning of ecological compensation; also, some enterprises and people are passive in carrying out the ecological compensation work. Some even discharge sewage on the sly, which has generated great pressure to the government. Financial strain in environmental protection; substantive input, especially the fund input, has caused great pressure to local government. Furthermore, the local government is not the only bearing great pressure from capital input. According to provisions on ecological compensation for water environment in Henan Province, when the withheld fund is insufficient for the ecological compensation and award, the provincial-level environmental protection special fund shall be used to make up such insufficiency, which has caused pressure to the provincial-level environmental protection department. Imperfect fund management system; for the moment, enforcement of the ecological compensation policies in Henan Province lacks an integrated fund management system, especially a fund monitoring and management system. Lack of encouraging compensation standard; currently, the ecological compensation standards for cross-border rivers in Henan Province target at limit exceeding sections based on the government examination, so they lack of encouragement for continuous improvement of sections meeting the standard.

4 Suggestions on Consummating Legislation on Watershed Eco-Compensation 4.1 Defining Compensation Body and Compensation Object (1)

Body of general watershed eco-compensation

The general watershed eco-compensation means in the watershed ecosystem service provision, the benefited parties of such services shall, according to a certain compensation standard, provide compensation for the service providers. Bodies of such compensation usually include the centralized life drinking water source areas and the headwater conservation areas. In order to ensure the smooth going of general watershed eco-compensation, it is necessary to define the compensation body. The current laws, however, are ambiguous, lagging and non-systematic, so that they fail to define the general watershed eco-compensation body and consequently produce little effect during the implementation of such compensation. Bodies of the general

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watershed eco-compensation include: (1) groups that have benefited from environmental protection in the watershed, the water-utilization activities include water utilization for industrial purpose, for farming and livestock breeding, for living, for hydropower generation, for tourism projects and for aquiculture and so on; (2) Individuals, enterprises or units that have discharged pollutants in their life or production and have influenced the water flow and quality of the watershed, in this case, water-utilization activities include water utilization for industrial enterprises, for commercial/family/municipal organizations and for recreation and tourism. (3) In practice, the watershed eco-compensation body sometimes is the State, which primarily accomplishes it through financial transfer. Law of the People’s Republic of China on Prevention and Control of Water Pollution [Revised] has provided legal basis for the State to make ecological compensation by means of financial transfer and defined the State to be a legal body during watershed eco-compensation. (2)

Object of general watershed eco-compensation

The object of watershed eco-compensation refers to a specific object that has received the watershed eco-compensation fund. To ensure providers and contributors of watershed ecological services can be rewarded, it is necessary to define the object of watershed eco-compensation. The compensation object falls into two categories: first, the ecological protectors and second, those who have decreased ecological destruction. The former include those planting and managing water-conserving forests in protected zones, those constructing and managing ecology of the upstream watershed, and those constructing and managing ecology in other areas. They can be local residents, villages or local government. The latter refer to bodies who have given up development opportunities in order to maintain a good ecological environment in the upstream of the watershed. For example, they maybe only select non-pollution projects to maintain a good ecological condition. Inhabitants are unable to carry out aquaculture and in their plant production, they will consume fewer fertilizers, which has produced opportunity loss. The local government may suffer decrease in fiscal revenue because of incapability of developing tourism resources and attracting investors. (3)

Body and object of cross-border watershed eco-compensation

The cross-border watershed eco-compensation shall be made according to the plan for preventing and controlling watershed pollution or the water quality (water flow) agreement signed between the upstream and the downstream. In the water quality agreement, the upstream and the downstream have reciprocal rights and obligations and their role of body or object switches between them. When the upstream has performed its obligations under the water quality agreement, the downstream will be the compensation body and accordingly, the upstream, the compensation object. Otherwise, the upstream will be the compensation body and accordingly, the downstream, the compensation object. It is an important and also the hardest section of legislation for watershed eco-compensation to establish the watershed eco compensation standard. It is important because it lays basis for providing (collecting).

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4.2 Establishing Compensation Standards It is an important and also the hardest section of legislation for watershed ecocompensation to establish the watershed eco-compensation standard. It is important because it lays basis for providing (collecting) compensation for (from) watershed ecosystem service providers (or destroyers); it is difficult because production and living activities of human have generated harmful influence on environment from many aspects and environmental benefits are hard to be calculated. (1)

Standard for general watershed eco-compensation

Such standard may be established using environmental cost–benefit analysis method, under which, the ecological environmental cost can be measured in currency through a series of assessment techniques. Such techniques include the market value method, opportunity cost method, and recovery/protection cost method, shadow project, human capital approach and the willingness to-pay method. Such techniques, however, can only provide reference for establishing such standard. In practice, the State may issue guide for such standard and then, the localities can make the ecological compensation standards according to their respective development level and situations. (2)

Standard for cross-border watershed eco-compensation

From the practice of policies on cross border watershed eco-compensation, it can be concluded that departments that have established such policies in the hope of balancing the pollutant reduction (getting the ecological compensation fund) and the pollutant discharge (paying the ecological compensation), thereby to control discharge 29 of pollutants into the watershed and improve water environment. Such policies function like this: the compensation standard can stimulate areas that have a lower pollutant marginal treatment cost to reduce more pollutants and that have a higher pollutant marginal treatment costs to reduce fewer, thereby to make the pollutant marginal treatment cost in each area is the same and thereby to control the total discharge of pollutants. For the moment, the standard for cross-border watershed eco-compensation includes the water quality compensation standard and the water quality/flow-based flux compensation standard. In establishment of compensation standards, it is a consideration whether such standards can promote areas that have a higher marginal pollutant discharge-reducing cost to reduce fewer pollutants and areas that have a lower marginal pollutant discharge reducing cost to reduce more pollutants. According to the function of policies on cross-border watershed eco-compensation, the establishment of such standards shall consider fully the pollutant reducing cost in the areas in the watershed and the water quality (flux) objectives of the cross border sections; analyze the best ecological compensation standard and ultimately prepare such standards according to the situation of pollutant reduction in a watershed. Or the standards are established through negotiation between the upstream and the downstream.

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4.3 Compensation Means (1)

Fund compensation

The upstream has protected water resources, which has most benefited the downstream. Naturally, the body of fund compensation shall be the downstream government. The common measure taken by the downstream is to regulate the water rate, which generally is composed of the engineering cost, the management cost and the resource cost. Generally speaking, the engineering cost and management cost are relatively stable, so they have little space of rising. By contrast, the resource cost can have a huge space of rising. Thus, the downstream areas can properly improve the water resource fee, which will then be allocated partially to the watershed ecocompensation fund. This method is operable. The upstream can also, referring to the action of the downstream, raise its water rate, which will then be allocated partially to the watershed eco-compensation fund. So far, the watershed eco-compensation fund can be maintained steadily. The upstream must use the compensation fund for special purposes mainly: firstly, for the water conservation, water source protection and ecological environmental construction of the upstream; secondly, water management cost; thirdly, cost of environmental protection in the water source areas. (2)

Policy compensation

Policy compensation means the higher level government provides rights and opportunity compensation for the lower level government. Those receiving the compensation may, within their authorization, use priority and preferential treatment for policy making to enact innovative policies, to strengthen support and provide more preferential for the upstream in aspects of investment projects, industrial development and fiscal levy and to promote economic development in the upstream and raise fund. It is of importance to use the system resource and policy resource for compensation, which is especially true for upstream areas lack of fund and economic strength. It is fair to say that policy is compensation. (1)

(2)

(3)

Pertinent fiscal policies can be established according to features of ecological construction and environmental protection of upstream of watershed. They are applicable to large rivers. The representative of such policies is the financial transfer payment system in West China. Market compensation policies shall be established to gradually foster the water right transfer market between the upstream and the downstream. Under such policies, the downstream shall pay the water resource cost according to the market price regularly. Such policies are applicable to small watersheds that involve in fewer interested parties. The watershed eco-compensation market is relatively easy to build. Technical project compensation policies shall be established. Under such policies, governments of all levels in the downstream shall arrange a certain number of technical projects in the area annually, to help the upstream regions develop substitute industries, or initiate non-pollution industries, namely, ecological

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industries. Such policies, having a higher operating cost, are more suitable for the ecological compensation for watersheds within a province or a city. Policies encouraging development in other regions shall be established. Under such policies, the local government shall allow and support the upstream to make experiments for development in the downstream by means of offering policy preferential in land use, investor recruiting and enterprise migration; it shall guide the upstream to allocate some pollution projects that are not allowed by ecological protection in the upstream. For restrictions from administrative management systems, the development in other regions is more suitable for watershed eco-compensation in a city. Industrial compensation

It is practical for the downstream to provide industrial projects for the upstream as a means of compensation through referring to the industrial transfer mechanism due to gradient difference in economic development. It is the best way for reducing development gap between the upstream and the downstream and improving local living standard to develop industries and explore the capacity of the upstream. The upstream shall have a concept of “to serve the downstream is to develop itself”, build a good industrial transfer platform and gather labor-intensive, resource-intensive, high-tech and low pollution industries of the upstream and the downstream to form industrial colonies and industrial processing areas. The industrial compensation policies shall take the watershed as a system and consider industrial layout and resource allocation within the watershed framework. Such policies will face difficulty for cross-border watersheds and be more easily carried out in a province. Yet, they may not work due to industrial policies of different regions, but for the watershed within a city, such policies will have more development space but lower operating cost. (4)

Market compensation

The market mechanism for watershed eco-compensation can be formed only after having the following preconditions: (1)

Severe contradiction between supply and demand of ecological services between the upstream and the downstream; in this case, the downstream has higher requirements on water quality or water flow, while the upstream, to chase economic interest, has set up factories, cut forests and opened up wasteland on sloping fields, which has caused water quality pollution, water loss, soil erosion. Besides, the upstream has used pesticides and fertilizers, which has caused non-point pollution. In this situation, the downstream, to get ecological effect such as better water source or sufficient water flow, may pay some ecological compensation fund for the downstream, to form an excitation mechanism for ecological protection in the upstream. Furthermore, the downstream may pay the upstream by means of agreement, requiring the upstream to produce as per ecological protection requirements.

Watershed Eco-Compensation in China: Practice and Review

(2)

(3)

(4)

33

Ratification from the public of functions and value of ecological services of the watershed; functions of ecological services are shown externally. The upstream and middle stream are service providers, while the downstream the benefited party of such services. The formation of a market mechanism for ecological compensation requires the public, especially the benefited party of ecological services, to be aware of functions and value of the ecological services of the watershed. According, it is indispensable to promote functions of such services and carry out relevant education and trainings. Clearly-defined property right; the public or government shall have awareness of system innovation. Property right is a basic guarantee for formation of functions of ecological services in the watershed. The clearly-defined property right of land and ecological services in the watershed can build a platform of transaction for both parties. The property right of ecological services can be defined through registering with the public sector. Better results of cost–benefit analysis; the formation of market is an economic behavior driven by economic interest. If the cost benefit rate of such transaction is higher than their counterparts, this method will be more easily accepted.

With progress of marketization in China, the market compensation mechanism is supposed to be the development trend of the watershed eco-compensation mechanism. In the process, forms of eco-compensation of foreign countries may work as reference, so that China can explore the one-to-one trading compensation pattern and the market-based ecological label pattern. It should be added that under the first three means, the government plays a leading role. The market compensation means is the development trend of watershed eco-compensation in China. The four means are basis for building watershed eco-compensation mechanisms of different levels. The foregoing has only described a logical framework of such mechanisms. In practice, the four means shall be carried out in watershed eco-compensation of different levels.

4.4 Source and Use of Compensation Fund After defining principles, body, object and standard of the watershed ecocompensation, it is significant for ensuring smooth going of watershed ecocompensation what legal form to be used to levy the eco-compensation fund, what legal to be used for providing compensation for the object, and how to guarantee reasonable use of funds. (1)

Fund sources

The compensation fund comes from six sources: (1) fixed source, namely, the part in the fiscal revenue to be used for watershed eco-compensation; (2) the compensation fund in project budget (including ecological construction, ecological protection, ecological development and construction of other public projects), which is decided

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according to requirements of project construction; (3) the eco-compensation fund from the transfer payment by the central government to the locality, which is calculated according to the financial transfer payment system and decided by the strength of the central finance; (4) the inter-government financial transfer payment between the upstream and the downstream, which is used exclusively for watershed ecological protection and environmental pollution prevention and shall be decided according to the situation of the watershed and economic development level of the upstream and the downstream. (5) Other expenses from the local fiscal revenue of the upstream and the downstream that can be used for watershed compensation; owing to different ecological functions of the watershed, different environmental protection and difference local financial strength, this part will differ region by region. (6) Fund from the market used for watershed eco-compensation under the guide of the government. (2)

Use of compensation fund

At current stage, the State has no law on use of ecological compensation fund. Some local regulations are too general. In Article 7 of revised Law of the People’s Republic of China on Prevention and Control of Water Pollution, it reads, “the State shall, by means of financial transfer payment, build and consummate the water environment ecological protection compensation mechanism for drinking water source conservation regions and the upstream of rivers, lakes and reservoirs”, but still fails to state how to use the compensation fund. In this case, the use of compensation fund will have no legal basis. Accordingly, it is hereby suggested in the legislation for watershed eco-compensation, the local government, after receiving the compensation fund, shall use a part of it for maintaining watershed resources and protecting environment and the other part for making compensation, according to legal conditions and procedures, for units and individuals who have contributed to watershed ecological services.

4.5 Compensation Implementation Mechanisms (1)

Management of implementation of ecological compensation

The legislation shall mainly include the management and monitoring authority over watershed eco-compensation, the investigation department, investigation method, body writing the investigation report, decision and its procedures for ecological compensation, monitoring of compensation behaviors and evaluation of compensation effect. To be specific, the management, monitoring and investigation of ecological compensation shall be performed by the national and local competent departments in accordance with related laws. From application for ecological compensation to examination of such application, the investigation process, investigation means (in field or questionnaires), hearing, and query of related parties shall all be defined. The time limit for preparing the investigation reports, primary coverage and publication reason shall give full consideration to remarks or opinions regarding such reports

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from interested parties of the ecological environment, based on which, the ecological compensation decision shall be made. Monitoring may be carried out by means of internal administrative monitoring and the upper-level department monitoring the lower-level one. (2)

Water quality examination system for cross-border section of watershed

Water quality examination of cross-province sections; such sections shall be decided by he Environmental Protection Department, Ministry of Water Resources and provincial/municipal people’s government concerned. The body responsible for managing water quality objectives of the cross-province sections shall be defined. The Environmental Protection Department shall examine water quality of such sections according to the yearly objectives; provincial people’s government shall take full responsibility for water quality objectives inside their administrative regions and examine the water quality objectives once quarterly, with examination results checked and issued by the Environmental Protection Department. Water quality examination of cross-city section in a province; such sections shall be decided by the provincial environmental protection competent department, the provincial water administrative competent department and the city-level people’s government. Water quality objectives shall be decided according to the unit water quality objective value and the yearly flow determined by the national and provincial/municipal water pollution prevention and control plan and the provincial water environment functional areas and considering the provincial people’s government’s total pollutant discharge plan. Municipal people’s governments shall take effective measures to cut the pollutant discharge to ensure water quality of sections can meet control objectives. The water quality objectives for cross-city watershed shall be examined once a month, with results checked and issued by the provincial environmental protection administrative competent department. (3)

Pollution online compensation

monitoring

system

matching

watershed

eco-

The provincial environmental protection administrative competent department shall organize water quality monitoring of sections. The provincial water resources departments shall organize the monitoring of water flow and flow direction of sections. Water quality, water flow and flow direction of sections are usually monitored automatically. Then, the monthly average of automatic water monitoring data approved by the provincial environmental protection department shall be taken as the water quality objective value of the month of the section. For sections where there is no automatic monitoring station, the provincial and municipal environmental monitoring institution shall manually monitor the sections once weekly and take the monthly average of effective monitoring data as the water quality objective value of the month of the section. Water flow and flow direction shall be approved by the provincial water resource department. As the same token, for sections where there is no automatic monitoring station, the provincial and municipal hydrological resource survey institutions shall work with individuals. They may decide the monitoring

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frequency according to hydrographical features of rivers and decide the water flow and flow direction of the month. The provincial environmental protection department shall work with the provincial water resource department to summarize the water quality, water flow and flow direction of sections of the last month and report the monitoring results to the municipal people’s government. (4)

Arbitration system for watershed eco-compensation

Arbitration systems will be used when interested parties disagree or oppose decisions on ecological compensation and accordingly resort to administrative reconsideration or administrative proceedings. Such systems shall state the rights and time limit to resort to administrative reconsideration to the ecological compensation competent department of the same level, the time limit to lodge a lawsuit to the people’s government in case of opposition to the administrative reconsideration, and the time limit for compulsory execution if no reconsideration applied within a time. The arbitration system for cross-administrative region watershed environmental protection shall be established. Disputes regarding cross-administrative-region water pollution shall be settled through negotiation between the environmental protection competent department of the higher-level people’s government and the people’s government concerned. If the negotiation fails, either party may submit such disputes to the watershed water pollution prevention and control institution for coordination. In case the coordination fails, either party or the watershed water pollution prevention and control institution may report to the higher level people’s government (for the cross province disputes, to the State Council) for arbitration. Disputes arising from liabilities for damage and the compensation amount due to water pollution shall be settled by interested parties; if no agreement is reached, such disputes may be submitted to the environmental protection competent department or to arbitration institutions according to legal procedures. The liabilities for damages and the compensation amount due to cross-province water pollution shall exercise Law of the People’s Republic of China on Prevention and Control of Water Pollution. In case of oppositions against monitoring data such as water quality, water flow and flow direction of the cross-city watershed in a province, the provincial environmental monitoring organ and the provincial hydrological resource survey organ shall settle such oppositions according to relevant provisions. If the people’s government of all levels and departments concerned fail to submit reports, bulletins, or refuse to report, or falsely report the water quality and water flow, they shall bear administrative responsibilities prescribed in the law. (5)

Legal responsibilities

Legal responsibilities mainly include the civil, administrative and criminal penalties when interested parties have violated relevant laws. To be detailed, if ecocompensation working personnel have conducted misfeasance, negligence, malpractices for selfish or disclosure, their employers or the higher-level competent organization shall carry out administrative sanctions over them. Those found to be guilty shall be inquired for criminal responsibilities. Provisions shall be established for

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interested parties of the eco-compensation who have provided false information to get the ecological compensation, those who have delayed or refused to pay the eco-compensation and who have destroyed the ecological environment.

References 1. Zhanfeng D, Jiannan W (2011) Quantitative standard of eco-compensation for the water source area in the middle route of the south-to-north water transfer project in China. Front Environ Sci Eng 5(3):459–473 2. Bin C, Rensheng T, Zhanfeng D (2012) Patterns and assessment of the watershed ecocompensation standard practices in China. Ecol Econ 4:24–29 3. Junfeng W, Chaobo H (2011) Study on government-oriented basin ecological compensation mechanism. China Popul Resour Environ 7:101–106 4. Huan L (2006) On the market mechanism of ecological compensation. National Institute of Environmental and Resources Law Seminar 5. Perrot-Maître D, Davis P (2001) Case studies of markets and innovative financial mechanisms for water services from forests 6. Johnson N, White A, Perrot-Maître D (2001) Developing markets for water services from forests: issues and lessons for innovators 7. Chunguang Z (2009) Research on China’s basin ecological compensation legal system. Doctoral Dissertation of Ocean University of China 8. Min D (2007) Ecological compensation system of forest in costa Rica. World Environ 06:66–69 9. Yong R (2008) Seven issues for establishing ecological compensation mechanism in China. Seven Issues Estab Ecol Compens Mech China 8:28–36 10. Ecological Compensation Mechanism and Policy Research Group (2007) Ecological compensation mechanism and policy research in China. Science Press 11. Jinnan W, Huiyuan Z, Jun W (2007) Thoughts on ecological compensation mechanism and policy framework. Chin Environ Policy 8(2):1–23 12. National Environmental Economic Policies Pilot Technology Group (2007–2012) Annual summary report of national environmental economic policy research and pilot (2007–2011). Beijing

Practices of Emission Trading in China: Exploration and Innovation Jinnan Wang, Zhanfeng Dong, Ying Qin, Qiong Wu, Chazhong Ge, Yueying Wu, and Jintian Yang

Abstract In recent few years, market economy mechanism in China has gradually established, and market-based policy tools were attached more importance than ever before. As China’s economy has been growing fast in the past three decades with an annual increasing ratio greater than 8%, its environmental problems are mostly getting worse. In the future, more environmental restraints would be imposed on the economic development, and bigger pressures of major pollutants reduction will be ensued, so policy innovation of environmental pollution prevention and control should be expedited. Emission trading pilot projects has emerged in China since late 1980s, but advanced very slowly. However, with great efforts in environmental protection of the governments these years, environmental monitoring and supervision and management capacities have been greatly increased, in particular in some industrial sectors or regions, and with these years pilot projects exploration, lots of policy implementation experiences of emission trading also gained. Under such backgrounds, pollution emission trading programs developed rapidly especially since 2007, development trends of emission trading have become vigorous. Firstly, this paper reviewed systematically practices and progresses of international and domestic emission trading policy in China during the past two decades, and concluded that emission trading is broadly used in the air pollutants reduction in USA, and the global carbon reduction with better effects, the emission trading policy exploration in China could be roughly divided into three stages: Initial Development stage (1988–2000), Piloting exploration stage (2001–2006), Deepening Piloting stage (2007-). Secondly, nine characteristics of the current emission trading practice in China were concluded and six key issues influencing the advancement of emission trading piloting were identified and discussed. And lastly, the paper proposed the pilot roadmap for implementation of the emission trading, and pointed out that efforts in the near future should focus on the construction of “six systems”, that are key technical supporting system, fair and reasonable allocation system of the emission permit, emission trading market system, laws and regulations system, pollution source monitoring and management system, and law enforcement and supervision system. J. Wang · Z. Dong (B) · Y. Qin · Q. Wu · C. Ge · Y. Wu · J. Yang Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_2

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Keywords Emission trade · Exploration · Innovation · Development trend

1 Introduction Emission trading, that originated from some American economists’ academic theory early in 1960s [1, 2] has been practiced and now evolved into an important environmental economic policy and an important approach to reducing pollution [3, 4] in many countries and is also a part of the global cooperative scheme in greenhouse gas reduction [3, 4, 6, 7]. As China continues with the construction of a market economy system, environmental policies and approaches are going through a gradual transition from a stage that features in the predominant application of administrative control measures to a stage that relies more on the market mechanism to achieve the goal of energy conservation and emission reduction. Thanks to the significant progress over the recent years in the implementation of the total emission control and energy conservation and emission reduction strategies, China has had in place the political and institutional circumstances required for the operation of the emission trading mechanism. Governmental authorities at all levels attach great importance to and launched emission trading programs to search for solutions to more effective configuration of environmental capacity resources at lower social costs [5–7].

2 The International Tendency of Emission Trading The market mechanism-based emission trading policies have been widely employed to effectively control pollution in some developed countries, such as United States and Canada. In recent years, this kind of policies has been applied in the global strategic cooperation on emission reduction, particularly revealed great policy vitality in the field of climate change.

2.1 Emission Trading for Air and Water Pollutants The emission trading system was originated from the United States, which implemented it as early as 1976 [8] to promote SO2 emission reduction and speed up the technical innovation of the electric power enterprises [8]. Generally, the course of emission trading in the USA can be divided into two phases. The first phase from the mid-1970s to the early 1990s was an exploration course of emission trading, when some local or regional emission trading had been carried out under the government coordination. Such emission trading was performed on the basis of the Emission

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Reduction Credits (ERCs), which consists of four major policies of the “bubbles”, “offset”, “banking” and “netting”. In general, the trading volume in this phase was much less; the actual effect of emission trading policy was less too. However, it was indicated from such practices that the emission trading policy was quite feasible for SO2 emission reduction of the electric power industry; meanwhile the valuable experiences have been also provided to further expand application of emission trading policy. The second phase is marked as the Clean Air Act Amendment passed and Acid Rain Program implemented in 1990 and lasted until today. The emission trading was legally institutionalized in the United States when the Clean Air Act was amended in 1990, in this phase it is featured as total quantity control, such policies have been successfully applied in this phase, and really formed the market-oriented emission trading mechanism, which has implemented all over the United States. The initial allocation of emission permits has three forms, including free distribution, auction and reward; among them, the free allocation is the main channel. The emission trading in this phase also entered the extension and all round popularization stage, the subject of policies covered SO2 , NOx, Hg, ODS (Ozone Depleting Substances), etc. The atmospheric emissions trading in the USA is the most extensive and successful international emissions trading practice by far, such policy significantly improved the atmospheric environmental quality, and also lowered the social cost for air emissions reduction. It is indicated from the statistics that total SO2 and NOx emissions respectively decreased by 40% and 48% from 1990 to 2006 under the condition that the generating capacity of USA electric power industry increased 37% in the same period. Since emissions of major pollutants have experienced the significant reduction, wet sulfate deposition in most of Midwest and Northeast America fell by 25–40% compared with that in 1990. In 2012, the ozone trading volume through the CAIR of United States amounted to 318,000 tons, the trading NOx volume to 759,000 tons, and total trading volume of SO2 through CAIR and Acid Rain Program reached to 8,446,197 tons. The SO2 trading volume in recent years is shown as Fig. 1. In addition to the atmospheric pollutants applied in the emissions trading, the water quality trading has been explored in some river basins in the USA with practices of point source—point sources, point source non-point source and non-point source -non-point source trading available [7, 8]. These trading cases are mainly distributed in the coastal areas and the Great Lakes region. Among them, the cases distributed in the eastern coast include nitrogen credit trading in Long Island (Connecticut), Wastewater Pretreatment and Trading Plan of the River Basin Commission of Passaic County (New Jersey), Neuse River Basin Nutrient-Sensitive Waters Management Strategy (North Carolina), Virginia Nutrients Credit Trading Plan (Virginia); the cases distributed in the western coast include Transaction of load between pasture (California), Boise River Emission Trading Demonstration Project (Idaho), Truckee River (Nevada), Clean Water Service (Oregon); the main trades taken place in the Great Lakes region include License of Rahr Malt Company (Minnesota), Southern Minnesota cooperation permit (Minnesota), Great River Basin trading pilot (Ohio), Red Cedar River Basin Nutrient Trading Pilot Project (Wisconsin). These cases of water quality trade involved twelve categories of major indicators; such indexes for point source water quality trading

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Fig. 1 Tendency of SO2 trading volume in the United States

involved total nitrogen, total phosphorus, Ca, Cu, Pb, Hg, Ni and Zn. Such indexes for non-point source water quality trading mainly include Se, CBOD, sediment and temperature (thermal load). Although the United States has conducted many pilot works at present, some states also issued relevant laws and regulations to standardize the emission trading; overall, the water quality trade is still in the exploratory stage in America, water emissions trading has many advantages in theory, but not completely put into practice. The trading volume of most transactions is still limited, and most of them are carried out under the government’s intervention, the overall market size is small, therefore it doesn’t related to the market manipulation, only water nutrient trading is more successful. It is indicated from the relevant studies funded by the USA Environmental Protection Agency that the nutrient emission trading is most promising in the United States in the near term, it is also possible for pathogens and chloride trading in the long run; however, there is little possibility of toxic material trading. The water quality emissions trading programs are shown in Table 1. Except for the USA, the emissions trading practices are only carried out in some countries with developed market economy, such as Germany, Australia, Canada and the UK. Germany, Canada and the UK have learned from the emissions trading system in the United States to certain extents [2]. For example, New South Wales, Victoria and South Australia have joined the Salt Reduction Credit Trading promoted by Murray-Darling Basin Commission to solve the regional salinization issue [3]. In order to control acid rain and reduce ozone layer depleting substance, Canada introduced SO2 , NOx and CFCs trading [4]. In addition, some countries, such as Australia, also carried out the water emission trading in the fields of river basin management. In general, the emissions trading system has become one of important measures to control pollutant emission in some developed countries.

–

–

1

6

–

328

New Zealand Unit (NZU)

RGGI

Chicago Climate Exchange

Australia NSW emission reduction system

Others

Subtotal of allowance-based market

Project trading market

7,971

–

59

3

–

–

–

–

Remove Unit (RUM)

7,908

–

321

2,109

–

25

23

–

–

–

–

2,061

Trading volume MtCO2

Allowance-based market

2007

Trading volume MtCO2

Turnover MUS$

2005

Emission allowance – allocated by government

EU emission allowance

Type of trade

Table 1 2005–2011 global carbon trading market

50,394

–

224

72

–

–

–

–

50,097

Turnover MUS$

7362

–

34

41

805

–

–

155

6,326

Trading volume MtCO2

2009

122,822

–

117

50

2,179

–

–

2,003

118,474

Turnover MUS$

7,162

94

–

–

210

7

–

62

6,789

Trading volume MtCO2

2010

134,935

151

–

–

458

101

–

626

133,598

Turnover MUS$

8,081

26

–

4

120

27

4

47

78,53

Trading volume MtCO2

2011

(continued)

148,881

40

–

63

249

351

12

318

147,848

Turnover MUS$

Practices of Emission Trading in China: Exploration and Innovation 43

11

20

382

710

Joint Implementation

Voluntary trade

Subtotal of project trading market

Type of trade

10,864

2,894

187

68

221

2,983

874

42

41

240

551

64,035

13,641

265

499

5,451

7,426

Turnover MUS$

Source State and Trends of the Carbon Market 2007–2012, World Bank

10

Secondary CDM market

2,417

Trading volume MtCO2

341

2007

Trading volume MtCO2

Turnover MUS$

2005

Primary CDM market

Type of trade

Table 1 (continued)

8,700

283

46

26

1,055

211

Trading volume MtCO2

2009

143,735

3,370

338

354

17,543

2,678

Turnover MUS$

8,772

1,609

69

–

1,275

–

Trading volume MtCO2

2010

159,191

24,257

414

–

20,637

–

Turnover MUS$

10,281

2,200

87

–

1,822

–

Trading volume MtCO2

2011

176,020

27,139

569

–

23,250

–

Turnover MUS$

44 J. Wang et al.

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2.2 Carbon Market Trading At the global level, the emission trading mechanism is mainly used for carbon emission trading. Currently, the global carbon market is divided into two basic types, the first type is based on project, such as the CDM (Clean Development Mechanism) and JI (Joint Implementation Mechanism) specified in Kyoto Protocol, mostly for fulfilling the emission reduction commitments and management requirements; the second is based on the quota, such as, some AAU (Assigned Amount Unit) transferred among the developed countries under the Kyoto Protocol, or EUAs owned by each member country under the EUETS (The EU Emissions Trading Scheme). The emission quota purchased by buyer is determined and allocated (or auctioned) by the management under the Cap and Trade System. Although some shortcomings still exist in these mechanisms, they still have played a great role in the global carbon emission reductions, and got rapid development. In 2005, the European Union issued permits to the main enterprise with greenhouse gas emissions, which effectively reducing GHG emissions, such as CO2 . According to statistics of the World Bank, the trends in global carbon emissions trade increased rapidly from 2005 to 2011, the global carbon emissions trade volume reached $10.86 billion in 2005, $64 billion in 2007, and $143.7 billion in 2009, it kept a constant increase since 2010 (see Table 1). According to the latest report of World Bank, total amount of gross carbon market grew by 11% in 2011, up to $176 billion; hit a record of 10.3 billion tons of CO2 equivalent volume. So far, the largest part of carbon markets is the EUAs, valued up to $148 billion. The market liquidity of certified emission reductions (CER) and new secondary emission reduction unit (ERU) is increased, also bringing the large volume increase of secondary Kyoto offset (increased by 43%, up to 1.8 billion CO2 equivalent, valued at $23 billion). In 2011, the global carbon market continuously follows the same pattern with previous years, mainly promoted by the EU ETS (Emissions Trading System). The global carbon emission trading system has been formed preliminarily (see Fig. 2). At present, the developed countries, such as Britain, Canada, Japan and Australia have established their domestic trading institutions to promote the GHG emission reduction. Many carbon trading market have been formed internationally, such as the EUETS, which is the biggest carbon market in world currently with trading volume accounting for over 3/4 of the global trading volume. As the EU is the largest buyer of the CDM project market, the progress of its trading scheme has great influence on the prospect of the CDM market. At present, the EU trading scheme has been introduced in the draft scheme of third phase; to some extent, the EU has agreed that the international credits unit of emission reduction can be used in the EU’s emissions trading mechanism prior to the end of third stage (before 2020). In view of the important position of the EU in the subsequent negotiations of Kyoto, the CDM will possibly continue to become the main tool of global carbon market. As created in April 2002, the UKETS (UK Emissions Trading Scheme) is the first GHG emissions trading market in the world, and joined the EU Emissions Trading system in January 2007. The NSW (New South Wales) GHG emission

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Fig. 2 Global carbon emission trading system framework

reduction system in Australia was formally launched in January 2003 with the trading volume only followed the EU emissions trading system, which is one of the earliest compulsory emission reduction systems. In the same year, the CCX (Chicago Climate Exchange) was formed as the first climate exchange in the world with the goal to provide a flexible market mechanism, which is also a carbon trading platform beyond the Kyoto mechanism, mainly serving the domestic trading system of voluntary CO2 emission reduction program of each state. In 2004, the CCX established the ECX (European Climate Exchange) with held its share, and also set up the CCFE (Chicago Climate Future Exchange), which is the largest environmental derivative exchange in the world. In 2005, the CCX set up Tianjin Climate Exchange (TCX) jointly with CNPC and Tianjin City; on May 30th 2008, it formed Montreal Climate Exchange jointly with Montreal Stock Exchanges; and India Exchange is under preparation presently. In addition, in July 2006, Montreal Climate Exchange is established in Canada; in the early of July 2008, Singapore Trade Exchange was established, Brazilian Mercantile and Futures Exchange was founded in succession; and in November of the same year, other environmental exchanges, such as the New Zealand Emissions System, also set up. In addition, the RG-GI (Regional Greenhouse Gas Initiative) was launched by George Pataki, former governor of New York George Pataki in April 2003 with ten states in the northeast America joined, such as Connecticut, Maine and New Jersey participated in. The RGGI was started on Jan 1st 2009 with goal that GHG emissions shall remain at the benchmark level before Dec 31st 2014 and lower than the benchmark by 10% before Dec 31st 2018. In September 2008, RGGI successfully auctioned the first emission project of all quotas, six of the ten states participated in the quota auction and bidding, and about 12.5 million quota was involved in the bidding, the tender amount accounts for about 300% of the auction quota quantity with unit price of $3.07. The revenue from the

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RG-GI has played a positive role in promoting integration of environmental protection with energy projects, energy efficiency and renewable energy use of each federal state. It is indicated from the statistics that it has increased by about 10–30%. The CDMS to promote the emission reduction of the developed countries are progressed quickly. According to the study of the World Bank, the scale of global CDM was reached about $6 billion in 2006, nearly $13 billion in 2007. China is the biggest seller in the global CDM market. According to the statistics of UNFCCC, there are totally 7,426 registered CDM projects in the world as of Feb 12th 2014; among them, China registered 3,739 projects, accounting for 50.35% of total amount, ranked first, India and Brazil are followed respectively. The EU is the biggest buyer of CDM and the joint performance market, holding about 86% of the market share. Japan holds roughly 7% of the market share. The fields of global CDM projects mainly cover 15 fields, such as the agriculture, afforestation and reforestation, waste treatment and disposal, solvent usage, production and consumption of halogen hydrocarbon and SF6 related to volatile emissions, fuel (solid fuel, oil and gas fuel) related to fugitive emissions, metal production, mining/mineral production, construction industry, transportation, chemical industry, and energy industry. There are different focuses of the packing and development of CDM industries when the developing countries are in different stages according to their actual national conditions. The key areas of CDM projects developed in China currently is mainly to enhance energy efficiency, develop and utilize new energy and renewable energy, as well as recycle methane and coal bed methane. Figures 3 and 4 show respectively the latest progress of registration and issuance of CDM projects in China and the world (until 2014). On the Climate Change talks in Bonn on 10 March 2014, the United Nations stated that, there is a gap between commitment of each country and necessary level

Fig. 3 Distribution of registered project by host party (2004–2013)

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Fig. 4 Distribution of CERs issued by host party (2004–2013)

claimed by scientists, maybe 40% of such gap can be made up at a lower cost through cancelling the carbon credits under the CDM. The CDM under the UN’s Kyoto Protocol allows investors to gain from selling carbon credits, so as to help them achieve their overseas emission reduction targets. Presently, investment nearly $400 billion have flowed to the CO2 emission reduction projects in developing countries through the mechanism. However, as various countries argued about the global agreement on climate change and new target to be developed, investment introduced through the mechanism has dried up. The price of carbon credits have fallen from over 20 Euros per ton in 2009 to less than 1 Euro now, which led to many projects unprofitable (see Fig. 5).

3 Practices of Emission Trading in China To China, emission trading is a completely foreign imported environmental economic approach with an evolution of nearly 20 years. Evolution of emission trading in China can be roughly divided into three stages.

3.1 Stage of Start-Up and Attempts (1988–2000) Practices of emission trading in China can be traced back to as early as late 1980’s. In 1987, paid transfer of emission allowances between enterprises was practiced in

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Fig. 5 Global carbon emissions trading market trading volume and turnover

Minhang District, Shanghai; On March 20, 1988, the State Environmental Protection Administration (SEPA) promulgated and enforced the Provisional Measures on Management of Water Pollutant Emission Permits, which stipulated in Article 21, Chap. IV that “the total emission allowances for water pollutants may be flexibly distributed among the emission entities in the same region”; in 1991, under the direction of SEPA, 16 cities were selected for the experimental practice of the air pollutant emission permit system followed by another 6 cities including Baotou, Kaiyuan, Liuzhou, Taiyuan, Pingdingshan and Guiyang that have piloted the trading of air pollutant emission rights since 1994 and gained some rudimentary experiences. In 1996, the “National Plan for Total Emission Control of Major Pollutants during the “9th Five-year Plan’ Period” (1995–2000) submitted by the State Environmental Protection Administration gained approval from the State Council, representing the official inclusion of the total amount control (TAC) policy of the major pollutants into the environmental protection appraisal objectives during the “9th Five-year Plan” period and nationwide implementation of the emission permit system in Chinese cities. Nationwide enforcement of the total emission control and emission permit policies laid an institutional foundation for practice and provided the soil for the rooting of emission trading in China. The Law on Prevention of Atmospheric Pollution adopted by the 9th Session of the National People’s Congress on April 29, 2000 provided legal assurance for the true transition of the focus of the national pollution control strategy from concentration control to total emission control and correspondingly defined the legal status of the emission permit system. In this Stage, to sum up, documented policies and cases of emission trading implementation came into existence primarily thanks to the efforts of facilitation by the national environmental protection authorities; these efforts were focused on initial experiments and attempts in emission trading of air pollutants and some beneficial experiences were gained, laying a foundation for further development of emission

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trading in the following piloting stage. Major historical events and cases of emission trading in this period see Annex 1.

3.2 Stage of Experiments and Researches (2001–2006) During the “10th Five-year Plan” period (2001–2005), China fully shifted its focus of environmental protection efforts to total emission control. In order to better align the environmental protection efforts with the needs of economic development, SEPA proposed the enforcement of the emission permit system and emission trading pilot projects respectively to facilitate and improve the total amount control of the major pollutants. In such a context, quite a few pilot projects were launched around 2001, such as the Sino-US Environment Partnership Projects of “Feasibility Study in Application of Market Based Mechanism in Reduction of SO2 Emission in China” and “Study in Facilitating the Implementation of Policies on Total Emission Control and Emission Trading of SO2 in China”, the ADB pilot project of “SO2 emission trading within the territory of Taiyuan City” and developed the “Management Methods of SO2 Emission Trading in Taiyuan” with the aid of ADB, as well as “the emission trading pilot project in Nantong city” executed by U.S. Environmental Defense Fund (EDF). Driven by these projects, multiple cases of emission trading were carried out and rich practical experiences were gathered. In 2002, supported by U.S. Environmental Defense Fund (EDF), SEPA issued the “Notice on Implementation of the Demonstrative ‘Study in Facilitating the Implementation of Policies on Total Emission Control and Emission Trading of SO2 in China’” and launched pilot projects in 7 provinces and cities including Shandong, Shanxi, Jiangsu, Henan, Shanghai, Tianjin and Liuzhou. In May 2006, a joint study in emission trading was conducted by the Ministry of Finance (MF) and SEPA in some provinces and cities. Expert panel discussions were held and the financial and environmental protection authorities of Shanghai, Jiangsu, Zhejiang, Tianjin, Shanxi, Henan, Guangdong, Fujian and Guangxi and State Grid, China Southern Power Grid and the top five power group corporations and some local power companies were consulted. It was agreed that the electricity sector has clear emission performance and proven SO2 treatment technologies and is suitable to carry out the nationwide pilot projects of emission trading. Experiments in water pollutants emission trading also made some progress in this stage. In 2001, for example, Xiuzhou District of Jiaxing, Zhejiang promulgated its “Provisional Measures for Total Emission Control and Emission Trading of Water Pollutants” and started the paid use of the initial emission rights of water pollutants. In 2006, Jiaxing City started the citywide implementation of total emission control and emission trading. In Jiangsu Province, the Provincial Environmental Protection Commission issued in 2004 the Notice on Issuing the Work Program on “Experimental Study on Paid Allocation and Trading of Emission Rights of Water Pollutants in Jiangsu Province”. However, the efforts on experimental research in

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emission trading for water pollutants are relatively weaker than those for air pollutant SO2 . Generally speaking, emission trading in this stage was primarily operated with the “matchmaking” efforts from the governmental departments. However, the potential role of emission trading policies and mechanisms came to light as continuous efforts were made in such experiments and researches. Shown in Annex 2 are the major events and cases of emission trading in this stage.

3.3 Stage of Further Development of the Pilot Projects (2007) Along with the shift of the National Environmental Protection Strategy from the traditional administrative control approaches to the integrated use of administrative, legal and market and voluntary approaches, governments at all levels attached greater importance to the fundamental role of the market in configuration of environmental resources over the recent years and the application of environmental economic policies received more attention. SEPA launched the pilot project of national environmental economic policies in 2007 to study and explore for policies of green credit, environmental insurance, green trade, environmental tax, ecological compensation and emission trading. Correspondingly, the local governments also showed special interests in the role of emission trading system in energy conservation and emission reduction. Emission trading in this stage is obviously unique in that it received higher recognition by the National Government, voluntary and active explorations were conducted by the local governments, the connection between the upper and lower levels is consolidated, explorations were carried out in diversified trading models, the scope of trading objects was widened, the space level of the policy was promoted on a continuous basis (to four levels, namely, the national level, the basin level, the regional level and the local level), local laws and policies were issued at a greater frequency, cooperative efforts in scientific research were given prior attention and companies specialized in emission trading appeared. Annex 3 listed the recent events related to practices of emission trading. Regarding the cooperative projects of environmental protection, for example, the 3rd Session of Sino-US Strategic Economic Dialogue (SED) held at the end of 2007 identified the cooperative project of SO2 emission trading in the electricity sector; Zhejiang Province adopted a “top-down” model in the exploration of new trading patterns and measures for the administration of emission trading of major pollutants were promulgated successively in Hangzhou, Shaoxing, Zhuji and Tongxiang; In Jiangsu Province, however, a “bottom-up” model was adopted and emission trading was gradually implemented in the Tai Lake basin and some cities and prefectures under the guidance of the Provincial Environmental Protection Bureau. Attracted by the business opportunities hidden behind the emission trading policies, companies engaged in commercial operation of emission trading emerged and active and cooperative efforts were made by the local governments to co-build emission trading platforms. The scope of trading objects is also wider and no longer limited to the major pollutants subject to the total emission control policy of the

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national government. It has been even expanded to all tradable objects involving environmental rights and interests. In May 2008, for example, Tianjin Property Rights Exchange, CNPC Assets Management Co., Ltd. and Chicago Climate Exchange (CCX) joined hands to prepare for the establishment of Tianjin Climate Exchange, which is engaged in trading of not only SO2 , COD and other traditional pollutants, but also the greenhouse gas emission permit, development technologies and other quantifiable, quota-based and standardized trading products. On August 5, 2008, China Beijing Environment Exchange and Shanghai Environment and Energy Exchange were established on the same day and the trading objects also cover a wide range of environment right products. On November 17, 2009, Asia Climate Exchange (AEX) was jointly established by Shenzhen International Energy and Environmental Technology Promotion Center, Shenzhen International Hi-Tech Property Exchange, and RESET (Hong Kong) Limited. It is the first Climate Exchange in Asia, the business focus on existing national emission quota trading license, emissions trading transactions between Shenzhen and Hong Kong, and other international trading. Besides, other provincial and municipal emissions trading centers have also been established. October 21, 2011, Shanxi emissions trading center was officially established. October 9, 2013, Shijiazhuang emissions trading center was established. Although the operability of such platforms is yet to be verified in practice, experiments and explorations for emission trading in this stage have marched a large step forward compared with the previous stage when the experiments of emission trading were conducted under the guidance of the environmental protection authorities. Since China has not yet undertaken the international carbon emissions responsibilities before 2011, most cases of domestic carbon trading are based on the voluntary. For example, on Aug 5th 2009, Tianping Auto Insurance Company Ltd. purchased 8,026 tons of carbon credits at the price of RMB 277,600 through the Beijing Environment Exchange platform for green travel activity during the Beijing Olympic Games, so as to offset carbon emissions of the company during operation from 2004 to the end of 2008; on Dec 17th 2009, Shanghai Runye Environmental Protection Technology Co., Ltd. successfully purchased 24,046 tons of voluntary emission reduction generated by Fujian Pingnan Tingtougang Hydroelectric Project through Shanghai Environment and Energy Exchange purchase, in order to realize its own carbon neutral, it is the largest domestic trade of carbon neutral. In March 2010, Wanxinda (Guangzhou) Technology Product Co., Ltd. (located in the Automobile Zone, Huadu District, Guangzhou) purchased 5000 tons of carbon credits of a hydroelectric project in Hunan Province at the price of $10,000 through the Beijing Environment Exchange platform, so as to offset its carbon emissions in 2009. On Nov 28th 2011, the 17th contracting conference of the UNFCCC (United Nations Framework Convention on Climate Change) was held at Durban, South Africa. The 12th “Five-Year” Plan on GHG Emissions Control was released in China before the meeting, which pointed that China will start from voluntary CO2 emissions trading to explore carbon emissions trading market. Over the same period, the General Office of the NDRC (National Development and Reform Commission) issued the Circular on Pilot Implementation of Carbon Emissions Trading to approve four municipalities directly under the central government, including Beijing, Tianjin,

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Shanghai and Chongqing, plus seven provinces and cities, such as Hubei (Wuhan), Guangdong (Guangzhou), and Shenzhen, to carry out the pilot work of carbon emissions trading; this was the first time that Chinese government launched the pilot work of emissions trading at the state level, which marks a new stage of carbon emissions trading in China. Since then, all pilot provinces or municipalities prepared for their work plan and released the related policies; actively pushing forward the pilot work. The local carbon trading pilot was gradually started since 2013. Beijing has issued the Circular on Carrying out the Pilot Work of Carbon Emissions Trading, Circular on Distribution of 2013 Carbon Emissions Allowance, and Circular on Issuance of ‘Regulations on Curb Exchange of Carbon Emissions Allowance (for Trial)’ in November 2013, the carbon emissions trading was officially launched on November 28. On the first day, Beijing’s carbon emissions trading volume reached to 40,800 tons with turnover of RMB 2.041 million. On Nov 25th 2013, Guangdong Development and Reform Commission issued by the Work Plan of Guangdong Province on the First Allocation of Carbon Emissions Allowance (for Trial), and the first bidding of 2013 annual allowance was completed on Dec 16th 2013, the emission allowance distributed in this time amounted to 3 million tons, the final bidding price was RMB 60/ton, and total turnover was RMB 180 million. In addition to carbon trading pilot works carried out in five cities and two provinces, the voluntary emissions trading is also under exploration. The NDRC issued the Interim Measures for Voluntary GHG Emissions Trading Management to gradually explore path and accumulate experiences for establishment of carbon emissions trading market under total control and development of better carbon trading rules. Although the priority was given to the allowance-based trading in view of the current carbon trading pilots, less to the voluntary emissions trading, the threshold and cost for voluntary emissions trading are relatively lower in China in comparison with these of the international CDM projects, which can promote some small businesses to participate in emission reduction. It is noted that six provinces and municipalities, namely Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong, signed the regional cooperation agreement on carbon emissions trading on Nov 28th 2013, planning to carry out the joint study in aspects of accounting and auditing of CO2 emissions, as well as allowance verification, which will lay the foundation for building the regional carbon trading market, and also explore the path to promote construction of the national carbon trading market to a certain extent. Recently, the NDRC also put forward to strive for gradually establishing a national carbon trading market in the “13th-Five Year”. Table 2 sees carbon emission trading pilots and trading status. Major historical events and cases of emission trading in this period see Annex 3.

Industrial scope

Industry (electric power, water affairs, manufacturing industry, etc.), and construction

Industrial sectors: electric power, steel, petrochemical, chemical industry, nonferrous metallurgy, building materials, textile, paper making, rubber and chemical fiber; Non-industrial sectors: aviation, airport, port, shopping mall, hotel, commercial office buildings and train stations

Pilot

Shenzhen

Shanghai

Spot trading (originally fixed-price trading), electronic bidding, block deals

Trading mode

Entities for emission Public trade and control, other protocol transfer entities and individuals; In 2013, only entities for emission control is permitted

Entities for emission control, other entities and individuals

Trading subject

Table 2 Coverage and situations of carbon emissions trading pilot in China in 2013

23,270

197,328

Trading volume (ton)

645,330

13,159,820

Turnover (RMB)

31.8

143.99

Ceiling price (RMB/t)

25

28

(continued)

Floor price (RMB/t)

54 J. Wang et al.

Industrial scope

Electric power, heating, cement, petrochemical and other industrial sectors and services

Electric power, cement, steel and petrochemical

Pilot

Beijing

Guangdong

Table 2 (continued) Trading mode

Entities for emission Public trade and control, other protocol transfer entities and individuals; In 2013, only entities for emission control is permitted

The performance Public trade and entity and protocol transfer non-performance (OTC) entity, excluding natural persons temporarily; The registered capital of non-performance entity must reach up to RMB 3 million

Trading subject

120,129

42,600

Trading volume (ton)

7,227,470

2,133,200

Turnover (RMB)

61

55.1

Ceiling price (RMB/t)

60

50

(continued)

Floor price (RMB/t)

Practices of Emission Trading in China: Exploration and Innovation 55

Industrial scope

.Electric power, heating, steel, chemical, petrochemical, oil and gas exploration

Pilot

Tianjin

Table 2 (continued)

Domestic and foreign institutions, enterprises, social groups, other organizations and individuals; Foreign institutions must be a Chinese holding companies; Natural person must be aged from 18 to 60, one full year of life, and proof of financial assets no less than RMB 300, 000 must be provided

Trading subject Network spot trading, protocol trading, auction trading

Trading mode 62,200

Trading volume (ton) 1,741,048

Turnover (RMB) 28

Ceiling price (RMB/t) 26

Floor price (RMB/t)

56 J. Wang et al.

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4 Nine Features of Pilot Exploration on Emissions Trading Policy in China How to play the role of market in allocating resources has become the basic direction of China economic system reform. With the rapid economic development and accelerated urbanization process in China, the emission reduction increasingly becomes a challenge, the market mechanism innovation, improving efficiency of pollution abatement, as well as giving play to the enthusiasm of market subject, have gradually become the important environmental tasks of Chinese Government, which is also an inevitable trend of China environmental policy. Under this context, China has carried on some positive exploration and attempts on emissions trading in recent years. However, it is still in the pilot phase on the whole, an effective environmental management system has not been formed yet. Meanwhile, as the market economy in China is still in the development process, the institutional and policy for environment management to explore the emissions trading in China is different from that in the United States and other countries, the exploration of emissions trading in China presented many unique features, these features also closely relate to the emissions trading still in a pilot exploration stage in China.

4.1 Government-Leading is the Major Impetus Chinese Government pushes the emission trading and explores new mechanisms for emission reduction at the national level, which is the institutional reason that quick important progress in China has been made during exploration of pilot emissions trading in recent years. Chinese Government increasingly values the emissions trading policy at the national level, the annual work reports of the Central Government have mentioned to expand the pilot emissions trading in recent years, and the guidance on paid use of emission rights and emission trading pilot has been studied and formulated. In 2011, the “12th Five-Year” National Plan stipulates to develop the emissions trading market and regulate behaviors of the emission trading. On the 7th National Conference on Environmental Protection in December of the same year, Vice Premier Li Keqiang pointed out that: it is necessary to improve the environmental protection law and regulation system and economic policy system with both incentive and constraint stressed, gradually promote on the basis of the pilot emissions trading. At present, the Guidance on Advancing the Paid Use of Emission Rights and Emission Trading Pilot for Major Pollutants and the construction scheme of the national emissions trading center have been completed, which are soliciting a wide range of advices for further improvement. The exploration of emission trading of major pollutants has been highly valued at national level. On the one hand, with increasing emission reduction pressure, some problems appeared gradually as the single administrative measures has been too stressed in the past

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environmental management, such as high cost for emission reduction and lower efficiency of policy tools, thus the gap between it and pollution mitigation demand was generated, which required to innovate the market mechanism, explore new and more effective reduction mechanism, and further improve efficiency of pollutant emissions. On another hand, in the view of the capacity needed, conditions for widely promoting the emission trading in many areas and specific industry have been in place, for example, the capability for pollution source monitoring and regulation in some areas of East China, such as Zhejiang and Jiangsu, can basically meet requirements for implementing the emission trading; many areas have also promoted the discharge permit. In Zhejiang, Jiangsu and North China, the online CEMSs (Continuous Emission Monitoring System) for SO2 flue gas of the power industry have been preliminary built, which can ensure implementation of the emission trading in aspect of monitoring technology capability. Many local governments have built the mission trading policy system. Compared with the lagged issuance of the related policies at the central governmental level, the local pilots are progressed rapidly, a lot of pilot provinces have issued related policies to promote the active exploration of paid use of emission rights and emission trading pilot, so as to provide the policy environment for the local practices. Such policies cover various aspects related to the paid use of emission rights and emission trading pilot, such as the initial allocation of emission permit, method of trading qualification examination, and usage management of the fund from the paid use of emission permit. The local policy systems of emissions trading are shown as Table 3. As one of leading province of the national emissions trading pilot, the pilot works in Zhejiang is in the leading position in China. It is indicated from the statistics, about 103 policy files have been promulgated at the provincial and city level; the system framework of policies and regulations have basically built for emission trading. Such policies covered the implementation rules for emission fees, paid use of emissions rights, emissions trading, initial emission permit allocation, etc., involved in each aspects of emission trading, which have provided the basis for the local exploration. Henan Province has listed the emissions trading as a special section of Regulations of Henan Province on Emissions Reduction, which has been approved on the fourth session of the Standing Committee of the 12th Henan Province People’s Congress on Sep 26th 2013. Which means emission trading mechanism was brought into the local regulations, which provides the corresponding legal basis for the paid use of emission rights and emission trading pilot. In other pilot areas, the related policy files have been also enacted to promote local emission trading pilot exploration; for example, Jiangsu Province has issued the Interim Measures of Jiangsu Province on Paid Use of Emission Rights of Major Water Pollutants at Tai Lake Basin and Subscription and Verification of Emission Permits at the Trading Pilots, which defines means and methods of the paid use of emission rights for each emission entity. The distribution of current emission trading pilots in China is shown in Fig. 6. The trading behaviors are mainly promoted by the government sectors. At present, the emissions trading cases in China are mainly driven by the relevant government sectors. At the primary market of emissions trading, namely the initial emission

Regulations on function division of the related sectors

Rules on emissions monitoring and accounting

Rules on the Electronic Bidding

Regulations on Emission Allowance Reserve and Management

*

√

*

Working procedures for emission trading

√

√

*

√

*

√

√

√

√

*

√

*

*

*

*

*

* √

*

*

√

*

*

*

√

*

*

*

*

*

*

√

√

√

√

√

√

√

√

√

*

√

√

√

*

*

*

√

*

√

√

√

√

*

√

√

*

*

*

√

√

√

√

*

*

√

√

*

*

√

√

√

√

√

*

√

√

√

*

√

√

√

*

√

#

√

√

√

(continued)

*

√

√

*

√

√

√

√

Tianjin Hubei Hunan Shanxi Inner Chongqing Hebei Shaanxi Mongolia

Provincial Jiaxing Shaoxing Hangzhou level √ √ √ √ √

Jiangsu Zhejiang

Measures for trading qualification examination

Allocation and verification of the initial emission rights

Fund use and management

Charge criterion/benchmark price

Measures for trading management (and/or implementation rules)

Guidance/pilot scheme

Contents of policy files

Table 3 Policy matrix of the pilot emission trading at the local level in China

Practices of Emission Trading in China: Exploration and Innovation 59

√

√

√

√

#

#

#

#

√

√

#

√

#

Provincial Jiaxing Shaoxing Hangzhou level

Jiangsu Zhejiang

√

√

√

√

√

√

#

*

√

√

#

√

√

#

* #

√

√

#

#

#

*

Tianjin Hubei Hunan Shanxi Inner Chongqing Hebei Shaanxi Mongolia

√ Lease/temporary/short-term * * * * trading √ means a separate policy file has issued; * means it is not been issued in a separated policy file but is reflected in other related policy files; # means just the internal document, not open to the public

Mortgage loan

Measures for total amount access/pre-audit

Administrative measures for emission permit

Supporting normative files related to the trading implementation and management

Management system of the trading center

Contents of policy files

Table 3 (continued)

60 J. Wang et al.

Practices of Emission Trading in China: Exploration and Innovation

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Fig. 6 Existing emission trading pilot in China

permit allocation, the benchmark trading prices are set by the government; in addition, both release of relevant information and follow-up tracking management of the trading results are completed by the relevant authorities or some agencies related to the government (for example, a lot of local environmental protection departments set up their emission trading platform). At the secondary market, most cases of emissions trading between enterprises in China are successfully promoted with the active intervention of the government, the relevant government sectors or the trading intermediary with governmental background play an important role in such progress. Taken the largest SO2 emission trading in China as an example, it was just based on the “matchmaking” of Shanxi Provincial Department of Environmental Protection, a SO2 emission trading contract was successfully signed between State Grid Energy Development Co., Ltd. and three power generation enterprises, including, Shanxi International Energy Group Co., Ltd., Shanxi Jingyu Power Generation Co., Ltd. and Tongmei Guodian Wangping Power Generation Co., Ltd. with turnover of nearly RMB 90 million. The basic conditions of emissions trading mainly rely on the governmental provision. Since the emission right is different from common rights, so its application is restricted by many factors, such as total regional discharge and environmental standards, the effective governmental monitoring and administration on pollution emissions by the enterprise is the premise of emissions trading system, which were provided by the governments. The social foundation for third party transactions has not spontaneously formed in China; although some professional agencies

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for market operations have been established, such as Beijing Energy and Environmental Exchange, they haven’t played any role in the emissions trading almost. The effective promotion in practice mainly comes from the emission trading platform set up by the government. At present, the emission right markets mainly is the primary markets, which are focused on the allowance indicator owned by the government and sold to the enterprises, however, the index amount is not determined according to demand of the enterprise, but determined by the government with full consideration of various factors, such as requirements for total amount pollutant control, how to allocate to the enterprise is also determined by the government unilaterally, the verification on the trading index of enterprise is performed by the government. The matters, such as establishment of emissions trading policy, provision of transaction information, supervision and management of trading process, purchase and reserve of temporarily idle emission allowances, are also carried out by the government, so the government is not only a participant, but also a supervisor of emission trading. In fact, it is impossible to form a stable and lasting trading market only with the governmental credibility as a guarantee. As the government controls the allocation of the emission allowances and trading means, once the power engages in resources allocation of during emission administration, the emission allowances will become the power resource of the authorities if there are no reasonable regulations, which will make the regulations on the emission trading based on the integrity and self-discipline of the relevant responsible person, and there is certainly a risk of corruption.

4.2 The Paid Use is Mainly Employed During the Initial Allocation of Emission Permit The scarcity value of the environmental capacity resource is gradually recognized, which is the most important motivation for the initial paid allocation of emission permit implemented at the local level. In the United States, 95% of trading right adopts the free initial allocation of emission allowance, only 5% adopts the auction. There is great difference between situations in China and the United States. Among the pilot areas for emissions trading in China, only Hubei and Chongqing haven’t adopted the paid allocation method, the rest pilots allocate the initial emission allowances to the enterprise with charge. After all, the comprehensive and composite problems are intensively appeared in China at the present stage, the competitive utilization of environmental capacity resources is increasingly intensified among the regions, industries or enterprises. Meanwhile, demands of people on better living environment are growing, and the scarcity value of environmental capacity resource is gradually and widely recognized, therefore Chinese Government is seeking more effective measures to solve such issues, its starting point is to promote the resource pricing mechanism, and implement the paid use of environmental resources and competitive utilization. Firstly, Chinese enterprises also gradually realize the environment capacity resource is valuable, it is necessary to pay certain fee to the owner obtain

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use rights of the competitive resources when they use the environmental capacity resources, so it is gradually recognized as a concept of productive resource element at the constant supply. Secondly, it is the important reason to improve the externality cost of the enterprise environmental behavior that China local governments implement the paid allocation of emission allowances. Before Chinese Government implements the paid use of emission right and trade exploration, the policy for environmental externality cost of enterprises were mainly pollution charges; however, since the current pollution charge criteria were formulated in 2003, the charge rate is RMB 0.7/pollution equivalent for sewage, RMB 0.6/pollution equivalent for air pollution. Such rates are relatively low, it is difficult to externalize the environmental externality of enterprise, and the incentives to the environmental behaviors of the enterprises are also not effective. Meanwhile, as the charging items are not complete, coverage is not extensive (e.g., no charge for ammonia nitrogen, total phosphorus and car exhaust), and the charge amount is no more than sum of three charge factor with the biggest pollution equivalent, the low level of sewage charge is asymmetrical to the negative environmental externalities caused by the enterprises during production and operation. Under this context, China local governments take the paid use of emission permit as an exploration to internalize the environmental cost externality. Thirdly, it is to increase the financial revenue and broaden the financing channels for environmental protection. In the current practice of the allocation of initial emission allowance with charge in China, the obtained capital is basically used by the local government as a special fund of environmental protection, namely the revenue from the initial allocation of emission allowance can only be used for environmental protection, it directly reflects the policy orientation of Chinese Government on the initial allocation of emission allowance, which is mainly to improve valuation of the environmental capacity resource scarcity and to raise environmental protection funds. In fact, although investment in the environmental protection is rising over the years in China, there is still a large gap between the input and demand to solve the environmental issues; it is also the main reason of paid use for initial allocation of emission allowance in various regions. In view of the policies about paid use of emission rights implemented in Zhejiang, Jiangsu and Shanxi etc., the fund from the paid use is partly used for acquisition of the emission allowance through trading platform, it also contributes to key environmental projects for the local pollution control, ecological restoration and environmental protection, so it can expand the financing channels for the environmental pollution control. In addition, some pilot areas, such as Zhejiang, Shaanxi and Hebei, have implemented the emission permit mortgages, which provide a new financing approach for the entities with pollution discharge, especially for the small and medium-sized enterprises (SMEs) through mortgage of emission allowances as property rights. Initial allocation of emission allowance was mainly based on historical emissions, the fairness and efficiency are often hard to balance. Initial allocation of emission allowance has always been a political and technical difficulty, whether the emissions trading system can be smoothly implemented is based on the fairness and efficiency during initial distribution of emission allowances, it is also challenge faced by the current emissions trading policy. There

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was a lot of controversy on how to realize the fair initial allocation during development of the emissions trading in American, accordingly three kinds of schemes have been designed, including the public auction, fixed price sale and distribution free of charge; ultimately the most feasible and cost-effective way was chosen in accordance with the “Grandfather Clause” that the hybrid distribution was mainly based on the free allocation, and then the paid allocation. However, this kind of allocation was still reviled, especially focusing on how to realize the fair allocation. Likewise, the emissions trading pilots in China haven’t realized fairness and efficiency of initial allocation too. The initial allocation of emission allowances is mainly determined according to the forecast emission amount assigned or the actual emission amount inherited in China pilot regions. Among them, for the new-build, rebuild or expansion entities, the initial emission allowances are mainly determined on the basis of EIA forecast amount and the monitoring data of actual emissions during the “three-simultaneity” 1 acceptance; While for the existing enterprises, it shall be comprehensively determined with reference to two sets of data above, the verified data on actual emissions from the environmental statistics and pollution charge system. However, it is unfair for new polluters, as the old enterprises can obtain emission allowances free of charge, and even can sell or benefit from it. New enterprise must purchase it, so the cost is increased, profit is diluted, and obviously it is difficult to embody fairness. Table 4 sees the determination means for initial emission allowances in main pilot areas in China at present. Price criteria are quite different for the paid use of initial emission allowances in various regions. Each pilot area in China has formulated the price criteria for paid use as the basis for trading pricing of the emissions trading market during the early stage. Overall, except for the average cost for emission reduction of the industrial enterprises as the leading reference during the initial pricing of each region; such criteria shall be adjusted and finalized with considering the degree of environmental resource scarcity and regional economic development level. As such conditions are different, and a national unified guidance is not in place, the price and validity of allowance index are extreme different in various regions. For example, there are many valid terms, such as 1 year, 5 years, 20 years and unlimited duration for emission allowance; the annual price converted from the paid use are also quite different; for example, the price of paid use of COD permits is only RMB188/(t·a) in Zhuzhou and Xiangtan, Hunan Province, whereas it is high up to RMB16000/(t·a) in Jiangyin, Jiangsu province. Table 5 sees the charge criteria and duration for paid use of main pollutants in the pilot areas.

4.3 The Current Exploration is Mainly Concentrated in the Primary Market, the Liquidity of Secondary Market Has not Formed Yet At present, China pilot exploration is mainly concentrated in the primary market; the secondary market with stable spontaneous trades hasn’t been formed. The primary

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Table 4 Determination of initial emission allowances of each pilot Pilot

Paid use or not

Determination of initial emission allowance New-build, rebuild or expansion entities

Existing enterprise

Hubei

No

EIA, “three-simultaneity” acceptance

No explicit provisions

Jiangsu

Yes

EIA, “three-simultaneity” acceptance

EIA, completion acceptance of environmental protection project, Environmental statistics and total emission reduction task

Inner Mongolia

Yes

EIA

Emission amount of emission permit, and requirements for total emissions control

Zhejiang

Yes

EIA, “three-simultaneity” acceptance

EIA, completion acceptance of environmental protection project, Environmental statistics and pollution census data

Chongqing

No

EIA, “three-simultaneity” acceptance

Emission amount of emission permit

Hebei

No

No explicit provisions

No explicit provisions

Henan

Yes

EIA, “three-simultaneity” acceptance

Inherit the emission amount of emission permit, free of charge

Hunan

Yes

EIA, “three-simultaneity” acceptance

subscribe emission permits from the trading agency of emission permits reserves according to the Notice on Payment for Paid Use of Major Pollutant Emission Permit,

Liaoning

Yes

No explicit provisions

No explicit provisions

Shanxi

Yes

EIA

Obtained freely

Shaanxi

Yes

Bidding transaction

No explicit provisions

Tianjin

Yes

EIA

No explicit provisions

Guangdong

Yes

Total quantity approval, EIA

Total quantity approval

market refers to a platform that the government transfers emission allowances, while new-build, rebuild and expansion entities purchase it. The secondary market transactions, namely transactions between enterprises, are mainly occurred in Jiaxing, Zhejiang Province and Chongqing. Taken Chongqing as an example, the construction of the secondary market is mainly promoted by the government. Since Chongqing

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Table 5 Charge criteria and duration for paid use of main pollutants in the pilot areas Pilot area

Paid use indexes

Charge criteria for paid use, RMB 188/(t·a)

Duration

Jiangsu

COD

2600 (sewage treatment plant), 4500 (special industry)

5 years

NH3 -N

6000 (sewage treatment plant), 11,000 (special industry)

TP

23,000 (sewage treatment plant), 42,000 (special industry)

COD

4000

SO2

1000

Hunan

COD

210 (Changsha), 188 (Zhuzhou and Xiangtan)

SO2

180

Chongqing

SO2

976

5 years

Inner Mongolia

COD

1000 (2000 originally)

NH3 -N

3000 (6000 originally)

Charge by year (charge for 5 years once originally)

SO2

500 (1500 originally)

NOX

500 (1500 originally)

Zhejiang

5 years 5 years

is transferred from an old industry, the industrial structure is relatively complex; Chongqing Municipal Government avoids the conflict from the initial allocation of emission permits when the regional emission trading is began to explore. There are total 236 trades completed from Dec 30th 2010 to Oct 31st 2012. The price is relatively fluctuated in early stage, and then leveled off gradually; the extent of variation is small between continuous time frames. The secondary market is relatively active in Chongqing, but the main driving force comes from the government, instead of market spontaneity. In view of the institutional arrangements, the secondary market of emission permits does have a lot of system superiority, which is helpful to arouse the enthusiasm of enterprise for pollution control. The enterprises with the pollution control cost lower than the price of emission allowances can benefit from sale of the redundant emission allowances. However, in view of the current stage of emission trading in China, the exploration is mainly concentrated in the primary market, the liquidity of secondary market is far behind. The ideal situations of the secondary emissions trading market are: the transactions among polluters shall be carried out in the secondary market; it is a sound market for free trading, and both its market price and trading rules shall be market-oriented. In order to enhance the allocation efficiency of emission allowances, the government shall gradually weaken its participation in the secondary market, mainly focusing on the effective supervision, cultivating the

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market, creating a good macro environment for emissions trading among enterprises and so on. From this perspective, there is a certain misunderstanding on emissions trading in practice in many regions of China. Most pilot areas took emission trading as an economic means of total quantity control and emission reduction, that is, emissions allowance is obtained for a new project through emissions trading under the certain total amount of emissions, and then the trading is completed, which is unable to form a continuous market transaction mode. In addition, the trades under the guidance of this thought can’t get rid of governmental leadership. Secondly, the weak regulatory capacity for secondary market of emission allowances brought negative impact on the formation of the secondary market. Polluter is an acting subject to pursue benefit maximization, if the effective supervision is absent or inadequate, some polluters often avoid inspection by various means, such as compilation of pollution data at will and hidden the drainage outlets, the actual emission of such enterprise is likely to exceed the purchased emission allowance in event that the market can’t oversight emission variation of enterprises, new companies entering the trading market will lose their confidences to the market, accordingly it is hard to promote the emission trading. In addition, the tracking system hasn’t been established to supervise the emission trading, so it is impossible to collect and verify the accurate emissions data of enterprises, which increase difficulty during calculation of the enterprise pollution index, it is difficult to guarantee the authenticity and consistency during emission trading. Finally, the activity of secondary market trading closely depends on the good market environment, the developed market economy and perfect institutions are the prerequisite and basis for smooth implementation of emissions trading, therefore, it is necessary to improve the market economic system, continually establish and improve the policies and regulations for market economic development, so that the enterprises can decide their own production and environmental behaviors on a fair platform according to the market rules. However, it is relatively weak yet in view of the current progress of emission trading pilot in China (see Fig. 7).

Fig. 7 Relation between transaction quantity and price of emission trading in Chongqing

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4.4 Coordination of Emission Trading is Ignored with the Existing Systems and Policies In view of the engagement between emission trading and China’s current environmental management system, the emission trading is closely related to total quantity control, the EIA approval, and emission license management as well as pollution charges. It is known from implementation of the local policies, the single policy design for emission trading has been stressed too much in China, the understanding and emphasis is insufficient to the unity of policy system and coordination with other related environmental economic policies, the supporting policies are not enough, all of which brought negative impact on the emission trading policy, even hinder the policy proceeding. The policy for total emission amount is inconsistent with the emission trading policy. In China, the policy for total emission amount is main means of pollution emission reduction policies of Chinese Government at present stage. Total quantity control refers to control sum of emissions within the certain region and term, and sum of an enterprise within a certain term. In the regions at the provincial level, the total emission target is usually set according to the economic development and environmental situations at certain stage, the total emission index is decomposed to the local governments step by step according to the “provincial, city and county” levels. Since the objective of emission reduction specified in the goal responsibility can’t be adjusted, the rigorous situations increased the pressure of emissions reduction at the region of the acquirer. In order to complete the own total quantity target, some local governments haven’t a positive attitude towards to the market behavior of purchasing emissions targets. In addition, the areas with remaining emission allowance don’t sell such emission allowance for a development space reserved for new projects. Since the government is a dominant power at the current emission trading market, it can interfere with the trading behavior, causing some transregional emission trades at an impasse. Emission permit license is inconsistent with emission trading policy sufficiently. The emission permit system is to specify the kind, quantity, rate and flow of the permitted emission from pollution sources on the basis of total emission amount control and industrial emission standards. The emission permit is not only a pass that a polluter discharges legally, but also main basis for the emission trading. The emission trading has an inseparable connection with the emission permit, both of them shall be an integrated policies of which shall complement each other. In the implementation of the paid use of emission rights, the allowance allocation shall be distributed to the enterprise in form of emission permit. When the allowance trading is conducted among the enterprises, the trading volume shall be reflected in the emission permit, which the permitted emission amount shall be determined by the owned annual emission allowances after accounting. However, the emission permit license and emission trading haven’t been taken into full consideration yet. Taken both validity of emission allowances as an example, generally the valid term of emission permit is 3 years, but the most pilot provinces of emission trading such

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duration is 1 year, 5 years or 20 years; thus, a lot of technical work needs to do for inconsistent validity of emission permits. As the initial emission allowance is determined through the EIA system for newbuild, rebuild and expansion entities, the negative impact is brought on formation of emission trading market. In the pilot areas where paid use of emission rights and emission trading has been implemented in China, the emission trading is mainly promoted from the paid use of main pollutant emission indexes of new-build, rebuild and expansion entities, while the initial emission permits of new-build, rebuild and expansion entities are mainly determined on the basis of the estimated emission amount in the EIA. However, main emission trading in China is to purchase the initial allowance (also called transaction in many areas) by the new-build, rebuild and expansion projects through the government, in which the regional emission level is mainly based on the Total quantity control system, the initial demand of emission permits is determined by the EIA system, and the price of paid use is set by the government without obvious market price leverage, which limits the trading activity to a great extent. Insufficient theoretical basis for paid use of emission rights negatively impacts the policy promotion. China’s pollution charge policy is to charge polluters who discharged pollutants to the environment or beyond the legal discharge standards in view of type, quantity and concentration of pollutants according to the statutory criteria. Pollution charge policy is the earliest environmental policy which is most widely used in China. With practices over years, some problems appeared in the system itself, especially the charge criteria is low, so the enterprises often prefer to pay such fees, so as to obtain more economic benefits to make up the charge paid for the excessive emission. As analysis above mentioned, the local pilots mainly focused on the primary market during development of emission trading, that is, the government allocates the environmental capacity resources to the enterprises. In the practices of the local pilots, the enterprises tend to think of there is duplicate charge between paid use of emission rights and pollution charge policy, although it is generally believed both theoretical basis and policy purposes are the same, the polluters pay for occupation of environmental capacity resources in the paid use policy of emission right, while they pay for the environmental damage caused by themselves in the pollution charge, two fees are levied on the different basis. However, this explanation is relatively fuzzy, also lack of complete theoretical basis. In addition, most of the pilot paid use price are set on the basis of the industrial average abatement cost, and extremely similar to the theoretical basis of charge standard, so a lot of polluters believe that the paid use of emission rights is double charge, and are unwilling even refused to pay such fees. In view of the policy implementation, various related policy are connected and involved each other, the inconsistence and conflict among them will inevitably increase the cost of policy implementation, while the exploration of environmental and economic policy is relative less in China, the function segmentations also cause insufficient coordination and cooperation among each sector during formulation of various policies, which will inevitably increase difficulty of policy implementation, accordingly influence the policy effects. Coordination between emission trading and related policies is shown as Table 6.

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Table 6 Coordination between emission trading and the related policies Name of policy

Engagement with emission trading

Principal contradiction

Total quantity control

Very strong

Pressure of total emission reduction is increasing, the enterprise is reluctant to sell out their emission allowance, and doesn’t positively participate in the trading

Emission permit

Strong

Term of emission allowance shall be consistence with that of the emission permit, the emission permits as the basis of emission trading hasn’t valued sufficiently

EIA

Very strong

Only limited to the initial allocation of emission permits for new-build, rebuild and expansion entities

Pollution charge

So so

There are same mistakes of cognition and practice for theory basis and objective of both policies, so the enterprises tend to think of the paid use of emission rights and pollution charge policy as duplicate charges

4.5 Progress of Emission Trading are Mainly Based on the “Bottom Up” Promotion Although the emission trading attaches great importance at the national level, the Ministry of Environmental Protection (MEP) and Ministry of Finance (MOF) jointly promote the national pilot, the relevant regulatory opinions, technical guidance or administrative measures have not been promulgated to promote the emission trading at the national level; while many local governments are actively exploring the emission trading mode suitable for their regions in combination with the local actual situations, so the inconsistence is widely existed in the total quantity determination, initial allocation pattern, specific pricing, trading operation and so on. Many areas have carried out many fruitful explorations on a series of key technical issues and management problems in the emission trading policy design and implementation. In overall, the emission trading is mainly promoted from bottom to top. As for the reason, emission trading is known as an introduced environmental economic policy from the foreign experiences, it is unknown whether it can be compliance with China’s national conditions and its feasible, it is still to be checked and explored by means of the local pilot. Meanwhile, under the context of rapidly changing social and economic environments and the environmental protection demand in China, the relevant environmental economic policies need respond

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quickly. In the case that the effect of policy implementation is unknown, it is not suitable to widely promote the policy from top to down. Above all, it is necessary to explore its feasibility at the local level. Besides, China has vast territory with the quite differences among various regions, through the various and different forms of exploration practices at the local level, it can facilitate to summarize the pilot practices at the national level, learn the useful experiences and lessons, which creates the favorable conditions for the emission trading in a nationwide pilot. Therefore, the exploration mode of “bottom-up” emission trading system has distinct Chinese characteristics.

4.6 The Piloting Exploration Modes of the Local Emission Trading is Diversified Top-down administrative management mode. As a typical case, the local blue green algae were broken out in Taihu Lake in Jiangsu Province at the end of May 2007, which caused Wuxi urban water crisis. The former Premier, Wen Jiabao particularly pointed out during an inspection on water pollution of Taihu Lake that: “it is necessary to promote reform of the environmental paid use system, and implement the compensatory transfer of emission indicators”. Therefore, under the context of emergency management to reduce emissions, the initial prices of main water emission indexes were determined for each industrial sector in Taihu Lake Basin through improving the environmental price system of Jiangsu Province; the compensatory transfer of emissions indicators was implemented to set up the primary market; the trading platform was established to carry out the exploration on emission trading through researching the supporting information management system and a series of measures. In addition, the scope of pilot and trading factors are all based on the actual pollution of Taihu Lake Basin; for example, total phosphorus is selected as an index of emissions trading. In view of pollution situations of Taihu Lake Basin, the paid use and trading exploration of emission rights in Jiangsu Province is featured as the strong administrative order with obvious characteristics of top-down administrative mode. Focusing on the primary and secondary markets at same time. It is a mode implemented in Zhejiang Province. Zhejiang province implemented the emission trading pilots at the county and city level in Hangzhou, Shaoxing, Tongxiang and Zhuji in, and entitled a certain discretion, each pilot can give play to own initiative, and actively explore the experiences in total amount indicator management and emission trading. Zhejiang Province issued over 100 policy files related to the paid use of emission rights and emission trading, while the files at the county and city level are more than that at the provincial level. Zhejiang Province promulgated policies to promote the emission trading in whole province only after the pilot experiences of Jiaxing and Shaoxing, etc. have been summarized, which implied that such development of trade pattern is featured as the “bottom-up”. Though there are inconsistencies of all aspects,

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Table 7 Development modes of pilot emission trading in China Modes

Typical region

Characteristics

Administrative development mode

Jiangsu, Hunan and Shanxi

Under the pressure from reduce emissions a top-down pilot model is carried out

Zhejiang and Henan

Spontaneous exploration in a bottom-up pattern within the province

Jiangsu, Shaoxing in Zhejiang, Tianjin, Shanxi, Hubei, Shaanxi, Inner Mongolia, and Hunan

The primary market moves first

Zhejiang and Tangshan in Hebei

Focusing on the primary and secondary markets at the same time

Market cultivation mode

Exploration mode focused on the secondary market construction

Jiaxing in Zhejiang, Chongqing Moving the secondary market first

such as emission trade standard, determination of total amount of the traded pollutant, initial allocation mode and specific pricing among the emission trading pilot areas, Zhejiang Province can allow the differential emission trading, which widens the market operation mode of pollution control, exerts regional initiative, and provides the demonstration experiences for the exploration mode of “bottom-up” national emission trading. Focusing on building the secondary market model. This typical case is the emission trading in Chongqing from which the secondary market is firstly began. The bidding mode is mainly used among enterprises aiming to increase the trading volume. The emission trading occurred more frequently in Chongqing, the larger demand of emission permits inspired the polluters to transfer their emission allowances; accordingly an active secondary market was formed. Although many problems still exist in market pricing mechanism in Chongqing with some differences against the secondary market in essence, it is considered which has combined the government regulation and market effect well. It is a typical case in the current exploration stage of emission trading in China. Table 7 sees the development modes of pilot emission trading in China.

4.7 Flourishing Development of Emission Trading Agencies For facilitating the emission trading work in local areas, emission trading agencies have been set up successively in quite a few places. In terms of region, they include three types. The first one is those which are oriented to the trading business across the country, such as Tianjin Climate Exchange, China Beijing Environment

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Exchange, Shanghai Environmental Energy Exchange, and Asia Climate Exchange (AEX). Among others, AEX, co-sponsored by Shenzhen United Property and Share Rights Exchange, Shenzhen International Technology Promotion Center for Sustainable Development and RESET (Hong Kong) Co. has radiated to South China and Southeast Asia, aiming at providing an international, market-oriented and professional emission trading service platform. The establishment of AEX indicated that the construction of primary emission trading market of Asia–Pacific Region with China at the center has been officially kicked off. The second one is those which are oriented to the provinces, such as Hunan Province Environmental Energy Exchange, Shaanxi Environmental Rights Exchange, Chongqing Major Pollutants Emission Exchange and Management Center etc.; The third one is those which gear to the needs of district/county level, such as Jiaxing Emission Quota Reserve and Exchange Center, Handan Environmental Energy Exchange etc.; In terms of subject matter for trading, the emission trading agencies were initially targeted at SO2 , COD, ammonia nitrogen, nitrogen oxides and other traditional pollutants, which are in conformity with the national policies for total emissions of pollutants. Along with the deepening of pilot, the subject matters for trading have also expanded to carbon, amount of energy saving and other environmental right and interest trading products. Judging from the functions of different type emission trading exchange agencies, the trading agencies of different levels play different roles. To take AEX with wide radiation in range for example, in 2013, it reached RMB13.16 million in carbon emission trading, providing a good platform for inter-regional wide-range trading. The emission trading platforms at provincial or municipal level are designed for meeting needs of the emission trading of local areas. For instance, the emission trading practice of Zhejiang Province mainly occurs on city level. The provincial environmental protection administration only makes a framework regulation for coordinating the emission trading in various areas within the province; in this case, emission trading platforms are usually set up on city level. The emission trading intermediary agencies in China are shown as Table 8.

4.8 Deficiency of MRV System Results in Weak Infrastructure of Emission Trading MRV system (monitorable, reportable and verifiable) is a basis to sustain implementation of the emission trading. Whether the emission trading can be extensively popularized or not depends on the degree of maturity for MRV system. The success achieved for USA in advancing pollutant emission trading and Europe in carbon trading lies in their perfect MRV system. However, the building of MRV system is deficient in China on the whole presently; even this problem exists in Guangdong, Zhejiang, Jiangsu and other eastern coastal developed regions. First, ensuring the accuracy of data on emission monitored for enterprises accessing into the trading market is a basic condition for launching emission trading.

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Table 8 Emission trading intermediary agencies Date

Agency

Remark

November 10, 2007

Jiaxing Emission Quota Reserve and Exchange Center was established by Jiaxing City

The first emission trading agency in China

August 5, 2007

China Beijing Environment Exchange was established

The business is oriented to the whole country

August 5, 2007

Shanghai Environmental Energy Exchange was founded

The business is oriented to the whole country

September 24, 2007

Tianjin Climate Exchange was founded and remaining quota of SO2 was auctioned

The business is oriented to the whole country

November 28, 2007

Hunan Province Environmental Energy Exchange was established

It is temporarily set at Changsha Municipal Environmental Protection Bureau

March 18, 2008

Wuhan Optical Valley United Property Rights Exchange was officially initiated by Hubei provincial government

–

March 27, 2008

Hubei Environmental Resource – Exchange was established in Wuhan

August 16, 2008

Kunming Environmental Energy Exchange was formally established

November, 2008

The first emission trading center in – Jiangsu Province was established in Changzhou City, Jiangsu

May 5, 2009

Jiaozuo Public Resource Trading Center, Henan Province was officially established

–

June 5, 2010

Shaanxi Environmental Rights Exchange was established

–

July, 2010

Guiyang Environmental Energy Exchange

–

September, 2010

Asia Climate Exchange (AEX) was Jointly established by Shenzhen established United Property and Share Rights Exchange, Shenzhen International Technology Promotion Center for Sustainable Development and RESET (Hong Kong) Co., Ltd.

October, 2010

Guangzhou Carbon Emission Exchange

–

November, 2010

Jilin Environmental Energy Exchange Co., Ltd.

–

The first new energy technology and emission trading platform in southwest China was set up

(continued)

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Table 8 (continued) Date

Agency

Remark

March 18, 2011

Qinghai Environmental Energy Exchange was established

–

May 30, 2011

Hebei Province Pollutant Emission Exchange Service Center was established

–

June, 2011

Chengdu Environment Exchange Co., Ltd. was established

–

July 23, 2011

Xiamen Carbon and Emission Trading Center was established

–

October 21, 2011

The inaugurating ceremony of Shanxi Emission Trading Center was held in Taiyuan, indicating the official founding of Shanxi Emission Trading Center

–

December 18, 2012

Suzhou Environmental Energy Trading Center was officially established in Suzhou Industrial Park

The first environmental energy trading agency in Jiangsu

January 9, 2013

Handan Municipal Environmental Emission Trading Center, Hebei Province was established

–

October 9, 2013

Shijiazhuang Municipal Emission – Trading Center, Hebei Province was established

December 23, 2013

Chongqing Carbon Emission – Exchange was officially established

December 20, 2013

Hubei Carbon Emission Trading Center was officially established

–

December 26, 2013

Tianjin Climate Exchange was officially established

–

Presently, there are some enterprises in China which have installed automatic emission reporting systems, but, in fact, due to poor maintenance of lots of online systems and poor operating quality, they cannot ensure the monitoring quality of enterprises’ pollutant emission data, seriously weakening the utility of real-time online monitoring systems. Generally, the state-owned large-sized enterprises perform better, however, for many other enterprises, especially medium and small-sized enterprises, even the online systems have been installed, the data quality is hard to secure. In this case, the measurement of total emission for nonstate and provincial control enterprises are still assessed based on traditional indirect method and material balance method, which are not accurate and timely. Second, the subsequent supervision and verification of emission trading quota after emission trading is finished needs to be in place. However, quite a few areas

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fail to meet the requirements in such a capacity. Today, the emission trading pilots launched in various areas of China are mainly based on such three aspects as verification of trading quota source, accounting of trading quota amount and management of transaction process. The subsequent supervision and verification after quota transaction have not been initiated yet. After an enterprise acquired the emission quota, if the pollutant emission volume during actual production is consistent with the emission quota amount acquired from transaction, there is any emission beyond the quota or there is any surplus with the emission quota etc. have not been included into the range of subsequent supervision of emission trading. Moreover, the authoritative third party mechanism has not taken shape in the society. At present, there are some agencies in carbon trading verification field, which claim to be the sole or one of authoritative verification agencies in China, but no agency has been accepted by international authorized institutions. No relevant government departments in China have been involved in the accreditation work. In this case, it tends to result in difference between verification of emission trading quota and result of examination and poor persuasion etc. The examination and verification of third party shall be the core to safeguard the quality of emission trading system. The deficiency of MRV system as a support to emission trading has impeded the extensive implementation of emission trading policy in China, which is also a critical basic issue to be firstly solved for further advancing the emission trading work across the country next stage.

4.9 Carbon and Emission Trading Lacks Systematic Consideration In China, though pollutant emission trading practice and carbon trading currently are carried out but separately pursued and lack systematic consideration. For both pollutant emission reduction and carbon emission reduction, the political basis, policy environment and technical condition for their implementation in China are available, that is to say, major pollutant emission trading and carbon trading can be incorporated into an integrated trading framework, however, in fact, they remain separate to each other on both national level and local level. To take Guangdong Province in which emission trading and carbon trading are introduced, in July 2007, Guangdong Province was listed as a province of national low-carbon pilot. In 2011, it was approved by the National Development and Reform Commission (NDRC) to launch carbon emission trading pilot. In September 2012, Guangdong provincial government issued the Implementation Plan for Carbon Emission Trading Pilot in Guangdong Province, embarking on building of carbon emission trading market within the province progressively. Meanwhile, Guangzhou Carbon Emission Trading Exchange was officially established, making it be the first carbon emission trading exchange. In 2013, the carbon emission trading in Guangdong stepped into operation stage. By the end of 2013, the total carbon trading volume reached 120,129 tons, with turnover at RMB 7,227,470, making up 29% of carbon

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market across the country. A carbon emission trading system has been basically set up in Guangdong. Besides, major pollutant emission trading was officially kicked off on December 18, 2013. Though the Opinions on the Implementation of Compensated Use and Emission Trading Pilot has been released, it obviously lags behind the pilot of carbon emission trading. What is the most critical is that Guangdong Province has not considered two issues of carbon emission trading and major pollutant emission trading as a whole. The same situation exists in other provinces and municipalities such as Beijing, Shanghai etc. in which both emission trading and carbon trading are launched. As a matter of fact, the major pollutant emission trading and carbon trading can be under coordinated control and incorporated into a united trading framework as a whole for carbon emission and air pollutant emission are both from the combustion of the fuel resources and could be controlled together. However, these two items is completely separated. On one hand, the management department of Chinese government has functional division. Ministry of Environmental Protection and National Development and Reform Commission push on major pollutant emission trading and carbon trading respectively from different angles; on the other hand, while different management departments are pursuing environmental policy, they lack communication and coordination, indicating the low efficiency arisen from “fragmentation” of environmental management system in China and shortage of systematic and optimized top level design in policy.

5 Development Trend of China in Emission Trading Policy To review the development of China in emission trading policy over the past two decades, we can find great progress in emission trading exploration with Chinese characteristics. The Third Plenary Session of the 11th Central Committee of the Chinese Communist Party clearly stated the implementation of resource compensated use system and clarify the further reform direction for deeply exploring how to achieve optimized allocation of increasingly scarce environmental capacity resources through emission trading policy. In general, over the past ten years, the emission trading clearly presents the features: increasingly importance attached by the state, active exploration made by local areas, intensified linking between upper and lower levels, diversified trading patterns explored, increasingly broad trading subject matters, continuously expanding level in policy space, frequent issuing of local regulations, policies and documents, emergence of professional emission trading companies etc. However, it deserves our attention that the emission trading market mechanism suiting the actual national conditions has not been formally established and the liquidity of secondary market has not formed yet. Judging from the trend of emission trading policy, in the coming period, the emission trading will move towards institutionalization, large-scale and diversification and present the following characteristics in trend of development: (1) The national policy pilot and institutional standardization will be further enhanced, the exploration of policy will find its way

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into deep water zone and great progress will be made in some key issues such as support from legislation and regulation, coordination between emission policy and relevant policies; (2) The voluntary exploration practice of local areas will have a trend of flourishing development, which is conducive to forming of secondary market and definition of price forming mechanism; (3) Some commercial companies with emission trading as business purpose have been successively established. Under the motive of pursuing profit, banking and financial departments will develop relevant financial products such as emission pledge etc. And further promote the development of emission trading secondary market; (4) The emission allowances shall be allocated and used primarily on a paid basis reflecting the scarcity and value of the environment capacity resources. However, it is still a problem as to how to define the price of the initial emission allowances in a reasonable way and with guaranteed fairness; (5) The range of trading subject matter will be gradually expanded, which is not only limited to traditional pollutants, but also include amount of energy saving, carbon emission right and water right trading and other environmental right and interest products; (6) The building of special pollution management system for emission trading policy will face a huge challenge. Among them, it is not only related with function positioning and policy selection of management department upon the policy itself, but also a tremendous test to management level of relevant government departments.

6 Six Remarkable Problems Emerged in the Pilot Projects Although emission trading is an excellent market economy policy and China has also gained some experiences in establishing management systems and operational mechanisms of emission trading after years of experiments in these aspects, obstructions from laws and regulations, administrative departments, enterprises and environmental concepts were felt and a large number of problems were exposed in the course of further deepening and extending such experiments since the policy system itself is not fully reasonable and the supporting systems and mechanisms are not perfect. These problems are remarkably noticed in the six aspects described in the following paragraphs.

6.1 Supporting Laws and Regulations Are Inadequate Both total emission control and emission permit policies are referred to in the “Law on Prevention of Atmospheric Pollution” and the “Law on Prevention and Control of Water Pollution” currently in force at the national level. Experiments on emission trading have been carried out successively at the local level for nearly 20 years. However, there is still not such a technical guidance on emission trading at the national level, let alone a national law on emission trading. Issues such as the contents

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of emission rights, rules of emission trading, responsibilities, rights and interests of the trading entities, settlement of trading disputes, tax preference and other trading incentives, mortgage of emission rights as assets, regulatory procedures, liabilities for breach of law, legal authorization in the policy of experimental emission trading, etc. still remain unsolved. To date, the only consents to experiments and studies in emission trading are expressed in the “Decisions on Implementing the Scientific Concept of Development and Strengthening Environmental Protection” promulgated by the State Council in December 2005 and the “Comprehensive Work Scheme for Energy Conservation and Emission Reduction” and the “10th Five-year Plan for Environmental Protection” issued by the State Council in 2007. Weak and inadequate legal basis for emission trading, in particular, the paid acquisition of emission permits, is also a problem from the perspective of the practical implementation of paid use and trading of emission allowances in the provinces and municipalities at the local level. So far, only Jiangsu and Zhejiang provinces and some other regions and cities have carried out some experiments and formulated and introduced some local laws and regulations on emission trading. In the majority of the other experimental areas, the legal basis for emission trading does not exist and the experiments are carried out in a purposeless way to a large extent. Consequently, many policies become “lawless” operations. Provinces and cities that started earlier in the practice of emission trading expect timely enactment by the national government of specific rules and regulations on paid use and trading of emission permits.

6.2 The Relationship with the Existing Environmental Policies is not Clear There is a great deal of environmental policies regarding pollution source management, e.g. pollutant emission charges, wastewater treatment charges, environmental impact assessment, total emission control and emission permit. In order to enable the emission trading policies to be integrated into the environmental policy system, the impacts produced by such policies on other policies in force and the relationship between them shall be identified. So far, no in-depth study has been carried out in this regard and no evaluation has been carried out from the perspective of the environmental policy system on the position and function of emission trading policies. In many places, the experiments of emission trading mechanism were conducted on a “learn-as-we-go” basis without clear knowledge. Therefore, the relationship between emission trading and the existing environment management system must be figured out at the theoretical and operational levels to achieve the complementation goals between emission trading and the related environmental policies.

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6.3 Methods for Allocation of Emission Allowances and Mechanism for Initial Pricing Are Imperfect Despite some experiences obtained in the methods of allocation of emission allowances to enterprises and significant improvements made to the fairness and impartiality of such methods, the performance-based allocation method is not yet practiced locally, the method for obtaining the emission allowances of new pollution sources is not yet identified and no specific enterprise access standards and regulations are established. These problems will become the obstacles to the implementation of emission trading mechanism. In addition, a scientific mechanism is not in place for initial pricing of tradable emission permits. Significant disputes still exist during the experiments over initial pricing of the environmental capacity resources adopting the mechanism of paid use to reflect the scarcity of which. Excessively low initial price fails to materialize the restrictive function of environmental capacity resources upon emission entities while excessively high initial price will overburden enterprises in the experimental areas and, consequently, lead to governmental rent seeking. The current practice in this regard is that the initial price for paid use of emission allowances is, in most of the cases, defined jointly by the authorities of environmental protection, price administration and development and reform committees. The low level of participation in the allocation of the initial emission allowances by the enterprises, as the objects of such allocation activities, has become one of the obstacles to policy enforcement.

6.4 Significant Expansion of Emission Trading Market is Difficult to Achieve in the Short Term Most of the emission trading carried out in the past cannot be fully classified as a market- based transaction because they were achieved with the coordination of the local environmental protection authorities. The environmental protection authorities are the maker of the trading rules and the intermediary in these trading cases. So far, no enterprises or professional intermediaries are playing the role of a broker. Such an arrangement in which the government plays a “matchmaking” role carries a taste of “guiding price” under very strong administrative interferences and is not linked with the market price mechanism, resulting in the failure of the price leverage and competition mechanism and an unhealthy pricing mechanism for emission trading, which, consequently, fails to show the scarcity of the environmental capacity resources. Therefore, in fact, China still does not have in place an emission trading market in the true sense and enterprises still find an ambiguous future for the allocation of total emission allowances and trends of emission trading prices. This situation tends to lead to a problem, that is, enterprises in possession of the emission allowance incline to preserving for the good of their own business, the result is the emission permit buyer always on the market but no seller could be found. This is one of the important

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causes of the slow development and low trading volume of emission trading market in China. In order to establish a market mechanism of emission trading, the national policies must be so established that incentives are provided to assure adequate circulation of residual emission allowances on market. This is essential to the establishment and sustainable operation of an emission trading market in the true sense. Otherwise, if there are very small quantities of residual emission allowances or emission reduction credits for sale on market, the emission trading market will fall into a trap of “zero supply” featuring in plentiful buyers but few sellers. The major factors affecting the growth of the trading market are: (1) The government enforces the inflexible “one-size-fits-all” emission reduction policy and a great majority of the enterprises have heavy emission reduction tasks to fulfill and find it very hard to make a flexible choice to sell or not to sell it’s residual emission permits into market; (2) Since energy demand keeps soaring nationwide while the medium and long term objectives and policies of emission reduction remain ambiguous, electricity enterprises are not willing to sell and prefer preserving their residual emission allowances for their own good; (3) The local emission trading market is severely segmented administratively and the scale development of the trading market for emission allowances for cross region trading, such as SO2 in particular, will be badly hindered with emission trading platform set up by a single city or province.

6.5 The Power of Pollutant Emission Monitoring, Supervising and Management Required for the Implementation of Emission Trading Are Still Inadequate Accurate measurement and monitoring of the level of emission at the pollution sources and a powerful regulatory and law enforcement system become important assurance of the implementation of paid acquisition of emission rights. Presently, the infrastructures for measurement of pollutant emission are relatively underdeveloped and the regulatory ability of the environmental protection departments is inadequate. The monitoring conditions required for the enforcement of this policy are not available in many areas. As a result, the environmental protection authorities find it difficult to get the true emission data from the pollutant emission entities and track and verify transactions. The effectiveness of policy enforcement is severely challenged. How to achieve timely tracking and supervisory management of the paid use of pollutant emission permit, issuance of emission permit and status of emission trading remains one of the issues that the governmental authority needs to study and solve with great efforts. In addition, from the perspective of regulation and law enforcement, the emission trading policy requires the environmental protection authorities to have a relatively high level of competence to regulate the illegal acts of

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the pollutant emission entities. Slack law enforcement by relevant authorities brings high risks to the enforcement of the emission trading policies.

6.6 Emission Licensing System as a Basis of Emission Trading Has not Been Built The exploration of emission right compensated use and trading in different areas is adaptable to environmental management needs of total control in China. If the total emission cannot be under effective control, the emission trading system has lost its soil of growth. Over the past years, the insufficient management over total control from environmental protection department is attributable to the close connection between total emission and local development. If total emission is under rigorous control, some enterprises with high energy consumption and high pollution will not be able to run in many areas. In this case, the local governments will have more collision with total control and weaken the control power of environmental protection department over pollutant discharge. If enterprises can own emission quota at low cost or even free of charge, they are unlikely to be interested in both buying and selling. The relevant departments in pilot areas create the market by means of “matchmaking”, which is impossible to continue over and over again eventually.

7 Basic Thoughts on Establishment of Emission Trading System in China Domestic and international experiences in emission trading reveal that emission trading is an approach with strong contribution to emission reduction. In face of the severe situation of emission reduction, China is in urgent need of an emission trading mechanism to achieve emission reduction at minimum social costs and establish a lasting and efficient mechanism of energy conservation and emission reduction. In addition, emission trading provides reserved policies for China to build its competence to cope with climate change. Therefore, the Chinese government must highly recognize the importance of the emission trading policies and design reasonable action roadmap to continuously advance the policy and make break-through progress in settlement of key problems. Supporting measures should be provided and greater efforts made in pilot projects of emission trading so as to build up and gradually shape an emission trading system that fits the specific situation of China.

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7.1 The Emission Trading System Shall Be Implemented in a Phased and Orderly Way with Break-Through Progress in Key Sectors and Regions Reasonably designed environmental policies shall be enforced on an experimental and demonstrative basis so that relevant experiences are gathered to facilitate extensive enforcement. This is an important “trump” for China to attain effective enforcement of its environmental policies. The order of priority of the experiments shall be arranged based on the finished activities as well as the level of urgency of the respective problems. Emission trading in the near future shall focus on SO2 emission trading in the electricity sector nationwide and the experimental emission trading of COD in Tai Lake basin. Local experiments in emission trading for small basins shall be encouraged. The electricity sector, known for its significant emission of SO2 that accounts for more than 50% of the total SO2 emission nationwide, is a major contributor to acid rain pollution in China. The electricity sector has had the conditions and infrastructures for efficient reduction of SO2. For a power plant using fuel coal of different sulfur contents, its marginal cost difference for SO2 treatment may be doubled or even larger and cost difference will become a major driving force for the electricity sector to carry out experiments in emission trading. In order to encourage the electricity sector to make more efforts in emission reduction and encourage enterprises to take incisive control actions to settle the conflicts between the development of electricity sector and the limited emission allowances, it is very essential to pilot SO2 emission trading in the electricity sector. Besides, above 70% national controlled key pollution resources of the fire power generation plants equipped with the online Continuous Environmental Monitors (CEMs) at the bottom of 2008. Under such circumstances, both the MEP and MF have explicitly required the electricity sector to pilot SO2 emission trading. Therefore, the “Measures for the administration of SO2 Emission Trading in the Electricity Sector” should be issued at the earliest possible date, the policies and supporting measures for the SO2 emission trading in the electricity sector should be improved and established and greater efforts should be made in the enforcement of the respective policies. Experimental ranges should be extended to other sectors when the conditions are mature; experimental ranges of emission trading shall be considered for chemical industry, construction materials and steel and iron and other sectors with relatively big proportion of SO2 emission other than the fire power generation sector; “Guidance for SO2 emission trading in non-electricity sectors” should be promulgated, greater research efforts should be made to explore for models of emission trading for NOx and Hg pollutants and study the feasibility and operating models for extending emission trading to greenhouse gases, land production equivalent quota, renewable energy quota, natural reserves (forests) quota and experimental projects should be carried out. COD emission trading should be implemented in the Tai Lake basin in the near future under the guidance of the MOF and MEP. In the early stage, experimental areas may be conducted in a number of small basins or regions around Tai Lake in Jiangsu and Zhejiang that have a relatively sound basis of pollution source management. Then,

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based on the experiences obtained from these experiments, gradual improvements can be made to the management mechanism and methods for paid acquisition and trading of COD emission permits and the territorial scope of such experiments can be further expanded to get ready for nationwide implementation of emission trading policies for major water pollutants in small and medium-sized drainage areas. Meanwhile, experiments on emission trading of nitrogen, phosphate and other water pollutants may be conducted in Tai Lake area in parallel with the national key technology R&D program in prevention and control of water pollution, the national research and pilot program on environmental economic policies and other S&T programs.

7.2 Greater Efforts Shall Be Made in the Construction of the Six Systems in Emission Trading The key elements that affect the implementation of emission trading in China are multidimensional, including the fair allocation of the emission permit (primary market) and the trading efficiency of the permit trading market (secondary market), the correlated impacts and connection between the policy with the other related policies, as well as regulatory and law enforcement guarantees, competence building for technical staffs, supply of trading platform, readiness of laws and regulations and policies. These elements are sequentially dynamic and spatially heterogeneous. Therefore, efforts in the near future should focus on the construction of “six systems”. A key technical supporting system shall be developed to provide technical assurances needed for smooth policy enforcement. There are many technical difficulties to overcome to achieve effective implementation of the emission trading policy. These technical issues directly affect the effectiveness and impartiality of policy enforcement. Therefore, the R&D progress should be expedited and greater efforts should be made in the supply of key technologies for the effective enforcement of emission trading mechanism to provide technical supports to the experimental and demonstrative projects and technical assurance for the enforcement of the policy. Areas in the key technology system that require break-through efforts include procedures and methods to assure the equality and fairness in the initial allocation of paid emission allowances, pricing mechanism for initial emission rights, emission trading platform, methods for eliminating trading asymmetry, trading ratio between different sectors and regions, schemes for increasing the cost of illegal acts at the pollution sources, solutions to taxation problems that might get in the way of emission trading, trading techniques for point sources and nonpoint sources, schemes for organic connection of emission trading and total emission control, emission charges, emission permits and environmental impact assessment and other relevant systems and policies. A reasonably constructed and continuously improved technical support system will be supportive to the implementation of the experimental projects at the national level and the experimental explorations at the local level so as to take the shortcut to and reduce the cost of emission trading.

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A fair and reasonable system shall be established to assure effective allocation of the initial emission allowances. Fair allocation on the primary market where the government dominates the initial allocation of emission rights serves as an important basis and prerequisite for effective operation of the emission trading mechanism. Relevant policies should be enforced to regulate the property rights of the emission permits on the primary market, define the rights and responsibilities of the MEP and the local environmental protection bureaus as the responsible governmental department in determining the target quantities and allowances for initial allocation, reasonably design the conditions, procedures and time limits for paid acquisition of emission permits, initial pricing mechanism, equivalent coefficient or correction coefficient for different regions and sectors, exploitation and management of the funds from the initial emission allowances and so on. What is worth noting in particular is that the emission performance methodology should be adopted to allocate emission allowances to enterprises; the initial allocation price should be adjusted based on the supply-and-demand relationship on market and changes of the unit cost of pollution treatment; new and existing enterprises, as the objects of allocation should be treated in a differential way while bankrupt enterprises should have the emission permits returned; in terms of the design of the effective period of such allocation, it is recommended that five-year emission permits be designed in association with the five-year total emission control planning to enable the subject of the emission trading market to have definite expectation on the price of emission allowances; payments for emission trading may be conducted in both a single payment or installments; so far as fund management is concerned, earnings from the public sale of emission allowances should be incorporated into a special emission charge fund for centralized management and utilized to support the development of renewable energy and promote energy efficiency etc. With a reasonable allowance allocation system, the allocation activities shall be carried out by the governmental departments in an equal, fair and open manner, corruption and frauds arising from allocation of emission permits shall be prevented and a primary market for emission trading shall be constructed and improved continuously. The emission trading market system shall be activated and the configuration efficiency of the environmental capacity resources shall be promoted through emission trading. Determination and allocation of total emission is only the first step and reallocation of the emission right (namely property rights of emission permit) among the emission entities shall be conducted on the emission trading market. The market system will not be activated and the role that the market plays in configuration of environmental capacity resources will not be brought into full play until emission trading is realized. In order to build a well operating secondary market for emission trading, the following tasks should be carried out to a satisfactory level: the major objects and scope of the functions of the secondary market policies shall be defined; new enterprises shall be allowed to obtain emission allowances from the secondary market or from the preserved allowances of the government on a paid basis; in terms of the design of trading prices, a pricing mechanism that involves self-adjustment by the market under the guidance of the government shall be established; trading

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rules shall be formulated to prevent monopoly of trading prices; A trading information platform shall be set up to keep track of and supervise and manage the trading of emission allowances; trading of different space dimensions shall be regulated according to different standards and cross-region trading, in particular, shall be regulated to avoid “hot spot” pollution as a result of large quantity of pollution emissions; transfer of emission permits shall be incorporated into the EIA approval and management procedure after an application is submitted to the local environmental protection authority; misuse and illegal transfer of emission permits shall be effectively curbed by means of legislation or other actions; deliberate forestall and other trading actions that might disturb the market shall be eliminated; trading liabilities shall be defined and enterprises discharging noncompliant pollutants shall be heavily punished; Active financial and taxation policies shall be established and the subjects of market shall be encouraged to contribute to the configuration of environmental capacity resources driven by the pursuit of maximum self-interest. With these actions in place, normal trading of emission permits on the secondary market shall be assured and the emission trading market shall be activated in the true sense. A system of laws and regulations on emission trading shall be built and the capability of law supply shall be strengthened to facilitate policy enforcement. Paid acquisition and trading of emission rights is an important attempt in the reform of environmental policies. Closer attention shall be paid to the legal competence building for the emission trading mechanism in order to assure powerful law supply and facilitate the enforcement of the policies and standardization of the entire process of emission trading. The legal status of the paid acquisition and trading of emission permits shall be stipulated upon the revision of specific laws such as the “Environmental Protection Law”, the “Law on Prevention and Control of Water Pollution” and the “Law on Prevention and Control of Atmospheric Pollution”. Included in the “Law on Prevention and Control of Atmospheric Pollution” and the newly revised “Law on Prevention and Control of Water Pollution” (2008 edition) are only some general provisions on emission permits and no legal supports are available for emission trading. In addition, laws and regulations should be enacted as soon as possible regarding the methods for implementation and management of total emission control and paid acquisition of emission permits, methods of regulating emission trading and methods for management of fund for paid use of emission permits. Responsibilities, rights and interests and liabilities for breach of law of the allocating subjects such as the government departments, enterprises and intermediaries as well as the trading entities in total emission control, initial allocation of emission permits and paid use of emission allowances and emission trading shall be further defined to provide rigid legal guarantee to the regulation of the primary and secondary market of emission trading and promotion of the operational stability of the emission trading market and to make sure that emission trading is conducted by law. The pollution source monitoring and management system should be improved to reinforce the capability building of emission trading in the experimental areas and sectors. For the sake of full implementation of emission trading, stronger efforts are

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needed to strengthen the pollutant emission monitoring and supervising and management capabilities and extend the scope of emission entities that are required to install online monitoring devices so as to assure effective tracking and monitoring of the emission of various pollutants. In view of the fact that the emission trading mechanism is a complicated system involving multiple subjects, multiple sectors, multiple institutions and issues of multiple aspects, a well-integrated information exchange and coordination platform is essential to the actual promotion of the effectiveness of policy enforcement. More efforts should be extended to the construction of the pollution source database and information platform, the management platform for paid allocation of emission allowances, the monitoring and verification platform for pollution source emission level and the management platform for pollution source emission trading accounts, an emission account system shall be established for the enterprises to achieve comprehensive management of pollution sources participating in the system of paid allocation and emission trading, and make sure emission of pollutants of all types is under effective control. A sound super vision system for enforcement of environmental laws shall be established to provide legal regulation for implementation of emission trading. Powerful supervision of environmental law enforcement is a baseline institutional assurance to the operation of the emission trading mechanism and also a basic approach to transition of the emission trading laws and policies from “what they ought to be” to “what they are”. Without effective supervision of law enforcement, the executing force of emission trading will be greatly compromised, the laws and regulations will be nothing but a pile of waste paper and the functions of the laws in regulating trading activities will not be realized. Procedures for review and approval of emission trading should be strictly followed and more powerful supervision and inspection and administrative punishment and sanctions should be carried out to increase the cost of the illegal acts by the emission entities breaking the total emission limit.

7.3 The Action Roadmap for the Advancement of Emission Trading Presently, Chinese emission right compensated use and trading institution still faces many difficult problems in policy, management institution and technology. Ministry of Environmental Protection, Ministry of Finance, State Development and Reform Commission and other relevant departments shall seize the good opportunities of current economic reform and transformation in China, combine the existing pilot basis and overseas experience, strive to make a key breakthrough in emission trading pilot of industries and regions with better conditions in the near future, arrange the implementation progress rationally, uphold the principle of progressive advance, stable progress and breakthrough in key areas in policy implementation in an effort to basically build an emission trading policy system in line with Chinese actual conditions before 2025.

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In the coming period (2014–2015), the focus will be laid on intensifying the research on emission right compensated use and trading, construction of supervision, platform, organization, publicity and education; actively supporting third party profitable agencies with emission trading behavior as a main operating target; extend the pilot of major atmospheric pollutant SO2 trading in national power industry to steel industry and other industries with high emission contribution and good monitoring condition appropriately; encourage other river basins and regions with relevant conditions to launch COD pilot synchronously based on strengthening Taihu Lake basin in launching COD trading pilot and actively push on the pilot attempt of nitrogen, phosphorus and NOx; continue to push on carbon trading pilot in seven provinces and municipalities. NDRC, MEP, MOF and other departments shall give an overall consideration of advancing emission trading and carbon trading in a united way; strengthen the development of CDM project operating platform, actively support CDM project in priority fields such as development of renewable energies, energy efficiency, recovery and utilization of methane. In the medium term (2016–2020), the efforts will be made in pushing forward the issuing of relevant policies, extending and deepening the range of emission trading policies and promoting the expansion of emission trading in industry and space. On the state level, include power and non-power industries with heavy contribution of SO2 into the SO2 emission trading policy framework and actively carry out pilots for exploration; strive to introduce COD trading in key river basins across the country during this period if the polices are ready; meanwhile, expand the range of trading subject matters, actively push forward the emission trading pilot of nitrogen, phosphorus, NOx and mercury; carry forward the implementation of carbon trading in a coordinative way in pilot areas of emission trading, basically build a market of major pollutant emission trading and carbon trading, vigorously encourage the pilots based on voluntary greenhouse gas emission trading and other environmental right and interest product trading. In the long term (2021–2025), efforts will be made in building national SO2 and COD emission trading market mechanism; strengthening the driving force of supporting policies, deepening the emission trading pilot of nitrogen, phosphorus, NOx and mercury; carry out emission trading in key industries such as power, cement, thermal supply and steel-making etc. in an all-around way, with subject matters including major pollutants and greenhouse gases. In the meantime, actively improve the construction of emission trading market policy system and building of emission compensated use and trading policy system in line with actual conditions of China.

References 1. Crocker T (1966) The structuring of air pollution control systems. In: Wolozin H. (ed) The economics of air pollution. W.W. Norton, New York 2. Dales J (1968) Pollution, property and prices. University of Toronto Press, Toronto 3. David J (1997) Environmental incentives: Australian experience with economic instruments for environmental management. http://www.environment.gov.au/

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4. Reuters News Service (Mar 14, 2007) Canada emissions trade seen worth C$12 Bln–CIBC. http://www.planetark.com/dailynewsstory.cfm/newsid/40845/story.htm 5. EPA Press Release (Dec 5, 1991) New EPA rule gives every American right to buy and sell acid rain emissions. http://www.epa.gov/history/topics/caa90/04.htm 6. Stewart S (May 4, 2007) IPCC report confirms EU call for deep cuts in global greenhouse gas emissions. http://engineers.ihs.com/news/eu-en-greenhouse-gases-5-07.htm 7. Risa M (Feb 27, 2008) Japan and Russia take steps to trade emissions rights. http://www.gcx. co.za/latest-industry-news/ 8. National Center for Environmental Economics (Jan, 2001) The U. S. experience with economic incentives for protecting the environment. http://www.cec.org/

Chinese Environmental Audit System for the Government Jinnan Wang, Hongqiang Jiang, Xuetao Zhao, Jing Zhang, Jixiang Chen, Xiangang Zeng, Scott Vaughan, Robert Smith, Jan Bakkes, and Glenn-Marie Lange

Abstract With rapid industrialization and urbanization, the “resources and environment for growth” model in China has led to increasing inconsistencies between economic and social development and environmental protection. As an issue of national concern, environmental protection has been become a policy focus for the Communist Party of China (CPC) and the national government. In spite of this, the country continues to face serious environmental challenges; excessive pollution, high levels of smog in many cities, contamination of surface and groundwater and soil degradation are just some of the challenges faced. Strengthening the government’s environmental audit systems must be part of the solution to China’s increasingly serious environmental problems. The government and its senior officials play crucial roles in the implementation of environmental and economic policies. Improved environmental audit systems are required to review the environmental performance of senior officials and hold them accountable for performing their environmental protection duties responsibly and fully. China already has an established economic accountability audit system for senior officials and has been actively making efforts in standardizing its systems for natural resource and environment audits. In July 2014, the Implementation Guidelines for Regulation of Economic Accountability Audit on Leading Officials of Party, Government and State-owned Enterprises was jointly issued by several key agencies of the Chinese government1. According to these guidelines, the economic accountability auditing of China’s senior officials should include, in addition to the quality and sustainability of economic and social development, auditing of officials’ performance with respect to environmental protection, natural resource management and improvement of people’s livelihood. J. Wang · H. Jiang · X. Zhao · J. Zhang (B) Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] J. Chen China Auditing Society, Beijing 100086, China X. Zeng Renmin University of China, Beijing 100872, China S. Vaughan · R. Smith · J. Bakkes · G.-M. Lange International Institute for Sustainable Development, Manitoba R3B 0T4, Canada © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_3

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Keywords Environmental audit · Post-term audit · Roadmap · Government audit There is a significant gap in the scope and methods of environmental auditing methods between China and other countries Canada, the Netherlands, the United States, India, Brazil, Japan and South Korea, among others, have made important progress in supporting the effective implementation of national environmental policies through independent national and sub-national environmental audit systems of various forms. The experience of these countries demonstrates that audit institutions at each level of the Chinese government should conduct audits of environmental funding, policy design and implementation, and policy and project management through their audit systems. Moreover, these systems must more fully reflect the characteristics of proper environmental audits as laid out by the International Organization of Supreme Audit Institutions (INTOSAI). 2 These characteristics include standards and methods for collecting evidence and ensuring objectivity and independence. With the recently issued guidelines on economic accountability audit (see above), the system of economic accountability audits that is widely applied in China now highlights the need for protection of natural resources and environment. In spite of this positive development, there remain problems in the practice of environmental auditing in China. Challenges include inadequate training and knowledge of audit team members; narrow audit scopes; the absence of appropriate audit standards and procedures; weak audit institutions and others. There are therefore large gaps in environmental audit systems between China and other countries, both in terms of the content of audits and the methods they employ. In the future, China must attach greater importance to its environmental audit systems. Improvements required include a greater emphasis on auditing the implementation of environmental policies (with the aim of improving the policies over time); the adoption of international standards for performance audits as the basis for environmental audit; improved documentation of environmental audit methods and procedures; and increased cooperation between the agencies involved in the environmental audit systems. The need to improve Chinese environmental auditing is recognized but better cooperation is required to achieve this There is widespread consensus in Chinese society that there is greater need to focus on environmental performance in the evaluation of senior officials of government. Though the government has carried out pilot environmental performance audits of officials at various levels, there remains much to be learned; for example, the environmental knowledge of audit professionals is uneven. Additionally, a set of implementation guidelines for environmental auditing that is flexible enough to be adapted to different needs does not yet exist. Cooperation between the agencies involved in China’s audit systems is weak at the moment. Better cooperation is required both to enhance the independence of audit

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institutions and also to deal with the practical difficulties faced by the current audit systems. The various government agencies responsible for natural resource management and environmental protection could do much to increase their efforts to support the activities of audit institutions, while respecting the need for full independence of these institutions. The Chinese government does not have a plan for strengthening its audit systems Though there is recognition that the Chinese government, through its audit institutions, must be more active in carrying out environmental audits, there is no national plan at the moment to accomplish this. Such a plan is needed to demonstrate how the government will establish both a solid theoretical foundation for environmental auditing as well as the strong technical support necessary to carry out effective audits. In any plan that might be established, environmental audit activities should be expanded on a step-by-step basis, starting with pilot audits. The experience gained from the pilot audits could then be used to improve audit methods and procedures on a nation-wide basis. It is also essential that environmental audit systems be brought into alignment with the new guidelines on economic accountability audit. This would require establishing and improving the legal basis, frameworks and technical guidelines for environmental auditing. The scope of environmental auditing, which is uncertain at the moment, requires clarifying as part of any plan. In addition to compliance and financial auditing, environmental auditing in China should also include environmental performance auditing if the country is to align with international best practices as set out by INTOSAI3. Looked at from the perspective of environmental issues, audits typically cover issues related to water, the atmosphere, solid waste, soil, natural resources and sustainable development. This is not the case currently in China, where the scope of environmental audit is limited to financial audits of funds used for environmental protection and some aspects of compliance with environmental laws, policies and regulations. The following existing national action plans could provide a path toward strengthening China’s environmental audit systems: the National Action Plan for Atmospheric Pollution Prevention; the National Action Plan for Water Pollution Prevention and the National Action Plan for Soil Pollution Prevention. A plan for strengthening environmental audit systems should also help direct efforts to improve audit methods and processes and the independence of China’s audit institutions, both which are in need of enhancement. The key CPC and government leaders at different levels who will be the objects of environmental audits are not clearly identified today. Nor is it clear that audit reporting is adequate or that and the necessary measures are in place to ensure that audit results are acted upon. It would be appropriate that all this be carried out under the guidance of the CNAO, which would be responsible for implementing any enhancements to the audit systems. Once the above improvements are implemented, it would be sensible as a final step to place the CNAO and related audit institutions under the responsibility of the National People’s Congress. Such a move could do much to ensure the independence

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of China’s audit institutions and, therefore, to ensure that environmental protection and natural resource management audits lead to real improvements in the quality of China’s environment.

1 Introduction In the 35 years since reform and opening up, China has achieved remarkable economic progress. However, some governments and officials, including local officials, have narrowly pursued the growth of GDP and overlooked the protection of resources and the environment, which has resulted in a significant conflict between economic development and environmental protection. High levels of urban smog, contamination of surface and groundwater, soil contamination and other issues have aroused significant public concern and criticism. Redirecting local governments’ pursuit of economic development at the cost of environmental protection requires strong, top-down administrative regulation, control and correction. In the absence of such redirection, China will not have sufficient resources and environmental capacity to support its development in the future. Needed are changes to the incomplete national economic accounting and performance evaluation systems; to environmental auditing and accountability of government departments and patterns of economic growth that can be achieved without high resource consumption and pollution. Since the opening of the 18th CPC National Congress, the implementation of improved environmental audit systems has gained a high level of attention as a key means for (1) independent and objective measurement and enforcement of the government’s responsibility for environmental quality and (2) establishing a lifetime accountability system for officials who have control over environmental and ecological protection. In addition, the 3rd Plenary Session of the 18th CPC Central Committee has proposed establishing a complete ecological civilization system; implementing environmental audits of senior officials when leaving their posts (either for promotion or on retirement); and establishing a lifetime accountability system concerning environmental and ecological damage. From this, it is evident that establishing and improving China’s environmental audit systems and making it a key environmental protection and management tool of the country has become one of the major tasks for environmental protection today. Establishing an appropriate system and mechanism for environmental performance evaluation of government and political leaders is essential. The current GDPcentered performance evaluation system in China has inspired great initiative and innovation on the part of governments and enterprises at all levels and it plays an important role in stimulating and promoting the acceleration of industrialization and development of the economy. At the same time, China has witnessed serious and astonishingly negative consequences by pursuing rapid economic growth while failing to care sufficiently about environmental and ecological capacity, loss of natural resources and damage of the environment. As part of the solution to these

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grave environmental issues, a key goal is to establish an environmental management system administered outside local governments. Also, it is an effective system which clears the environmental accountability of local governments. A major cause of the serious environment is the bad implementation of environmental policies due to the passive position of environmental departments, environmental departments are unable to participate in decision-making since the early stages of major projects. However, after the occurrence of pollution accidents, the environmental departments are assumed the role of scapegoat. Instead, local governments must be encouraged to seek local development through management and institutional innovation, change their understanding rather than simple growth. Improvement of government environmental audit systems is a key institutional innovation that will advance China’s creation of an “ecological civilization” and will be of great importance in implementing scientific development and the decisions of the 3rd Plenum of 18th CPC aimed at guaranteeing the health of national economy, society and environment. Environment auditing in China includes both environmental audit of government programs as well as environmental accountability audit of senior officials after leaving their posts. The study covered six separate sets of outputs: firstly, introduction, it introduces research background and significance. Secondly, international and Chinese theories, methods and practices in environmental auditing were studied and drawn upon. Thirdly, drawing upon the lessons learned from international practice, a proposed framework for environmental auditing in China has been developed. Fourthly, the post-term environmental audit system for senior officials has been considered. What’s more, problems in implementing Chinese environmental audit systems have been pointed out. Finally, on the basis of the above activities, a roadmap for the Chinese government to improve its environmental audit systems in the future has been put forward.

2 Overview of Environmental Audits at Home and Abroad 2.1 International Experience Environmental auditing began in the late 1960s and 1970s, when national audit offices in some Western countries began to examine the effectiveness of government policies related to natural resources such as forests, water, agriculture and fisheries. For example, the United States Government Accountability Office conducted an audit for a water pollution abatement project in 1969. Other western countries, such as Canada, also began to implement environmental auditing [1, 2]. Around this time, some private businesses in the West also embarked on environmental audits out of need to address concerns arising from rapidly growing economies and the emerging understanding of the need for environmental sustainability. They made use of environmental consultants to conduct the audits and the results were

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used by senior managers to improve environmental performance and reduce raw material consumption. It was during the 1980s that environmental auditing truly emerged as its own discipline and gained a significant role as a macro management tool. It expanded to address a broader series of government actions related to pollution abatement, freshwater management, biodiversity, regulatory design and enforcement, and adherence to international environmental agreements. Environmental audit has since become an important tool in formulating and implementing environmental policies. During the last two decades, there has been particularly rapid development of the discipline. The United Nations Conference on Environment and Development, held in Rio de Janeiro in 1992 was a collective global response to environment and development problems. Agenda 21, the outcome document adopted during the conference, pointed out that environmental problems would become the main challenge faced by human beings in the twenty-first century and called for focused attention of all countries on environmental issues. During the 14th congress of the INTOSAI, held in the United States in 1992, the membership expressed a strong interest in assisting national audit institutions to deal more effectively with the issues related to environmental auditing. The formation of a Working Group on Environmental Auditing (WGEA) was therefore initiated and approved at the Washington congress. The WGEA aims to improve the use of national audit mandates and instruments to promote effective environmental protection policies. The 15th congress of the INTOSAI, held in Egypt in 1995, again considered environmental auditing in depth and resulted in the Cairo Declaration: International auditing organizations [should] advocate that all supreme auditing institutions take environmental problems into consideration while exercising their auditing responsibilities in view of the importance of protecting and improving environment.

It was further decided during the 16th congress of the INTOSAI (held in Uruguay in 1998) to establish regional working groups of the WGEA. The support thus given to environmental auditing greatly promoted its development. At present, national environmental auditing is carried out in most countries. According to the INTOSAI, national audit institutions have undertaken more than 2,000 environmental audits since the late 1990s. Canada, the Netherlands, the United States, Norway, India, Brazil, Japan and South Korea, in particular, have carried out a wide range environmental, conservation and sustainable development audits focusing on the use of fiscal instruments, procurement, environmental quality monitoring, sustainable fisheries and other topics. These efforts have been effective in helping promote the implementation of national environmental policies. For example, audits conducted in Canada by the Office of the Commissioner of the Environment and Sustainable Development discovered, among others, the following shortcomings. • The Canadian Coast Guard had weak command and control coordination to respond to major oil spills from tankers, which led to a two-year program to improve the central command structure.

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• Canada’s liability limits for offshore oil platforms were significantly below world levels, which led to the federal government introducing legislation to increase the limit to $1 billion. • Inspections of energy pipelines by the National Energy Board were inadequate to understand risks, which led to $14 million budget increase. In addition to the work of national audit institutions, other methods of assessing governments’ environmental performance are commonly used in western countries; for example: • policy assessment through state of the environment reporting (e.g., 2012 PBL Assessment of the Netherlands); • periodic meetings of senior government officials (e. g, the indicator-based European Semester); • strategic environmental assessments; • corporate social responsibility reporting (e.g., the Global Reporting Initiative). All of these methods are annual or biennial and all require substantial but not enormous quantities of human and financial resources. All synthesize many types of information and make use of indicators along with other forms of evidence to assess performance. None addresses the performance of individual leaders; rather, they focus on institutional performance. Experience with them suggests that they work best when a separate scoping phase is conducted by an independent agency to formally determine the scope and targets of the assessment. The use of “traffic lights” (red, yellow, green icons) to summarize and compare the state of complex situations in a visually appealing and simple manner has been shown to be effective (e.g., by the OECD). In the Netherlands, for example, the state-of-the-environment (SOE) reporting conducted by the national environmental assessment agency (PBL) is used as a tool to assess the effectiveness of Dutch environmental policy. PBL’s independent SOE reports are used as a basis for parliamentary debate and a chance for government to explain its performance record. The reports address questions of ambient environmental quality, natural resources, policies and trends. They are based on statistics, models and political science and are complemented by statistical data compendia and future outlooks. Another example is the so-called European Semester, which is an annual spring meeting of European heads of state. There is extensive preparation for these events, which make use of indicators as the basis of assessment. There is sectoral/countryoriented coordination of opinions. Formal milestones are set and regulations put in place. A wide range of issues is discussed and countries set self-imposed performance targets. The event is essentially a type of peer review that fits well in the specific style of governance unique to the European Union. The process is carefully structured in terms of governance mix, with distinctions made between hierarchical/centralist, market-driven and network-based approaches. The semester is currently one of the few ways the European Commission can “take the measure” of national governments in the EU.

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Both of these approaches (SOE reporting and the European Semester) actually have more influence on policy than do formal audits in Europe, except in the case where audits expose actual wrongdoing.

2.2 History and Current Status of Environmental Auditing in China Since its foundation in 1983, the Chinese National Audit Office (CNAO) has used environmental audit as an important measure for promoting environmental protection and sustainable development in China. This is consistent with the Cairo Declaration (see above). Today, the statutory authorities and duties of Chinese government audit institutions regarding environmental audit have been clearly formulated and the corresponding departments of the central, provincial and regional audit institutions have largely been established. During the restructuring of the government administration of 1998, the State Council strengthened the basis for environmental audit by approving the restructuring plan of CNAO. This included the establishment of the CNAO’s Department of Agriculture, Resources and Environmental Protection Audit and clarified its environmental auditing functions. The 18 regional offices of CNAO along with the audit institutions of China’s 31 provinces, autonomous regions and municipalities have all set up departments specializing in environmental audit. CNAO has reinforced its environmental audit functions, increased the number of relevant institutions and departments and carried out a series of audits of natural resources and environment [3, 4]. In 2013, after a number of years of auditing experience, CNAO’s Department of Agriculture, Resources and Environmental Protection Audit clarified its definitions of environmental auditing. It proposed that environmental auditing refer to the auditing of the legitimacy, legality and effectiveness of revenues and expenditures and management activities related to natural resources and environment carried out by governments, relevant authorities and enterprises and institutions engaged in creating an ecological civilization and promoting sustainable development.

2.2.1

Content of Environmental Auditing

Natural resource audits carried out by audit institutions in China include audits of the development, utilization, and protection of natural resources and of the management of related revenues and expenses. Areas of focus include land resources, mineral resources, energy conservation, water resources and forestry resources.

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Environmental auditing mainly includes audits of pollution prevention and control, supervision, protection and improvement of the environment and management of related revenues and expenses. Areas of focus include auditing of water pollution control, air pollution control, solid waste management, heavy metal pollution and pollution reduction [3]. In general, natural resource and environmental auditing focuses on four issues: (1) management of funds; (2) policy implementation; (3) program management; and (4) project management. (1)

(2)

(3)

(4)

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Audits of the management of funds include those focused on the collection, management, and use of funds, including government financial funds and special funds for natural resources and environment. Their primary focus is the legitimacy, compliance and effectiveness of the management of the funds. Audits of the implementation of environmental policies include those focused on the fulfillment of national policies, laws, plans and measures for natural resource management and environmental protection, the achievement of the policy’s objectives and the implementation of recommendations resulting from policies. Audits of the fulfillment of environmental program responsibilities by government departments include fulfillment of the responsibilities and objectives related to the delivery of public services and management activities related to natural resources and environmental protection as specified in China’s laws. Project management audits include those focused on the management and operating conditions of major natural resource and environmental projects, as well as the impacts of other major projects on natural resources and the environment. The Organization of Government Environmental Auditing

Environmental auditing in China has evolved a specialized organizational approach in which environmental audits are integrated into audits of other sectors/disciplines. Audit institutions began to consider coordination of resource and environmental auditing with other audits following the establishment of the Environmental Audit Coordination Leading Group by the CNAO in 2003. Since then, the responsibility for environmental auditing has shifted from a single audit department within CNAO to all audit departments. Under this integrated approach, all departments are expected to pay attention to natural resource management and environmental protection issues when conducting audits in their specific domains. They must incorporate environmental considerations into their audit plans in accordance with national policies and laws for natural resources and the environment. Such an integrated approach reflects the characteristics of economic and social development in China and the country’s special needs for natural resource management and environmental protection.

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Environmental Audits of Senior Officials

In China, a unique audit system focused on the economic accountability of senior officials of the government and the CPC has evolved during the expansion of economic and political reform in the last decades. It is recognized as an innovation of the modern audit system in China. Article 25 of China’s Audit Law (as revised in February 2006) clarifies the legal basis of such “economic accountability” audits. The CNAO published its opinions on strengthening natural resource and environment auditing in 2009, which specified that “in auditing fiscal, investment, financial, enterprise, foreign investment and economic accountability, audit bodies at each level should incorporate resource and environment into audit plan for implementation” and “economic accountability audits should keep a watchful eye on officials’ performance of resource management and eco-environmental protection responsibilities, especially on the accomplishment of goals with respect to energy conservation and emission reduction as well as agricultural land (particularly basic farmland protection), while disclosing resource and environment problems resulting from poor decision-making, improper performance of duties and poor management”. In line with the spirit of these statements and to strengthen the laws, regulations, methods and scientific development of economic accountability audit, the General Office of the CPC Central Committee and the General Office of the State Council issued Regulations on Economic Accountability Audit for Leading Cadres of the Party and Government and Leaders of State-owned Enterprises in October 2010. These regulations specify that economic accountability audit is to be used to encourage senior officials to contribute to the scientific development of China’s regions, departments and units and to pay close attention to the scientific outlook on the development of the economy. In the organization and execution of economic accountability audits, special attention should be paid to the economic, social and ecological benefits generated by major decisions made by senior officials [3, 4]. The CNAO has clarified how economic accountability auditing is to be used in natural resource and environmental auditing in its audit documentation and institutional standards. In 2012, it proposed Guidance for Economic Accountability Audit that stated, “for senior officials of the government, economic accountability audits should be focused mainly on the implementation and effects of policies with respect to energy conservation, environmental protection based on an overall review of financial balance scale, structure and performance”. According to the Implementation Guidelines for Regulation of Economic Accountability Audit on Leading Officials of Party, Government and State-owned Enterprises jointly issued in July 2014 by several key government agencies5, the economic accountability audit of Chinese senior officials should focus on: “quality, benefits and sustainability of economic and social development; economic, social and environmental benefits of management and decisions related to senior officials’ economic responsibility; debt borrowing, natural resource assets management, environmental protection, improvement of people’s livelihood, technology innovation; and issues for which senior officials shall assume direct responsibilities.” (Italics added) As the

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italicized phrases suggest, these guidelines are highly relevant to the management of natural resources and environment in China.

3 Designing and Implementing Strengthened Environmental Auditing Systems in China This chapter discusses the design and implementation of strengthened government environmental auditing systems in China. The purpose is to lay out the basis necessary for China to create systems that: are focused on the appropriate measures (financial management; compliance and performance) and targets (government programs and senior officials) have a strong legal basis, and are implemented by objective and independent auditing institutes [5–12].

3.1 Objective and Basis of Environmental Auditing 3.1.1

Objective of Environmental Auditing

Governments at all levels have the responsibility to protect the quality of the environment and to comply with environmental policies and laws. The purpose of environmental auditing is to provide objective and independent information on the performance of government and their officials in meeting these responsibilities. The objective is improved government actions and environmental decision-making and, ultimately, improved environmental quality and sustainability [5, 6].

3.1.2

The Basis for Environmental Auditing

Environmental auditing rests on three pillars: laws and regulations, institutions and processes. • Clear, sound and comprehensive laws and regulations are essential for ensuring that environmental audits are legitimate and that their results have credibility. • Auditing institutions must be (and be seen to be) independent of the institutions and individuals that are the targets of their audits; must be staffed by properly trained professional audit staff; and must be mandated to undertake audits across the full scope of relevant issues. • Finally, audits must be based on clear, sound and comprehensive processes, including principals, ethics, guidelines, procedures, methods and indicators. Currently, there is insufficient basis for implementing environmental auditing in China. Laws and regulations are not adequate. Auditing institutions require further

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strengthening to ensure their independence, equip them with strong audit teams and permit them to broaden their audit scopes. Audit processes are not clear enough to ensure high quality audit results.

3.2 Audit Institutions and Their Targets 3.2.1

Audit Institutions

Audit institutions are responsible for the quality and effectiveness of environmental audits. Their success depends in the first instance on their independence from the targets of their audits. In the case of government environmental audit, this means audit institutions must be independent of the government departments and the officials they are charged with auditing. Only such independence can ensure the objectivity and credibility of audit outcomes and, therefore, the effectiveness of the audit outcomes [11, 13]. In China, there is need to strengthen the independence of audit institutions. Four possibilities for doing so are given below. Table 1 discusses the advantages and disadvantages of each. Option 1 (status quo)—Environmental auditing fall sunder the responsibility of audit institutions at the central, provincial and regional levels. These institutes are agencies with in their respective governments. Option 2—Environmental auditing falls under the responsibility of the People’s Congress. Under this option, audit institutes at the central, provincial and regional levels are mandated by and accountable to their respective People’s Congress, which provides supervision for the audit systems. Option 3—Environmental auditing falls under the responsibility of environmental protection agencies at the central, regional and local levels. Option 4—Environmental auditing is a joint responsibility of environmental protection agencies and auditing institutions at the central, provincial and regional levels. Auditing institutions are specifically responsible for audit management, planning, implementation and publication. Environmental protection agencies are responsible for technical matters, drafting of auditing reports and implementing auditing recommendations. Each of the four options has advantages and disadvantages. From the point of view of audit processes, the joint responsibility option (#4) scenario is attractive because it offers the opportunity to limit government interference and also secure the expertise of staff knowledgeable in environmental issues to take part in audit teams. It also offers low transition costs. It brings an increased risk of government influence, however, due to the direct involvement of environmental protection agencies in audit processes. From the perspective of China’s long-term socio-economic development, the option of making audit institutions accountable to the People’s Congress is particularly attractive, as it offers the surest protection of audit processes and outcomes from

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Table 1 Comparison of institutional options Responsible body

Independence

Feasibility and cost

Audit institutions

Independence of audit processes and outcomes is, in principle, assured but, as agencies of the government, the institutions are possibly subject to government influence

Audit institutions suffer from a number of shortcomings that limit their ability to effectively carry out environmental audits; in particular, lack of professional audit staff with environmental knowledge. The cost of institutional transition is high

People’s congress

Since audit institutions are accountable to the People’s Congress, full independence of the audit systems from government agencies and officials is assured, greatly reducing the possibility of government interference in audit processes and outcomes

Lack of environmental auditing expertise within the People’s Congress would limit its ability to hold audit institutions accountable for their work. The cost of the institutional transition from the current situation is high

Environmental protection agencies

The independence of audit processes and outcomes is not assured because the same agencies that will be the targets of the audits will also be responsible for them. High likelihood of influence of the outcomes by government

Audit teams will benefit from the environmental knowledge of staff in the environmental protection agencies. The cost of institutional transition is low

Audit institutions and environmental protection authorities jointly

Independence of audit processes and outcomes is, in principle, assured by the independence of the audit institutions, though the involvement of the environmental protection agencies greatly increases the likelihood of government influence

Audit teams will benefit from the environmental knowledge of staff in the environmental protection agencies. The cost of institutional transition is low

government influence. The relatively high transition costs of this option mean that it cannot be adopted in the short term however. For now, the status quo, in which audit institutions accountable to the government are—with appropriate strengthening— responsible for environmental auditing is the best option to mitigate the distrust between the government and public on environmental matters and reduce the possibilities of social crises. Thus, we recommend strengthening of the status quo in the short term followed by reform of the institutional arrangements in the longer term to make audit institutions accountable to the Peoples’ Congress. Environmental auditing not only requires knowledge and experience in finance and accounting but, equally importantly, knowledge of environmental issues and the

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science underlying them. This includes knowledge of ecology, biology, engineering, physics and chemistry in relation to air, water and soil. A set of systems to cultivate and identify professionals with this knowledge to work as environmental auditors is needed in China, since audit institutions currently have few such staff. Consideration should be given to establishing a qualification examination system that could be used to certify the knowledge of environmental auditors.

3.2.2

Target of Environmental Auditing

A core principle underlying environmental auditing is the notion that governments, businesses and individuals have responsibilities to protect the environment and that they can be held publicly accountable for the fulfilment of those responsibilities when they have been entrusted with them by the nation. Article 6 of China’s newly revised Environmental Protection Law clearly defines these responsibilities [7–12]: • Governments at all levels are to assume responsibility for the environmental quality of their administrative regions; • Enterprises, institutions and other producers should prevent and reduce environmental pollution and environmental damage and bear responsibility (in accordance with the law) for any damage they are unable to prevent; • Citizens should be aware of the need to protect the environment and live in accordance with this need by, for example, adopting low-carbon, sustainable lifestyles. According to the new Environmental Protection Law (Article 26), governments and their officials at all levels may be targets of environmental auditing. Enterprises also may be audit targets (Article 42).

3.3 Audit Types Environmental auditing includes, in principle, the same three audit types as does government auditing in general: financial auditing, compliance auditing and performance auditing. In terms of its environmental scope, it includes audits focused on water, atmosphere, pollution, natural resources and ecosystems. Again in principle, there are no significant differences between the conduct of environmental audits and audits in general. Environmental financial audits focus, like all financial audits, on the legality and legitimacy of the management of state funds devoted to natural resource management and environmental protection. Environmental compliance auditing focuses on whether the audited organizations and officials are acting in accordance with the environmental programs, plans, policies and standards stipulated by the state.

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Environmental performance auditing considers whether government organizations and officials have fulfilled their natural resource management and environmental protection responsibilities; in particular: whether their activities achieve their intended objectives; whether their use of financial resources is cost-effective; whether their efforts result in permanent changes, and, ultimately whether environmental quality has actually improved.

3.4 Audit Process The audit process can be broken into four phases: Preparation: Environmental auditing objectives and implementation and guarantee mechanisms. Establish the requirements and basis for environmental auditing in accordance with the major environmental objectives and programs of the state. Establish annual audit schedules and work plans, define clear working responsibilities and tasks and set up corresponding systems to ensure that audit recommendations are acted upon. Implementation: Establish systems and processes in accordance with the objectives of environmental auditing and define the responsibilities of different audit professionals. Establish qualification certification systems for audit team professionals. Prepare technical guides and specifications for different types of environmental audits. Reporting: The legal status and authority of environmental audit reports must be made clear and reporting guidelines introduced. Data sources used in audits must be clearly documented to ensure the objectivity of results. Audit reports should include both audit conclusions and recommendations to correct deficiencies found. Post-audit monitoring: Systems must be established to publicize environmental audit results to increase their transparency and credibility. The management of environmental audit information, materials and files must be improved to improve audit efficiency.

3.5 Audit Evidence 3.5.1

Requirements of Audit Evidence

To ensure the legitimacy and fairness of environmental audit and to reduce risks of errors in audit processes, the collection and analysis of audit evidence is of fundamental importance. The adequacy of evidence must be taken into account during its

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acquisition and auditors must exercise good professional judgment in determining this. There are several principles that must be kept in mind [6, 8, 11]. Completeness of evidence: Evidence must be collected to cover the full range of issues relevant to the target of the audit and the type of audit being conducted. The overall audit should be broken down into individual elements and evidence should be collected and classified according to these elements. The classification should be established from the bottom up and the evidence should be collected to form a complete system adequate to underpin the audit results and recommendations. Coherence of evidence: The collection and evaluation of audit evidence must be linked with audit objectives and the relationships among individual pieces of evidence must be made clear; merely collecting and presenting a mass of evidence is not sufficient. Relationships among pieces of evidence are determined by relationships among auditing items themselves. Objectivity of evidence: During the collection and evaluation of audit evidence, auditors should never replace objective evidence with their own subjective opinions. Audits must be based on facts collected through, for example, field observation and monitoring, as explained next.

3.5.2

Acquisition of Audit Evidence

Several methods are available for the collection of appropriate audit evidence. Examination of laws and related databases: In the process of collecting evidence for environmental audits, examination of existing laws, policies and regulations and the associated databases should be the first approach. Relevant databases include the financial accounts, administrative records and other standard reporting systems maintained by government departments and agencies. Other relevant databases include official statistics, environmental monitoring data and reports, and performance assessment reports. Statistical sampling: Audit institutions must investigate thousands of separate issues during the course of their work. The burden of evidence collection associated with this can be substantial. In case of insufficient resources to collect comprehensive data, statistical sampling can be considered as a valid means of reducing the burden and cost of data collection while maintaining the overall quality of the data collected. Field surveys: When auditors require a deep understanding of a natural resource management or environmental protection activity, they should carry out direct field surveys of the relevant organizations. Standardized questionnaires: The use of standardized questionnaires (e.g., selfassessment reports) is an effective means of collected audit evidence in some cases. Audited organizations may be requested to fill in a questionnaire aimed at collecting,

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for example, general information on environmental management activities or environmental performance. Questionnaires can also be used to collect information related to the public’s satisfaction with the management of environmental quality.

4 Post-term Environmental Audit System for Senior Officals Generally, post-term audits of senior officials refer to review, verification and overall evaluation of the fulfillment of the economic accountability responsibilities of the officials during their entire tenure. As the senior officials of the government form a special group in China, such economic accountability audits are already regularly carried out when senior officials leave their posts (either to assume a new role or to enter retirement). In contrast, environmental accountability audits are not yet implemented. Since senior officials decide upon the allocation of substantial economic and social resources in China and, therefore, have great influence on economic and social development and environmental protection in the regions where they hold office, senior officials should be the subject of post-term environmental accountability audits. Compared with general government environmental auditing (discussed in the preceding chapter), post-term environmental accountability audits have several unique features. First, environmental accountability audits are specific only to the special group of senior officials with significant powers to allocate resources. Second, environmental accountability audits are implemented only when senior officials are leaving their posts rather than during their tenure. Thirdly, environmental accountability audits focus on a given senior official’s specific responsibilities, which makes them much narrower in scope than government environmental audits are typically. Fourthly, only the Human Resources Department of the government or institutions authorized by this department can undertake such audits and act upon their results.

4.1 Audit Institutions and Targets 4.1.1

Audit Institutions

Generally, environmental auditing institutions in China include the state auditing institution (CNAO), internal auditing departments of government departments and agencies and social auditing agencies. As senior officials are a special subject in China, in practice it is not possible for environmental accountability audits to be

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undertaken by social auditing agencies, as they will face obstacles in evidence collection and application of results. Therefore, environmental accountability audits must be the responsibility of the CNAO and internal auditing departments.

4.1.2

Auditing Target

The target of environmental accountability audits follows the definition of senior officials in China. Generally, this group refers to the senior officials of the Communist Party of China, the People’s Congress and state-owned enterprises, as defined in relevant national laws and regulations. According to the leadership system that is in place in China, the local head of the Communist Party have primary responsibility for environmental protection in their administrative region. Therefore, these officials are subject to environmental accountability audit first, followed by senior officials and, as relevant, other personnel of government departments and state-owned enterprises.

4.2 Audit Types As with general government environmental audit, environmental accountability audits include three types of audits. First, there are financial audits of senior officials’ management of funds allocated for environmental protection purposes. These audits focus on the legality and legitimacy of senior officials’ collection and use funds under their direct administration and their efforts to guarantee compliance with laws in the investment and use of funds by departments and agencies under their control. Second, there are audits of compliance with responsibilities to enforce laws, policies and regulations designed to ensure environmental protection. Senior officials are expected to take action to enforce these by, for example, supervising and encouraging relevant departments and lower-level authorities to carry out legally required environmental protection responsibilities and ensure that national environmental protection objectives are achieved. Finally, there are audits of the performance of senior officials in carrying out their responsibilities for environmental protection, which are aimed at the actual protection and enhancement of environment quality. These audits focus on, for example, performance in meeting targets for environmental quality and pollutant control.

4.3 Audit Implementation There are two possibilities for the implementation of environment a l accountability audits of senior officials. One is to add such environmental audits to the current process for economic accountability audits, making environmental performance an

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important—or even key—basis of evaluation of the overall performance of officials. The second possibility is to implement environmental accountability audits as separate category of audit for senior officials that are leaving their posts.

4.3.1

Legal Basis

A legal basis for environmental accountability audits is potentially offered by in the Measures for Comprehensive Evaluation of the Local CPC and Government Leading Group and Leading Officials as Required by the Scientific Outlook on Development (trial) promulgated by the Central Committee of the Communist Party in 2006. These measures include three evaluation criteria that are related the environmental performance: environmental protection, resource consumption and workplace safety, and natural resource (e.g., arable land) management. These criteria have not yet been broken down into indicators that could be suitable for evaluation purposes at the national level however. At the end of 2013, a circular entitled Improving Performance Appraisal of Local Communist Party and Government Leading Group and Leading Cadres was promulgated by the Central Committee of the Communist Party. It outlined requirements for improvements to the performance appraisal of local party officials and other senior officials, noting that efforts to promote ecological protection should be a consideration in performance evaluation. In parallel with China’s strategy of classifying land into development areas considering, inter alia, ecological carrying and population density (main functional area strategy), many local governments have already put forward requirements that accountability audits of senior officials leaving their posts should focus on environmental protection in order to motivate them to take their responsibilities seriously. However, as there are many problems still to be resolved in the implementation of environmental accountability auditing, no actual audits have yet been conducted.

5 Major Challenges in Implementing Government Environmental Audit Currently, challenges facing implementation of environmental audit system are mainly reflected in such aspects as legislation, institution, mechanism, technology and institutional guarantee, with legislation and institutional mechanism as the primary barriers [14–16]. • In terms of legislation, both post-term audits of senior officials and government environmental audit system lack legal basis in the implementations. Neither

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Audit Law nor various laws on resources and environmental protection in China has made explicit stipulations on implementing off-office leading cadres natural resources assets audit and government environmental audit. Therefore, National Audit Office and environmental protection departments have insufficient legislative basis for implementing environmental audit. As for institution, financial funds audit in China is mainly undertaken by National Audit Office, with internal audit offices established within various ministries and commissions to provide support. However, no explicit entities are designated in the field of government environmental audit, including post- term audits of senior officials, despite that the State Council has identified National Audit Office as the leading unit. In regard of implementation, audit offices at all levels are insufficient in knowledge and capacity to carry out environmental audit. Annual key audits can hardly play substantial driving role in environmental protection, due to extensive involving scope, strong technicality and high requirements to auditors. Therefore, efforts should be made in institutional innovation, so as to tackle environmental audit system building problems through top-level design. With regard to mechanism design, efforts should be made to clarify the relationship between performance assessments currently implemented and environmental audit, and coordinate various tasks. On the side of environmental protection departments, local governments are struggling to respond to existing numerous assessments with various focuses and objectives (including various creating activities), which are ineffective to urge the implementation of responsibilities of governments at all levels to protect environmental quality, and relevant assessment results, due to lack of strong post-supervision means, fail to play due incentive role. On the side of contents, there are no significant differences between performance audit and performance assessment except financial audit. Environmental audit aims to testify authority and effectiveness of assessment/audit results, with focus on responsibility fulfillment. Therefore, the establishment of environmental audit system will, directly or indirectly, strengthen effects of various assessment means. In terms of technology and implementation, environmental audit, especially performance audit, involves various elements, sectors and industries with strong technicality, which requires unified audit standards and supporting technical methodologies to guide and support implementation of environmental audit. In the meantime, a professional audit team for environmental audit should be established to improve capacities of institutions and personnel. From institutional guarantee point of view, implementation of environmental audit system should be supported by scientific and standardized books and records and statistical monitoring data with legal significance, and cooperation from personal administration and supervision departments are required for audit results application, with a view to enhance objectivity of audit results and authority of audit implementation.

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6 Roadmap and Policy Recommendations on Implementing Improved Chinese Environmental Audit Systems 6.1 Roadmap for the Environmental Audit Systems 6.1.1

Objective

The objective of this roadmap is: To set up unified, scientific and practical government environmental audit systems nationwide. The audit systems are to cover auditing of government programs and accountability auditing of officials leaving their posts (either because of promotion or retirement). The ultimate goal is to standardize and institutionalize activities of environmental auditing. To promote the implementation of environmental audit systems nationwide (beginning with a series of pilot audits) in order to support the improvement of environmental performance for officials at all levels of the government and, in particular, environmental accountability of senior officials. To provide policy recommendations for the improvement of environment audit for inclusion in China’s 13th Five-Year Plan and other important environmental initiatives, thus promoting the creation of an ecological civilization.

6.1.2

Focus

Currently, Chinese environmental auditing is mainly centred on financial and legal compliance audits of the use of public funds for environmental purposes and not on the government’s environmental policies and regulations or environmental planning and performance. As a result of this relatively narrow audit scope, China’s existing audit systems are failing to reveal the country’s deeply rooted environmental problems. To correct this, the focus of future improvements to environmental audit systems should be: To increase the scope of the auditing of government environmental programs in alignment with priorities for environmental protection to include, for example, energy saving and emission reduction audits, rural development program audits, air pollution prevention and control action plan audits, water pollution prevention and control action plan audits and soil protection action plan audits. To establish cooperation mechanisms between audit institutions and all other departments, while fully ensuring the independence of the audit institutions. To carry out environmental accountability audits of senior officials when they leave their posts (either for promotion or upon retirement). To establish and improve frameworks and criteria for environmental auditing. To explore new processes, operating modes and technical methods of environmental auditing.

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Proposed Schedule

Stage 1—Development stage (2015): During this stage, the basic methods and processes of government environmental audits and environmental accountability audits of senior officials when leaving their posts will be designed. The theoretical foundation for future work will be laid down. Technical guidelines will be developed and a program of pilot audits will be designed to provide practical experience for the expanded scope of environmental auditing. Stage 2—Pilot audit stage (2015–2020): During this stage, pilot environmental accountability audits of senior officials leaving their offices in selected regions and cities will be undertaken in order to gain experience, explore methods and processes, demonstrate the feasibility of national implementation and provide improvement suggestions. Stage 3—Post 13th Five-year Plan period (Beyond 2020): During this stage the improved environmental audit systems for government programs and environmental accountability of senior officials will be implemented on a nationwide scale on the basis of the experience gained during the pilot stage. Periodic reviews of the audit systems (every three years) will be carried out so as to adjust and guarantee the sustainability of the system and ensure on-going, standardized national environmental audit systems remain in place. Proposed implementation schedule Development stage

Pilot audit stage

National promotion stage

2015

2015–2020

Beyond 2020

Basic methods and processes of EA; Technical guidelines will be developed and a program of pilot audits will be designed

Pilot audits in selected regions and cities will be undertaken

Implemented on a nationwide scale; Periodic reviews ensure on-going, standardized national EA systems remain in place

6.1.4

Institutional Reform and Coordination

Every effort will be made to fully understand the importance, urgency and difficulty of developing and implementing the new environmental audit systems and to strengthen organizational leadership for implementation and adoption of necessary policies. Building upon the opportunity offered by the decision of the CPC Central Committee related to comprehensively deepening China’s reforms, special reform groups should be established for environmental auditing, beginning with a reform group for the environmental audit of officials who are leaving their posts. To ensure the success of the new systems, China’s audit institutions should strengthen their cooperation with the Ministry of Environmental Protection, the

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Ministry of Water Resources, the Ministry of Land and Resources, the State Forestry Administration and the State Oceanic Administration to work out the development of the systems together and define clear responsibilities, while ensuring the full independence of the audit institutions. Efforts shall be made to strengthen coordination to ensure the necessary reforms and unify efforts relating to the environmental audit systems. Regular meetings will be held to study and solve the major problems encountered in the process of promoting reform of the systems.

6.2 Policy Suggestions for Improved Environmental Audit Systems Based on China’s current situation and a review of international best practices, six priority policy recommendations were proposed as follows [17–20]. Recommendation 1: Establish and improve the legal basis for government environmental audit Revise China’s existing Audit Law and other relevant auditing guidelines with new provisions that will strengthen existing government environmental audit systems and clarify the subjects, targets and scopes of these systems and ensure their outputs are shared with the public to the fullest extent possible. • Revise existing environmental protection laws and regulations with new provisions that will strengthen existing environmental audit laws and improve the basis for integrating the findings of environmental audit s to improve the implementation of environmental law and decision making. • Strengthen communication and cooperation between Chinese National Audit Office (CNAO) and State Ministry of Environmental Protection, to jointly issue Guidance on Government Environmental Audit to clarify their approach to mutual cooperation and to strengthening of government environmental audit systems. Recommendation 2: Strengthen government environmental audit capacity Undertake institutional reform of national and local audit institutions to strengthen their capacities to undertake environmental audit and enhance their responsibilities in this regard. Expand and improve the institutional support for environmental audit systems and their application in decision-making through, for example, the establishment of an Environmental Audit Research Centre. • Establish an environmental audit professional qualification system to standardize and strengthen the process of managing the professional qualification of auditors. Use this system to expand and strengthen human resource capacity for environmental auditing and establish an expert pool of professional auditors. • Strengthen and expand environmental audit training and education. Develop and publish relevant training materials and technical guidelines.

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• Strengthen capacity in terms of database and information technology. Improve and expand environmental statistics and accounting systems to improve data quality. • Strengthen understanding of international audit standards and practices and increase international collaboration in audit design and implementation. • Increase investment in government environmental audit capacity. • Recognizing the urgent need for reform, in near-term, undertake strengthening of environmental audit systems with auditing institutions as the lead authority working in cooperation with environmental authorities; in mid-term, consolidate strengthening, with auditing in stitutions assuming full and independent control of the environmental audit systems; in long-term, reform current audit institutions; i.e., establish the CNAO as a body of the National People’s Congress in order to assure the full independence of its auditing. Do all that is necessary to ensure that this schedule is met or, ideally, accelerated; for example, begin immediately to educate senior officials about the environmental accountability audit system and its implications for their roles. • Test other methods of environmental performance assessment to complement formal environmental audits. These methods can be particularly useful in the evaluation of performance related to environmental issues with long time delays; environmental degradation caused by past economic activities; and where interregional pollutant flows are responsible f o r environmental degradation. They are also valuable in assessing the complex situations in which positive and negative influences have to be disentangled in order to present a realistic and fair assessment of performance. Recommendation 3: Improve technical guidelines and standards for government environmental audit systems • Develop technical guidelines for different types of government environmental audit systems, in particular audits of government programs and accountability audits of senior officials, drawing wherever possible on international experiences while also considering practices in China. • Develop: Government Environmental Audit Standards System Technical Guide lines on Environmental Audit of Government Programs (Operational Manual) Technical Guide lines on Environmental Accountability Audit of Senior Officials after Leaving their Posts (Operational Manual) • Develop: Environmental Indicator System and Application Methods for Audit of Government Programs Environmental Audit Indicator System and Application Methods for Environmental Accountability Audit of Senior Officials after Leaving their Posts

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Recommendation 4: Strengthen coordination between government environmental audit systems and other environmental evaluation systems Strengthen coordination with other government environmental evaluation systems, including systems designed to provide future outlooks; e.g., environmental performance evaluation; pollution emission reduction targets evaluation; systems as stipulated in new Environmental Protection Law such as the environmental status reporting system7; accountability systems; environmental information disclosure system; and public consultation system. Recommendation 5: Initiate a series of pilot audits to gain experience with strengthened audit systems and gradually promote government environmental audit Implement pilot environmental audits at levels of province, municipality and county governments. Conduct special environmental audit pilots for key environmental protection tasks such as air, water and soil pollution control and key natural capital conservation tasks such as forest and fisheries management. Develop an agenda of issues related to strengthening of government audit systems requiring additional research and discussion. Recommendation 6: Strengthening the Use of Government Environmental Audit Results Establish a joint working mechanism of personnel, discipline inspection, finance, state-owned and other related departments, and use audit results to tighten environmental accountability. Establish the regular audit results reporting (to the NPC) system, and timely disclose annual government environmental audit reports to the public, so as to strengthen the supervision of the governments.

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7. INTOSAI WGEA (2013) Work plan 2014–2016 8. INTOSAI WGEA (2010) Auditing government response to climate change: guidance for supreme audit institutions 9. INTOSAI Working Group on Environmental Auditing (2004) Sustainable development: the role of supreme audit institutions 10. INTOSAI WGEA (2007) Evolution and trends in environmental auditing 11. INTOSAI Working Group on Environmental Auditing (2010) Auditing sustainable energy guidance for supreme audit institutions 12. INTOSAI WGEA (2012) The seventh survey on environmental auditing 13. Leeuwen SV (2004) Developments in environmental supreme audit institutions. Environmental management 14. Wei J (2006) The study of problems in Chinese environmental auditing. Dongbei University of Finance and Economics. (in Chinese) 15. Jinmei M (2006) Sustainable development strategic and Chinese environmental auditing. Mark Mod Mag (474):292–293. (in Chinese) 16. Shaanxi Audit Society, Xi’an Technological University (2007) Barriers and strategies for implementation of Chinese environmental audit, Shaanxi Audit (2):7–10 17. Pahuja S (2013) Environmental audit. Encycl Corp Soc Responsib 969–979 18. Baoqing W (2000) Policies to environmental auditing. Auditing Theory Pr (4):12–13. (in Chinese) 19. Zhansheng Z, Hongqiang J et al (2008) Recommendations on the development of environmental auditing in China in the new situation. Chin Environ Policy, 10. (in Chinese) 20. Hualin Z (2015) Chinese environmental audit system for the government is trying to move on. China Environment News, 03.06. (in Chinese)

Developing Indicators and Monitoring Systems for Environmentally Livable Cities in China Fang Yu, Fei Peng, Weishan Yang, and Jinnan Wang

Abstract While the environments of more and more Chinese cities are becoming less polluted following successful introduction of pollution control and environment renovation measures in recent years, more attention is now being given to the livability of cities. However, these successes are often not quantifiable and are not universally recognized. Based on a survey of globally- recognized urban livability indices and their monitoring systems, the paper is to develop and agree with the government counterparts on a verifiable and measurable environmental livability index system targeting the PRC cities, and find a suitable approach for investment assessments in reaching the benchmarks, i.e. the costs of producing changes in environmental livability. With the Chinese Environmental Livability Index System developed in the paper, environmental performance of 33 Chinese cities were ranked and the environmental challenges of these cities are identified with the further PressureState-Response analysis and trend analysis. With a comprehensive analysis with the trends of long-term environmental livability and the pollution control investment of Chinese cities, more effective and aim-oriented incentives and investment policies for urban environmental livability improvement are put forward in this paper. Keywords Environment · Livability · Index · The PSR framework · Sub-index

1 Background and Methodology With the development of environmental protection work, the pollution control has been well functioned, in consequence that environmental quality has been improved, and the urban environmentally livability is getting more and more attention. In order to better evaluate of livable environmental level of Chinese cities in recent years, based on “China Livable Environment Evaluation (ADB project) of 2007” [1–3], F. Yu (B) · F. Peng · W. Yang · J. Wang Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_4

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this paper aim at updating the livable environmental level by using 2014 data for China municipality directly administrated under the central government, provincial capital cities and other specific cities. The indicators matrix relating to ‘environment’ and ‘livability’ were developed based on the PSR framework in the following areas: Aquatic environment, Water resources, Atmospheric environment, Solid waste, Acoustic environment, Ecological environment, Domestic livability and Environmental management. Environmental Livability system has 41 indicators, of which 8 indicators for aquatic environment, 3 indicators for water resource, 11 indicators for atmospheric environment, 6 indicators for solid waste, 1 indicator for Acoustic environment, 4 indicators for ecological environment, 4 indicators for Domestic livability, 4 indicators for environmental management (see Table 1).

2 Aggregation of Indicators into Sub-index and ELI There are two levels of aggregation: (i) aggregation of sub-index and (ii) composite environmental livability index. To make indicators comparable, normalization is an important step for integrating the indicators system into the sub-indices and ELI. According to the data index, the standard method is different. The score of the subindices and ELI will be ranged from 0 to 1 since all the indicators will be normalized into a range from 0 to one and sum-up of the weights is equal to one. A higher score represents a better quality. The sub-index can be given by Sub_E L Ii,s =

J 

W j Ni,s, j

J =1

where Sub_ELIi,s = city i for sub-index s, sub-index can be water environment, water resource, air quality, Acoustic environment, solid waste, ecosystem, environmental management. Wj = weight for the j-th indicator. NIi,s,j = normalized j-th indicator value under sub-index s for city i. The composite ELI can be calculated from E L Ii =



Ws ∗ Sub_E L Ii,s

where ELIi = environmental livability index for city i; Ws = weight for the s-th sub-index.

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Table 1 Environmental livability indicators and weights Sub-index

Sub-index weight

Indicator

Unit

Indicator weight

Water environment

0.14

COD discharge intensity

kg per ten thousand CNY

0.11

Wastewater ton per ten discharge intensity thousand CNY (industrial and domestic)

0.13

Heavy metal kg per 100 million 0.13 discharge intensity CNY Proportion of national surface water monitoring sections under Class V

Water resources

Atmospheric environment

Atmospheric environment

0.14

0.17

0.17

%

0.12

Water quality % up-to-standard rate of centralized drinking water source areas

0.14

Sewage network coverage rate

%

0.12

COD (industrial and domestic) removal rate

%

0.12

Above Class II treatment rate of urban wastewater

%

0.12

Water resource availability per capita

m3 per capita

0.37

Water reuse rate

%

0.32

Water use intensity m3 per ten thousand CNY

0.31

SO2 emission intensity

kg per ten thousand CNY

0.09

NOx emission intensity

kg per ten thousand CNY

0.09

Smoke dust emission intensity

kg per ten thousand CNY

0.09

Energy consumption intensity

ton per ten thousand people

0.09

(continued)

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Table 1 (continued) Sub-index

Solid waste

Sub-index weight

0.08

Indicator

Unit

Indicator weight

Number of days with urban air quality meeting Class II

%

0.10

Annual PM10 average concentration

mg/m3

0.09

Annual SO2 average concentration

mg/m3

0.09

Annual NO2 average concentration

mg/m3

0.09

Industrial SO2 removal rate

%

0.09

Industrial NOx removal rate

%

0.09

Industrial smoke dust removal rate

%

0.09

Municipal domestic waste generation intensity

ton per capita

0.15

Hazardous waste generation intensity

kg per ten thousand CNY

0.17

Industrial solid waste generation intensity

ton per ten thousand CNY

0.15

Urban domestic % waste disposal rate

0.18

Safe disposal rate of hazardous waste

%

0.18

Utilization rate of industrial solid waste

%

0.17

Acoustic environment

0.07

Reginal noise level dB(A)

0.07

Ecological environment

0.10

Population density Number of 0.25 persons per square kilometers (continued)

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Table 1 (continued) Sub-index

Domestic livability

Environmental management

Sub-index weight

0.16

0.13

Indicator

Unit

Indicator weight

Groundwater exploitation rate

%

0.26

Farmland change (loss) rate

%

0.23

Green coverage in % built-up areas

0.26

Water supply coverage rate

%

0.27

Gas supply network coverage rate

%

0.26

Per capita green space

m2

0.25

Daily water use per capita

m3 /d

0.23

Normal operation % rate of urban wastewater treatment facilities

0.28

Environmental protection treatment personnel per 10,000 people

0.21

Personnel per ten thousand people

Proportion of % environmental investment in GDP

0.26

Resolved proportion of environmental pollution letter and visit cases

0.26

%

3 Composite of Urban Environmental Livability Index (ELI) Figure 1, which ranks 35 major Chinese cities in 2014 according to their environmental livability indices, demonstrates that the ELI is generally higher in southern China, eastern coastal cities and economically developed regions and lower in the north, northwest and less-developed regions. For example, Hangzhou, Ningbo, Fuzhou, Beijing, Qingdao, Dalian, and Tianjin score better than Lanzhou, Harbin, Taiyuan, Urumqi, and Shijiazhuang. The index is also higher in cities with good natural conditions or with large environmental capacity such as Nanning, Haikou

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Fig. 1 Urban environmental livability indices in China (2014)

and Hangzhou. Of China’s megacities, Beijing has a higher ELI than Shanghai and Guangzhou. Hangzhou ranks the highest and Lanzhou has the lowest ELI score.

4 Trend Analysis in Major Cities From 2000 to 2014, environmental livability in Beijing, Shanghai, Guangzhou, Wuhan, Lanzhou and Shenyang have rose consistently, as shown in Fig. 2. Table 2 compares the six cities, showing their index values and rankings for the years 2000, 2003, 2005, 2007, 2011, and 2014. Guangzhou has the highest improvement rate (55.1%) and Shanghai has the lowest (31%). Over the period, environmental

Fig. 2 Trend analysis of environmental livability indices of major cities

0.48

0.50

0.50

0.50

0.41

Wuhan

Beijing

Shenyang

Shanghai

Lanzhou

6

1

3

2

4

0.44

0.60

0.54

0.57

0.56

0.55

Index

Ranking

5

Index

0.45

2003

2000

Guangzhou

City

6

1

5

2

3

4

Ranking

0.47

0.63

0.58

0.59

0.62

0.64

Index

2005

6

2

5

4

3

1

Ranking

0.48

0.66

0.64

0.70

0.65

0.66

Index

2007

Table 2 Ranking comparison of environmental livability indices of major cities

6

2

4

1

3

2

Ranking

0.60

0.67

0.71

0.70

0.73

0.76

Index

2011

6

5

3

4

2

1

Ranking

0.56

0.66

0.66

0.72

0.67

0.70

Index

2014

6

4

4

1

3

2

Ranking

35.7

31.0

31.8

42.9

38.3

55.1

% improvement (2000 to 2014)

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livability in Guangzhou, Beijing and Wuhan rose significantly. Growth in Shanghai and Shenyang was slower. Lanzhou’s position at the bottom of the group remained unchanged.

4.1 Beijing Figure 3a shows that in 2000 the main environmental problems in Beijing were in the areas of water environment, water resources, air quality and solid waste. By 2007 (Fig. 3b) its water environment index had risen from 0.43 to 0.82, water resources from 0.32 to 0.49, air quality from 0.23 to 0.52 and solid waste from 0.42 to 0.68, rising by 91.2%, 51.8%, 125.3% and 62.4% respectively. Despite these improvements, water resource and air quality indicators remain poor because Beijing has low per capita water resources, high concentrations of nitrogen oxide and limited ability to remove these.

Fig. 3 a Beijing ELI (2000), b Beijing ELI (2007), c Beijing ELI (2011), d Beijing ELI (2014)

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From 2007 to 2011, Beijing water resources index has become deteriorated, but the atmospheric environmental index has relatively improved. From 2011 to 2014, Beijing water resources, atmospheric environment, and the ecological environment has improved. Overall water resources and atmospheric environment index of Beijing city is still low. To tackle such problems, Beijing should strengthen water resource management and air quality control.

4.2 Shanghai Figure 4a shows that Shanghai’s major environmental problems in 2000 are related to water resources and environment, and air quality. All aspects had improved significantly by 2007, as shown in Fig. 4b. However, water resource and air quality remained weak when compared to other indicators because of Shanghai’s low per capita water resource base, heavy sulfur dioxide pollution and limited ability to remove pollutants

Fig. 4 a Shanghai ELI (2000), b Shanghai ELI (2004), c Shanghai ELI (2011), d Shanghai ELI (2014)

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at source. Solid waste and ecological indices during the seven-years period fell by 15.7% and 24.6% respectively as urban domestic waste production increased but treatment capacity lagged behind. Figure 4c shows that the atmospheric environment, water resources and solid waste management in Shanghai city has been improved, but the environmental management has declined. Figure 4d shows that environmental management and ecological environment in Shanghai has declined, in which the decline of environmental management index is mainly due to the low proportion of environmental protection investment accounted for GDP. Shanghai must focus attention on water resources, air quality, and the management of solid waste. Therefore, in the process of continuing to strengthen the management of water resources and atmospheric environment, Shanghai needs to pay more attention to environmental management and ecological environmental management, and investment in environmental protection.

4.3 Guangzhou Figure 5a indicates that in 2000, Guangzhou’s water environment, water resource, air quality, solid waste and environmental management index were in low level. By 2007, as shown in Fig. 5b, many of these indicators had risen substantially: water environment, water resource, air quality, solid waste and environmental management index had risen by 101.9%, 82.1%, 68%, 58.3% and 82.3% respectively. From 2007 to 2011, Guangzhou’s ELI continued to improve (Fig. 5c). From 2011 to 2014, the ecological environment index has declined, and other index changed slightly (Fig. 5d). Ecological environment index is mainly due to the high population density in 2014, resulting in a slight decline in the ecological environment index. Overall, Guangzhou city has made great achievements in environmental protection. At present, the ecological environment, water resources and environment livable index in Guangzhou city is still low. The city’s water resource indicator remains low because Guangzhou has low per capita water resources and low water recycling rates. Further work is needed in the water resource and ecological environment.

4.4 Wuhan Figure 6a demonstrates that Wuhan’s key environmental problems in 2000 were related to its water environment, water resources and air quality. By 2007, as shown in Fig. 6b, it had recorded significant improvements in all of these areas, most particularly in relation to water environment (where the index climbed by 218%). Nonetheless, Wuhan’s water resource and air quality indicators remain low because of low

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Fig. 5 a Guangzhou ELI (2000), b Guangzhou ELI (2007), c Guangzhou ELI (2011), d Guangzhou ELI (2014)

per capita water resources, sulfur dioxide and particulate pollution, and its limited ability to treat nitrogen oxides. Wuhan City, in addition to the acoustic environment and the ecological environment has declined slightly, the rest of the livable index has increased by 2007–2011, as shown in Fig. 6c. From 2011 to 2014, in addition to a slight increase in the acoustic environment index, the rest of the index has declined, as shown in Fig. 6d. Wuhan must continue to focus on the management of water resources (by advocating for more economical use of water and encouraging improved water circulating utilization rates) and strengthen the treatment of atmospheric pollution.

4.5 Lanzhou Figure 7a shows that in 2000 the main environmental problems facing Lanzhou are related to its water environment, water resources, air quality and domestic livability.

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Fig. 6 a Wuhan ELI (2000), b Wuhan ELI (2007), c Wuhan ELI (2011), d Wuhan ELI (2014)

By 2007, as demonstrated in Fig. 7b, all of those indicators had improved, with strong improvements in air quality especially. From 2007 to 2011, water resources, water environment, and livability quality index are improved, the atmospheric environment index decreased slightly (Fig. 7c). From 2011 to 2014, water resources, water environment, and livability quality index slightly decreased, and the atmospheric environment index increased (Fig. 7d). However, Lanzhou’s solid waste and ecosystem indicators fell from 2000 to 2007, by 46.5% and 26.9% respectively, mainly because of the city’s inability to treat hazardous and harmful domestic waste. But solid waste livable index continues to improve from 2007 to 2014. Lanzhou’s indices in these areas remain relatively weak, despite the improvements, due to COD emissions, high concentrations of sulfur dioxide and particulates, limited wastewater treatment and high levels of urban water consumption.

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Fig. 7 a Lanzhou ELI (2000), b Lanzhou ELI (2007), c Lanzhou ELI (2011), d Lanzhou ELI (2014)

4.6 Shenyang Figure 8a shows that in 2000 the main environmental problems facing Shenyang related to its water environment, water resources and air quality. By 2007, indicators in all of these areas had improved, with particularly strong growth in water environment (150%) (Fig. 8b). Its ecological environment and environmental management indices dropped over the study period by 13.3% and 3.81% respectively due to rising groundwater exploitation and insufficient investment in protection of the urban environment. From 2007 to 2011, water resources, water environment and atmospheric environment index are improved (Fig. 8c), and from 2011 to 2014, atmospheric environment and environmental management index decreased (Fig. 8d). When compared with other cities, however, indicators of water resources, atmospheric environment, and environmental management are weak due to Shenyang’s poor surface water quality, low per capita water resources, high sulfur dioxide and particulate concentration, and limited ability to remove major atmospheric pollutants. In addition, due to the high level of groundwater exploitation in Shenyang, inadequate

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Fig. 8 a Shenyang ELI (2000), b Shenyang ELI (2007), c Shenyang ELI (2011), d Shenyang ELI (2014)

investment in urban environmental protection. Therefore, Shenyang need to increase investment in environmental protection, and strength environmental management in water resources, atmospheric environment and environmental management to improve the city’s environmental livability.

5 Findings by Sub-index In this section, the report offers information about (i) each city’s ranking within the sub-index area, (ii) a general overview of the findings as they relate to pressure-stateresponse (PSR), and (iii) case studies demonstrating problems PRC cities may try to address.

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5.1 Urban Aquatic Environments City ranking Figure 9 compares the Water Environmental Livability Index of the 35 cities studied. The highest index city of Water environment is Beijing, the lowest index city is Xining. Among megacities, Beijing and Shanghai rank better than Guangzhou. In general, cities with a greater water environmental capacity, such as Haikou and Qingdao, do better than those without. Cities built on or around major river basins or lakes score badly, indicating that these water sources are of poor quality and efforts to improve water quality are urgently needed. Examples include Kunming in the Dianchi Lake, Harbin and Changchun in the Songhua River drainage area, and Wuhan in the Changjiang River drainage area. Water environment index of Water shortage area in West is not high, such as Xining, Taiyuan and Lanzhou. The water ELI average of 35 cities studied is 0.74, and 17 cities’ water ELI, half of selected cities, are lower than the average level. There are maybe three reasons leading to the low scores in these cities: i. The water environmental capacity is low in nature and the pressure of water pollution discharge is high in some cities of Xining and Lanzhou, and the pollution disposal capacity is also not sufficient in these cities; ii. The population density is relatively high (especially in some megacities as Guangzhou, Shijiazhuang, Shenzhen, Chengdu, Wuhan and Dalian) and their pollution discharge exceeds their environment capacity. In addition, the pollution disposal capacity of these cities also need further improvement; iii. In some lessdeveloped cities, such as Changchun, Harbin, and Nanning, the waste water disposal capacity is too low and their waste water disposal rate is lower than the average level. Pressure-state-response Figure 10 demonstrates the pressure-state-response of different cities. It shows for example that Xining has the highest water environmental pressure and Beijing

Fig. 9 Ranking of urban water environmental livability indices in China

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Fig. 10 Pressure-state-response analysis of urban water environmental livability index in China

the lowest; Ningbo has the best water environmental state and Shenzhen the worst; Qingdao has the best water environmental response and Harbin the worst. Of the megacities Guangzhou’s and Shanghai’s pressure is higher than Beijing’s. Guangzhou’s response and state are lower than Beijing’s and Shanghai, the reason is that Above Class II treatment rate of urban wastewater of Guangzhou is low. There is a positive correlation between water environmental condition and response, with cities suffering poor water quality showing a stronger response than those with good water quality. Urban water environmental pressure is affected by upstream pressure as well as local discharge, so the pressure index does not correlate well with the state and response indices. The water environmental state in cities with low pressure is better in those with high pressure, for example Guiyang’s, Nanjing’s, Haikou’s, and Beijing’s state are better than Wuhan’s, Shijiazhuang’s and Nanning’s. Cities with poor water environmental state, such as Qingdao, Shenyang, Jinan and Zhengzhou, have a high response rate, indicating that they attach great importance to protection and treatment of water. Some cities that earned average ratings for environmental pressure and response are rated relatively strongly for environmental state thanks to their naturally high water environmental capacity. Examples include Nanjing and Haikou. A comparison of the pressure, state and response of all 35 cities leads to a number of suggestions regarding the improvement of water environmental quality and reduction of environmental pressure. These are detailed in Table 3. Case study Figure 11 analyzes Xining and Nanning. In Xining water environmental issues rank second only to atmospheric and solid waste problems: the city suffers from high discharge of major pollutants and low capacity for removing these pollutants or treating water. To improve its urban environmental livability, Xining must raise its ability to treat and dispose of water pollutants. In Nanning water environmental problems are also serious. The city has substantial discharge of water pollutants, and treatment of wastewater and pollutants is average.

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Table 3 Pressure-state-response analysis for water environment Environmental state

Environmental pressure and response

Major cities

Suggestions

Good quality

Medium environmental pressure and low response

Guiyang

Urban water environmental livability can be improved by strengthening pollution abatement and enhancing environmental management capacity

Relatively Poor quality

High environmental pressure and low response

Nanning, Wuhan

Further strengthen water environmental treatment work, reduce urban water environmental pressure and improve water environmental quality

Poor quality

High response and low environmental pressure

Shenzhen, Qingdao, Shenyang

Carry out comprehensive rectification and improvement with the upstream regions to release urban water environmental pressure and improve water environmental quality

Notes Poor quality means that the quality state index is below 0.55. Relatively Poor quality means that the quality state index is between 0.55 and 0.8. Good quality means that the quality state index is between 0.8 and 1

5.2 Water Resources City ranking Figure 12 ranks water resource environmental livability index in the 35 cities. Hangzhou ranks the highest and Haikou the lowest. Haikou City, mainly due to lower water reuse rate, and higher water intensity caused by low water resources livable index. Of the megacities, Beijing ranked higher than Guangzhou and Shanghai. In general, large and medium-sized cities like Beijing, Nanjing, Jinan, Zhengzhou, Qingdao, and Tianjin have low index due to their large populations and relatively limited water resources. Some other cities with low indices, such as Shenzhen, Dalian, Wuhan, and Haikou, rank poorly because of intensive water use but limited recycling capacities. Cities like Lanzhou, Yinchuan and Taiyuan with limited water resources have comparatively low index.

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Fig. 11 Identification of major issues in Xining and Nanning

Fig. 12 Ranking of urban water resource environmental livability indices in China

Pressure-state-response Figure 13 demonstrates the pressure-state-response data for urban water resources. It shows that Lanzhou has the highest water resource environmental pressure and Chongqing with the lowest; Hangzhou has the best water resource environmental state and Zhengzhou the worst; Wuhan has the best water resource environmental

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Fig. 13 Pressure-state-response analysis of urban water environmental livability

response and Shenzhen the worst. Of China’s megacities, Beijing and Guangzhou have higher water resource pressure than Shanghai. Beijing’s state is lowest. But Beijing’s response is higher than that of Guangzhou and Shanghai, that is because relatively scarce of water resources, the high intensity of water use in Beijing. By comparing the relationship between water resource pressure, state and response in all 35 cities, suggestions regarding how to reduce pressure and enhance management capacity have been developed. They are outlined in Table 4. Table 4 Pressure-state-response analysis for water resource environment State

Pressure and response Major cities

Suggestions

Good quality

Low pressure and low Changsha, response Guangzhou

Enhance water resource management capacity and improve urban water resource livability

Relatively Poor quality

Low pressure and medium response

Lanzhou, Nanjing

Increase water reuse rate and wastewater treatment levels

Poor quality

High pressure and low response

Tianjin, Taiyuan, Jinan

Tap new resources and economize on expenses, further enhance comprehensive utilization of water resources, relieve urban water resource pressure and improve the state of water resources

Notes Poor quality means that the quality state index is below 0.06, Relatively Poor quality means that the quality state index is between 0.06 and 0.3, Good quality means that the quality state index is between 0.3 and 1

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Fig. 14 Identification of major issues for Jinan, Tianjin, Nanjing, and Shenzhen

Case study In Jinan, Tianjin, and Nanjing, where per capita water resources are quite low, but usage is very high, resource problems are remain severity, as shown in Fig. 14. In order to improve the environmental livability of water resources in these cities it is necessary to both raise awareness of the need to save water and reduce consumption. Water resource problems in Shenzhen is the cities’ main environmental problems as shown in Fig. 14. This is mainly because their per capita water resources are low, and the water circulating utilization rate is low.

5.3 Atmospheric Environment City ranking Figure 15 ranks atmospheric environmental livability indices in the 35 cities studied. It shows that Shenzhen ranks the highest and Xining the lowest. Among megacities, Guangzhou ranks more highly than Beijing or Shanghai. In general, southern cities have a higher atmospheric environmental livability index than northern cities while industrialized and resource-based cities such as Shijazhuang, Taiyuan and Urumuchi rank relatively poorly. Figure 16 shows that Xining has the highest atmospheric pressure and Haikou the lowest. Haikou, however, has the highest atmospheric environmental state and Jinan the lowest. Shenzhen scores highest in terms of response and Shenyang scores

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Fig. 15 Ranking of urban atmospheric environmental livability indices in China pressure-stateresponse

Fig. 16 Pressure-state-response analysis of urban atmospheric environmental livability indices

lowest. Of China’s megacities, Shanghai and Guangzhou have lower atmospheric response than Beijing. But Shanghai and Guangzhou have higher atmospheric state than Beijing. Cities such as Haikou, Shenzhen, Xiamen, and Guangzhou with low pressure rank well in terms of environmental state. Those under high pressure, such as Shijiazhuang, Taiyuan, Yinchuan, and Huhhot, tend to rank poorly in terms of atmospheric state. Some cities where pressure is relatively low (such as Jinan, Shenyang, Tianjin, and Harbin) nonetheless rank poorly with regard to atmospheric quality because of their weak response. To reduce atmospheric environmental pressure and enhance treatment of atmospheric pollution, a number of suggestions are made and outlined in Table 5.

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Table 5 Pressure-state-response analysis for atmospheric resource environment Environmental state

Pressure and response

Major cities

Suggestions

Good quality

Low pressure and low response

Haikou, Fuzhou, Kunming

Further strengthen treatment of atmospheric pollution and improve environmental management capacities

Relatively poor quality

Average pressure and low response

Xi’an,Changchun, Chengdu, and Hefei

Strengthen treatment of atmospheric pollution sources, increase investment in atmospheric pollution abatement and improve urban air quality

Poor quality

High pressure

Shi jiazhuang, Taiyuan, and Harbin

Strengthen treatment of urban atmospheric pollution, enhance regional and urban air quality, and increase urban ecological environmental construction

Notes Poor quality means that the quality state index is below 0.4. Relatively Poor quality means that the quality state index is between 0.4 and 0.8. Good quality means that the quality state index is between 0.8 and 1

Case study Atmospheric environmental problems are extensive in Xining and Shijiazhuang (Fig. 17). Xining due to high NOx and smoke dust emissions but low cleaning and pollutant removal abilities. Shijiazhuang due to high sulfur dioxide and NOx emissions but low cleaning and pollutant removal abilities.

5.4 Solid Waste City ranking Figure 18 ranks solid waste livability indices: Nanning ranks the highest and Kunming the lowest. Of megacities, Beijing ranks higher than Guangzhou or Shanghai. In general, west cities such as Kunming, Xining, Huhhot, Taiyuan, Lanzhou, Guiyang, and Urumchi rank relatively poorly.

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Fig. 17 Identification of major issues for Xining and Shijiazhuang

Pressure-state-response According to Fig. 19, Kunming has the highest solid waste discharge pressure and Changsha the lowest. Chengdu has the strongest disposal response and Hohhot the weakest. Of China’s megacities, Shanghai’s and Guangzhou’s discharge pressure is higher than Beijing’s, but their response is similar.

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Fig. 18 Ranking of urban solid waste livability indices in China

Fig. 19 Pressure-response analysis of livability index in urban solid waste in China

In general, as discharge pressure increases, environmental response capacity decreases. Some cities, such as Hohhot, Kunming, and Guiyang have substantial solid waste pressures but very weak response capacities. These cities must enhance their ability to use, treat and dispose of urban solid waste to improve their environmental livability index. Case study Solid waste problems in Kunming are main problem, as shown in Fig. 20. This is because Kunming produces a lot of industrial and hazardous solid waste but is ill equipped to utilize, treat and dispose of it.

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Fig. 20 Identification of major issues for Kunming

5.5 Acoustic Environment City ranking Figure 21 ranks noise levels for the cities studied. Jinan and Changsha rank the highest and Harbin the lowest. Of China’s megacities, Beijing has a higher noise environmental livability index than Guangzhou or Shanghai. In general, compared with the other environmental indices discussed in this report, urban Acoustic environmental livability in China is high, with the index mostly above 0.6, indicating reasonably good livability in most cities except Harbin, Guiyang, Qingdao and Ningbo.

Fig. 21 Ranking of urban noise environmental livability indices in China

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Fig. 22 Identification of major issues for Guiyang and Ningbo

Case study The main environmental problem in Guiyang and Ningbo, as shown in Fig. 22, is noise pollution. To improve its overall environmental livability, Guiyang and Ningbo should therefore focus on treating urban noise pollution.

5.6 Urban Ecological Environment City ranking Figure 23 ranks cities by ecological environmental livability indices. Nanjing is ranked highest and Zhengzhou lowest. Of megacities, Beijing rank higher than Shanghai and Guangzhou.

Fig. 23 Ranking of urban ecological environmental livability indices in China

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Fig. 24 Identification of major issues for Xi’an and Zhengzhou

Case study Ecological environmental problems are serious in Xi’an and Zhengzhou, as shown in Fig. 24, because of its high population density and ground water depletion.

5.7 Urban Domestic Livability Figure 25 ranks cities by domestic livability indices. Chengdu is ranked the highest and Zhengzhou the lowest. Of megacities, Guangzhou and Beijing have a higher domestic livability index than Shanghai. In general, urban domestic livability in the economically developed east south regions (such as Hangzhou, Nanjing, Shenzhen, and Qingdao) is higher than in western cities (such as Kunming, Guiyang, Lanzhou, and Xining). For example, in Lanzhou the indicators of gas supply coverage rate and per capita park green area are lower than the economic well-developed region level.

Fig. 25 Ranking of urban domestic livability indices in China

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Fig. 26 Ranking of urban environmental management livability indices in China

5.8 Environmental Management City ranking Figure 26 ranks cities by environmental management livability indices and shows that Yinchuan has the highest livability index in China and Shanghai the lowest. Shanghai mainly due to a lower environmental protection treatment personnel per 10,000 people, and proportion of treatment investment in GDP of megacities, Guangzhou and Beijing rank more highly than Shanghai. In general, economically developed regions, such as Nanjing, Beijing, Tianjin, Chongqing, Dalian, Ningbo, Wuhan, and Guangzhou rank relatively well, indicating that they invest in environmental protection and attach importance to urban environmental management. Some cities (Nanning, Xiamen, Qingdao, and Haikou for example) that rank highly with regard to environmental livability rank poorly for environmental management. Such cities should increase investment in environmental protection and strengthen environmental management in order to raise overall urban environmental livability. Case study According to Fig. 27, environmental management is a major problem in Shanghai. This is the result of low investment in environmental protection and few staff dedicated to environment management. Therefore, investment in urban environmental protection should be raised.

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Fig. 27 Identification of major issues for Shanghai

6 Conclusion and Prospect Conclusion In 2007–2014 most cities have showing increase trends on their ELI, the city owning lowest ELI has the most potential on increment. During 2007–2014, ELI ranking has few changes in cities position, Fuzhou, Ningbo, Kunming, Xiamen, Beijing and Hangzhou has highest value of ELI, and Lanzhou Urumuqi, Shijiazhuang and Taiyuan with relative low value of ELI. Among those cities who have high ELI, Fuzhou, Ningbo, Nanjing, Kunming, Xiamen and Dalian have declined 3.9%, 0.3%, 1.1%, 6.4%, 2.5% and 3.6% respectively. Among those cities who have relative low ELI, Lanzhou, Urumuqi, Harbin, Shijiazhuang, and Changsha have the most increasing trend with 16.8%, 21.5%, 10.8%, 14.1%, 13.8% and 23.3% respectively. In the megacities, only Tianjin decline 4.1%, and Beijing and Guangzhou have increased 1.8% and 7.1% respectively (see Fig. 28). In 2007–2014 most cities have showing increase trends on their atmospheric environmental ELI the city owning lowest ELI has the most potential on increment. During 2007–2014, Shenzhen, Xiamen, Haikou, Kunming, Ningbo, Nanchang have the highest atmospheric environmental ELI, and Urumuqi, Xining, Shijiazhuang, Lanzhou, Taiyuan and Shenyang have the relative low atmospheric environmental

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Fig. 28 2007–2014 ELI changes in major cities

ELI. In 2007–2014 Shenzhen, Xiamen, Haikou, Guangzhou and Ningbo’s atmospheric environmental ELI has increased 17.6%, 11.8%, 19.8%, 22.3% and 14.6% respectively, and Xining, Shijiazhuang, Yinchuan, Taiyuan, Shenyang’s atmospheric environmental ELI has decreased 10.9%, 1.9%, 13.7%, 20.1% and 17.7% respectively. Compare with 2007, the increase of Xining and Harbin in 2014 is because of high emitting intensity of SO2 and NOx which cause of days of achieving second grade air quality decrease, although the removal rate of SO2 and dust has decrease, but in overall atmospheric environmental ELI still has declined (see Fig. 29). In 2007–2014 most cities have showing increase trends on their water environmental ELI only Xiamen, Fuzhou and Dalian showing decline indication. During 2007–2014 Lanzhou, Guiyang, Kunming, Xian, Nanjing and Chongqing has increased its water environmental ELI 48.3%, 42.1%, 36.4%, 34.4%, 36.5% and 31.6% respectively. But Xiamen, Fuzhou and Dalian has declined the same

Fig. 29. 2007–2014 atmospheric environmental ELI changes in major cities

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Fig. 30 2007–2014 water environmental ELI changes in major cities

index with 21%, 9.1% and 5.3% respectively. Compare with 2007 level, Xiamen has increased its intensity on waste water and heavy metal discharge, Fuzhou has increased its COD and heavy metal intensity, and Dalian has mainly increased its COD, wastewater discharge intensity. Although these three cities have increased their urban waste water treatment rate, but still their water environmental ELI has declined (see Fig. 30). Prospect Although the test application shows that the ELI system can be used as a tool for environmental livability evaluation and policy analysis, but there are many methodological uncertainties regarding establishing ELI and institutional barriers for applying ELI for policy making. The methodological uncertainties include: (i) The aggregated ELI and its indicators are usually constructed in a manageable size by scarifying details. Further some aspects on environmental livability may not be measurable in a quantitative way. Policy analysis and making are normally required to fully understand the phenomenon or issues, which may require other qualitative and scientific information such as driving forces and natural conditions for explaining trends or issues, therefore the ELI system should be used as only one of tools, that is, as a tool for helping reveal trends and draw attention to problems that require further analysis and possible actions. (ii) Implicit assumptions in selection of indicators and calculation of weights. The determination of weights directly affects the evaluation results. These indicators and weights need to be further tested and verified in the future applications, therefore the ELI system needs to be upgraded regularly. For example the improvement of the weight of water and atmospheric environment will make the evaluation result closer to the public feeling. The institutional barriers are: (i) data availability and data quality. The data availability and data quality is a critical issue for applying the ELI system. For current testing application, data comes from different sources. Some of data are from research

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reports, that means these data are not regularly measured, also most of data are not available for medium and small cities. The data availability has made problems in selection of appropriate indicators, which may result in failing to measure important aspects of environmental livability and also it limits the possibility of applying it in small and medium cities. Lack of data availability and data quality will cause problems to give unbiased or complete picture of environmental livability, that may lead to serious problems on policy decision. (ii) benchmarks and targets. Environmental standards and national environmental planning target can be used as benchmarks and targets for some of the indicators, but it is difficult to define a common recognized benchmarks and targets for standardizing some of the indicators such as emission per GDP etc.

References 1. UN_HABITAT Global Urban Observatory Country and City Projects. http://ww2.unhabitat.org/ programmes/guo/countryandcityprojects.asp 2. UN Department for Economic and Social Affairs, Division of Sustainable Development, Core Publications, Agenda 21. http://www.un.org/esa/dsd/agenda21/resagenda2100.shtml 3. P. Newton, Urban Indicators and the Management of Cities. http://www.adb.org/Documents/ Books/CitiesDataBook/02chapter2.pdf

An Analysis of Disease Burden Attributable to Urban Air Pollution in the Context of Population Ageing in China from 2010 to 2030 Fang Yu, Guoxia Ma, Weipan Xu, Yanshen Zhang, and Jinnan Wang

Abstract Air pollution has a great impact on human health. Accelerated population ageing in China will aggravate disease burden attributable to air pollution. Making use of the predictive population data of different age groups in China from 2010 to 2030, and adopting the methodology of Environmental Burden of Disease (EBD), this Study calculates the disease burden of people in different scenarios of air pollution. Results show: (1) Population ageing has a great impact on disease burden attributable to air pollution. Affected by ageing, Average Potential Years of Life Lost in 2030 will be 20 years, 33% higher than 2010; premature deaths attributable to air pollution will be 558,000, up by 20.1% over 2010. (2) If air quality is not improved, with the dual impact from urbanization and ageing, premature deaths attributable to air pollution in cities will grow markedly. In 2020, premature deaths attributable to air pollution in Chinese cities will be 632,000, up by 36% over 2010; in 2030, the figure will be 845,000, up by 81.8% over 2010. (3) To contain the growth in air-pollution premature deaths in cities, China has to improve air quality substantially. If the air quality of all Chinese cities reaches Grade I (40 µg/m3 ), premature deaths in 2030 can be controlled at the 2010 level.

1 Introduction It has been a hot spot and focus in the environment policy making internationally to use the Environmental Burden of Disease (EBD) methodology to assess the impact of environment pollution on health [1]. The impact of air pollution on health in China has all along been a concern. International organizations such as the World Bank [2], World Health Organization [3] and Health Effects Institute of the USA [4] assessed air pollution’s damage to health in China. According to results as calculated by the Chinese Academy for Environmental Planning, premature deaths due to air pollution in China from 2004 to 2010 are between 350,000 and 500,000 [5]. F. Yu (B) · G. Ma · W. Xu · Y. Zhang · J. Wang Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_5

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China has been a country with the world’s largest aged population [6]. In 2011, the elderly dependency ratio for elderly people aged 65 or above was 13.08%. With the share of aged population in the total population continuously growing, China’s population ageing will reach a peak in the coming 20–40 years [7]. Most studies on China’s population ageing focus on its evolution process [8], characteristics [9], existing problems and countermeasures [10], and analyze the impact of ageing on the economy [11, 12], supply of labor [13] and consumption [14]. Being vulnerable and susceptible, the elderly population are prone to impact from outside. With the aged population growing up, the disease burden caused by air pollution will be increased inevitably. If the air quality is not improved, premature deaths due to air pollution in China will be on the rise. Using 2010 as the base year, this study calculates the years of life expectancy lost from 2010 to 2030 by predicting the population and deaths of different age groups. Air-pollution-caused premature deaths and Average Potential Years of Life Lost (PYLL) across different scenarios are calculated, and the air-pollution-caused disease burden in the context of population ageing is also analyzed.

2 Methodology and Date Sources 2.1 Average Potential Years of Life Lost Potential Years of Life Lost (PYLL) represents the sum of differences between the life expectancy of a sample population with a certain disease and their actual life span without the impact of that disease. It is, therefore, the loss of life expectancy caused by premature death or a measure of premature mortality. Based on the expected life span, it calculates the potential years of life lost caused by death at different ages. And Average Potential Years of Life Lost (APYLL) can be calculated by using the PYLL and actual deaths. The APYLL of premature death attributable to air pollution is calculated based on the difference between the actual PYLL (with air pollution being considered) and the PYLL without air pollution being considered. A PY L L = (

19 

ex ∗ ndx )/(

x=1

PY L L =

19  x=1

ex ∗ dx −

19 

ndx )

x=1 19 

ex ∗ (dx − dax )

x=1

In the formula, APYLL means Average Potential Years of Life Lost, x means age group. There are 19 age groups in China. ex means the actual life expectancy of age group x. d x measures actual deaths in a certain age group. PYLL a represents the average potential years of life lost due to air pollution. eax is the life expectancy of age group x where there is no air pollution. d ax is the number of deaths where there is no air pollution.

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Being a key element in measuring the above indicators, life expectancy can be calculated via the life table. Life table is a table which is based on the mortality rate of different age groups of a certain population. For a certain generation of people (100,000 persons) who are born at the same time and die at different ages, the life table can be used to calculate the ‘probability of death’, ‘number of death’ and ‘survivorship’ of people from a certain age. As the life table is developed based on the mortality rate of different age groups, indicators in the table are not limited by the age mix of the population. The abridged life table in 2010 is based on the sixth National Population Census (Table 1). Table 2 shows the predictive data of population and mortality in different age groups in 2020 and 2030. The abridged life table (Table 1) is prepared as follows: (1) (2)

(3)

(4)

(5)

(6) (7)

Age: age intervals x to x + n, where x = 0, 1, 5, 85, and above, and n is the width of the age interval in years. nMx: age-specific death rates calculated from information on deaths among persons aged x to x + n during a given year and the population aged x to x + n at the mid-point of the same year. nMx = nDx/nPx. nQx: probability of death refers to the probability of dying between exact ages x and x + n. For the 0 ~ years age group, the probability of death-Q0 can be replaced with the infant mortality rate. For other groups, we follow the formula nQx + 2 × n × nMx/(2 + nMx), in which n means the age interval of different age groups. For the last age group, the probability of death is 1. lx: number of people alive at exact age x among a hypothetical birth cohort of 100,000. l0 = 10,000, d0 = l0 × Q0, l1 = l0 – d0, ndx = lx × nQx, lx + n = lx-nd. nLx: total number of person-years lived between exact ages x and x + n. l0 = l1 + 0.15 × d0 for the 0 year age group (0.15 is the empirical coefficient for China), nLx = n × (lx + lx + n)/2, Lw = lw/mw for the last age group: Where, lw is the number of survivors in the last group and mw is the mortality rate of the last group in the death statistics. Tx: total number of person-years lived after age x: Tx = Tx + n + nLx. ex : expected average number of years of life left for a person age x: ex = Tx/ lx.

Mortality rate of different age groups are based on research results by Meng Lingguo and other researchers [15].

2.2 Premature Mortality Due to Air Pollution The calculation of premature deaths due to air pollution depend on such indicators as air pollutants, the health threshold value of air pollutants, the health results of air pollutants and the exposure–response relations. A certain region’s health damage background value is first calculated according to the region’s air pollution level, health damage results and exposure–response value. The damage of air pollution

5,375,279

25,561,191

30,565,659

32,807,526

53,589,992

71,058,518

57,679,956

56,010,957

65,025,365

63,786,496

53,629,541

39,186,388

37,437,535

26,036,917

17,910,329

14,777,260

10,531,503

5,762,828

2,584,543

0–

1–

5–

10–

15–

20–

25–

30–

35–

40–

45–

50–

55–

60–

65–

70–

75–

80–

85–

398,188

386,359

416,652

347,803

234,251

195,791

170,428

123,132

94,613

70,321

45,330

25,046

18,474

18,001

10,936

5964

5300

9697

15,904

Death nDx

0.1541

0.0670

0.0396

0.0235

0.0131

0.0075

0.0046

0.0031

0.0018

0.0011

0.0007

0.0004

0.0003

0.0003

0.0002

0.0002

0.0002

0.0004

0.0030

Death rate nMx

1.0000

0.2871

0.1800

0.1111

0.0633

0.0369

0.0225

0.0156

0.0088

0.0055

0.0035

0.0022

0.0016

0.0013

0.0010

0.0009

0.0009

0.0015

0.0030

Probability of death nQx

43,763

61,387

74,863

84,224

89,918

93,363

95,513

97,025

97,885

98,426

98,770

98,991

99,149

99,275

99,376

99,467

99,553

99,704

100,000

Alive lx

43,763

17,624

13,476

9361

5694

3446

2150

1512

860

541

344

221

159

126

101

90

86

151

296

Life table death ndx

284,054

262,874

340,624

397,716

435,353

458,202

472,190

481,345

487,275

490,777

492,989

494,401

495,350

496,061

496,628

497,107

497,549

398,514

99,749

Personyears lived nLx

Note The data is based on the deaths in the sixth national population census of 2010 according to age and gender

Population nPx

Age X

Table 1 Abridged life table of urban citizens for the sixth national population census of 2010

284,054

546,929

887,553

1,285,269

1,720,621

2,178,823

2,651,013

3,132,358

3,619,633

4,110,410

4,603,398

5,097,799

5,593,149

6,089,209

6,585,837

7,082,945

7,580,494

7,979,008

8,078,756

Total number of person-years lived Tx

6.49

8.91

11.86

15.26

19.14

23.34

27.76

32.28

36.98

41.76

46.61

51.50

56.41

61.34

66.27

71.21

76.15

80.03

80.79

Life expectancy ei

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Table 2 China’s total population and urban population of different age groups in 2020 and 2030 (unit: person) 2020

2020

Age group

Total population

Urban population

Mortality rate

Total population

Urban population

Mortality rate

0

14,412,861

8,373,289

3.8

11,150,859

7,730,026

2.5

1–4

68,419,675

39,749,064

0.5

52,934,537

36,695,413

0.3

5–9

80,530,944

46,785,221

0.3

74,469,234

51,623,749

0.2

10–14

77,715,286

45,149,438

0.3

82,530,536

57,212,025

0.2

15–19

74,503,800

43,283,694

0.5

79,999,508

55,457,460

0.4

20–24

85,502,189

49,673,314

0.7

76,324,414

52,909,802

0.6

25–29

101,347,754

58,878,946

0.9

72,573,462

50,309,557

0.7

30–34

126,191,430

73,312,117

1.1

83,730,899

58,044,144

1.0

35–39

99,479,184

57,793,382

1.4

99,844,683

69,214,582

1.3

40–44

92,484,264

53,729,617

1.8

124,438,640

86,263,666

1.6

45–49

114,227,816

66,361,741

2.8

97,583,072

67,646,782

2.4

50–54

118,770,840

69,001,054

3.7

89,881,427

62,307,828

3.0

55–59

95,420,349

55,435,363

5.6

109,201,237

75,700,755

4.5

60–64

72,964,803

42,389,599

9.3

110,488,930

76,593,413

7.6

65–69

69,956,093

40,641,661

15.8

85,090,046

58,986,335

12.9

70–74

45,440,868

26,399,306

26.9

60,043,953

41,623,820

21.8

75–79

27,920,363

16,220,602

45.9

51,144,123

35,454,257

38.9

80–84

17,538,651

10,189,247

73.5

26,696,771

18,506,803

62.8

85–89

8,401,852

4,881,136

115.5

11,113,122

7,703,866

102.3

90–94

2,391,229

1,389,207

183.5

3,803,163

2,636,438

163.9

95–99

370,526

215,261

217.8

778,436

539,629

185.7

100 +

25,200

14,640

274.5

72,198

50,049

20.4

Data Source Total Population and Urban Population are based on data on the website of US Census Bureau http://www.census.gov/population/international/data/idb/informationGateway.php

against health is the value after the health damage background value is deducted. This study takes PM10 as the air pollutant. The methodology for verifying the above mentioned indicators can be referenced in the already published research results [16]. Premature Deaths Attributable to Air Pollution as follow: Ped = 10−5 ((R R − 1)/R R) f p Pe In the formula, Ped refers to the number of all-cause premature deaths at the current air pollution level (in ten thousand persons); fp refers to the all-cause mortality rate at the current air pollution level (1/100,000). The 2010 data is from China Health Statistical Yearbook (2011). The 2020 and 2030 data is calculated from the above

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mentioned age-group population data and mortality data. ft refers to the all-cause mortality rate at the clean density level (1/100,000); Pe refers to urban exposed populations (in ten thousand persons). The 2010 data is from China City Statistical Yearbook and the 2020 and 2030 urban population prediction is from ADB’s Study of China’s Water Sector; RR refers to the relative risk ratio of all-cause deaths attributable to air pollution.

2.3 Scenario Analysis A premature death attributable to air pollution is a major indicator measuring air pollution disease burden. Premature deaths are linked to such factors as the exposed population, all-cause actual mortality rate, air quality and APYLL. As a result of population ageing, China’s APYLL and all-cause actual mortality rate are on the rise. Meanwhile, China’s urbanization is irreversible and the urban population will be increased at a faster pace. If the air quality fails to be improved, China’s airpollution-caused disease burden will certainly grow dramatically. In consideration of the above, this Study analyzes the impact of population ageing on the air-pollutioncaused disease burden in China by looking at three scenarios, ie, the baseline scenario in which air quality is not improved, high and low scenarios in which air quality is improved to different degrees. Baseline Scenario: Air quality in 2020 and 2030 are not improved. The average PM10 concentration stays at the 2010 level. High Scenario: In 2020, cities which have already reached National Grade II standard in terms of average PM10 concentration stay at the current level. The average PM10 concentration in cities which have not reached National Grade II standard reach the standard of 70 µg/m3 . In 2020, all regions reach the National Grade I standard, ie 40 µg/m3 . Low Scenario: In 2020, the targets set in the Air Pollution Prevention and Control Action Plan in relation to the average PM10 concentration are reached, ie, as compared with that in 2012, the PM10 concentration in cities at or above the prefectural level goes down by 10%; the PM10 concentration in the Beijing-Tianjin-Hebei Area, Yangtz-River Delta and Pearl-River Delta goes down by 25%, 20% and 15% respectively. The PM10 concentration in Beijing is controlled at around 60 µg/m3 . In 2030, the PM10 concentration in cities at or above the prefectural level is close to the 2010 level of the USA and the annual PM10 concentration in all regions is 50 µg/m3 .

2.4 Date Sources The Study includes information obtained from National Atmospheric Environment Monitoring Date (2010) for cities at or above the county level, which is collected by the China National Environmental Monitoring Center; China Health Statistics

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Yearbook (2010); National Health Service Survey 2008: the 4th Household Health Interview Survey Analysis Report; China Statistical Yearbook (2011) and China City Statistical Yearbook (2011). Some key parameters are cited from Guideline for Chinese Environmental and Economic Accounting. Urban population predictive data, age-group population data, age-group mortality data are from relevant references.

3 Results 3.1 How China’s Population Ageing Evolves As a manifestation of social progress and improved livelihood, population ageing represents an important mark of a country’s modernization. According to WHO standards, a region will enter the era of population ageing when people aged over 60 account for 10% of the total population, or when people aged over 65 account for 7% of the total population. When people aged over 65 account for 14% of the total population, the region will enter the era of ‘super’ population ageing. In October 1999, China completed its transition from a country where adults feature prominently to a country where the elderly feature prominently. China is the world’s only country where the aged population is over 100 million and growing at a fast rate of over 3% annually. China will be in a process of rapid ageing between 2010 and 2020 and in a process of accelerated ageing between 2020 and 2030. In the meantime, the population aged over 80 will also be growing markedly. According to data obtained from the Sixth National Population Census, the proportion of the population aged over 60 among the total population was 13.26%; the proportion of the population aged over 65 was 8.87%; the proportion of the population aged over 80 was 1.57%. According to the predictive data from the US Census Bureau, in 2020, China’s total population is 1.394 billion, and the proportion of the population aged over 60 among the total population will be 17.57%; the proportion of the population aged over 65 will be 12.34%; the proportion of the population aged over 80 will be 2.06%. In 2030, China will enter an era of ‘super’ population ageing when its total population will be increased to 1.404 billion with the proportion of the population aged over 60 being 24.88% of the total population; the proportion of the population aged over 65 being 17.01% and the proportion of the population aged over 80 being 3.02% (Fig. 1). Due to regional disparity, population ageing also varies significantly across regions. Different from developed countries which are featured by ‘getting rich first and getting old latter’, China, in terms of population ageing, is featured by ‘getting old before getting rich’ or ‘getting old though not getting rich’ [17]. The impact of ageing can be found in labor supply, savings and economic growth, which is reflected, among others, as low productivity and shortage of innovation. In addition, with a large proportion of the aged population being disabled people, China is faced with

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Fig. 1 China’s Age and Gender Structure from 2010 to 2030

an increasing demand from the elderly for Medicare. Diseases commonly seen among the Chinese aged population include malignant tumor, cerebrovascular disease, heart disease, diabetes, high blood pressure and respiratory disease, which contribute to 83.4% of total deaths of elderly people aged over 65. The direct economic burden caused by these 6 diseases in 2003 was as high as 34 billion RMB Yuan [18]. Being a vulnerable group which is susceptible to various acute and chronic diseases, the elderly people face increasing disease burden year on year as they get old. The burden for diseases caused by air pollution is the most remarkable.

3.2 Impact of Ageing on Disease Burden Caused by Air Pollution in China The burden of diseases caused by air pollution in this Study is mainly measured by premature deaths attributable to air pollution, which in turn are mainly affected by the exposed population, all-cause actual mortality rate, air quality and the APYLL. Population ageing gives rise to changes in all-cause actual mortality rate and the APYLL. From 2010 to 2030, if the urban population and air quality do not change, change in the disease burden attributable to air pollution will be mainly attributed to ageing. The Study aims to analyze ageing’s impact on air-pollution-caused disease burden on the assumption that air quality and urban population do not change. As shown by research results, the APYLL in China tends to rise as the population ages. In 2010, China’s APYLL is 15 years with an all-cause mortality rate of 630.3/100,000 in urban areas; in 2020, the APYLL is expected to rise to 21 years with an all-cause mortality rate of 655.6/100,000; in 2030, the APYLL is expected to be 20 years with an all-cause mortality rate of 724.4/100,000. As a result of growth in the all-cause mortality rate and APYLL, premature deaths due to air pollution will be rising. In 2010, China’s premature death due to air pollution was 465,000. In 2020, the figure

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will go up to 493,000, up by 6.1% over that of 2010. In 2030, the figure will rise further to 558,000, up by 20.1% over that of 2010. As China is experiencing rapid urbanization with an annual urbanization rate of around 1%, the number of people being exposed to air pollution grows dramatically. This study looks at the disease burden caused by growth in urban population from 2020 to 2030 with the presumption that the population ageing and air pollution density remain unchanged. In 2020 when the urban population rises, if China’s air quality does not improve, the premature deaths due to air pollution will go up to be 608,000, and 717,000 in 2030, which are up by 30.8% and 54.4% respectively over 2010. China is moving from the stage of rapid ageing onto the stage of accelerated ageing, population ageing’s impact on air-pollution-caused disease burden will be further aggravated. If the air quality fails to be improved, and as population ages and urbanization accelerates, there will be a remarkable increase in air-pollution-caused disease burden as a result of population ageing.

3.3 Prediction of Air-Pollution Disease Burden in Different Scenarios From 2010 to 2030 In the baseline scenario, if the air quality is not improved and stays at the 2010 level, driven by both urbanization and ageing, the premature deaths attributable to air pollution will grow markedly. In 2020, premature deaths attributable to air pollution in Chinese cities will be 632,000, up by 36% over 2010; in 2030, the figure will be 845,000, up by 81.8% over 2010. If the air quality is improved but with a small margin, in the low improvement scenario, the premature deaths attributable to air pollution will continue to rise. The premature deaths attributable to air pollution in 2020 and 2030 will be 576,000 and 616,000 respectively, growing by 23.9% and 32.8% respectively over that of 2010. In the high improvement scenario, the airpollution premature deaths drop after rising. Premature deaths attributable to air pollution in 2020 and 2030 will be 563,000 and 503,000 respectively, growing by 21% and 8.2% respectively over that of 2010. To contain the growth in air-pollution premature deaths in cities, China has to improve air quality substantially. If the air quality of all Chinese cities reaches Grade I (40 µg/m3 ), premature deaths in 2030 can be controlled at the 2010 level. Further scenarios are developed to calculate the APYLL attributable to air pollution on the basis that the APYLL attributable to air pollution is 0.66 year. In the baseline scenario, the APYLL in 2020 and 2030 will go up to 1.69 and 1.68 years respectively, up by 1 year over that of 2010. In the low improvement scenario, the APYLL in 2020 and 2030 will be 1.52 and 1.18 years respectively, up by 0.9 and 0.5 years over that of 2010. In the high improvement scenario, the APYLL in 2020 and 2030 will be 1.48 and 0.95 years, up by 0.8 and 0.3 years over that of 2010.

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Along with intensified industrial transfer and rapidly-growing urban population in the West, premature deaths attributable to air pollution in the West grow faster that in the East. In the baseline scenario, the premature deaths of the East grow by 67.1% in 2030 over 2010. The premature deaths in the Beijing-Tianjin-Hebei Area, Yangtz-River Delta and Pearl-River Delta, which are eastern regions of high population density, go up by 89.7%, 87.4% and 69.3% over 2010. The disease burden is greater in area of population aggregation where air quality is not improved. In 2030, premature deaths in the West increase by 103.1% as compared with 2010. Premature deaths due to air pollution in the following areas increase by over 100%: Guizhou (134.2%), Yunnan (125.5%), Xinjiang (117.4%), Gansu (114.9%), Sichuan (104.8%) and Guangxi (101.4%) (Table 3). In the low improvement scenario, premature deaths in the East increase by 22.7% as compared with 2010, premature deaths in the West increase by 51.8% as compared with 2010. In the high improvement scenario, premature deaths in the East of 2030 can be controlled at the 2010 level, premature deaths in the West increase by 22% as compared with 2010.

4 Conclusions (1)

(2)

(3)

(4)

As one of fastest ageing countries, China is faced with problems of ‘getting old before getting rich’ or ‘getting old though not getting rich’. Though being an inevitable result of social development and progress, population ageing is accompanied by a host of social problems such as low productivity, innovation shortage and increasing disease burden. Population ageing has a severe impact on disease burden attributable to air pollution. Affected by ageing, the APPLY in 2030 will be 20 years, 33% higher than 2010; premature deaths will be 558,000, up by 20.1% over 2010. If the air quality is not improved, driven by both urbanization and ageing, premature deaths attributable to air pollution in cities will grow markedly. In 2020, premature deaths attributable to air pollution in Chinese cities will be 632,000, up by 36% over 2010; in 2030, the figure will be 845,000, up by 81.8% over 2010. To contain the growth in air-pollution premature deaths in cities, China has to improve air quality substantially. If the air quality of all Chinese cities reaches Grade I (40 µg/m3 ), premature deaths in 2030 can be controlled at the 2010 level.

19,699

37,838

10,434

Guangxi

21,422

Hubei

Guangdong

28,713

Hunan

35,589

Henan

24,032

Zhejiang

Shandong

36,115

Jiangsu

12,082

14,207

Shanghai

Jiangxi

13,595

Heilongjiang

18,303

9825

Jilin

13,181

19,008

Shanxi

Fujian

9014

Inner Mongolia

Anhui

22,376

11,490

Shanxi

7900

Hebei

14,490

Tianjin

15,390

48,142

27,939

28,855

44,364

45,383

16,864

17,506

26,130

31,261

46,223

16,948

17,132

12,816

22,438

11,583

15,347

30,499

11,636

19,353

21,017

60,920

38,248

37,719

62,848

60,317

23,614

22,450

35,944

38,894

58,018

22,133

21,882

16,785

27,532

14,463

20,122

42,195

16,744

26,046

10,434

37,838

19,699

21,422

28,713

35,589

12,082

13,181

18,303

24,032

36,115

14,207

13,595

9825

19,008

9014

11,490

22,376

7900

14,490

2010

14,223

42,297

26,234

27,250

42,035

42,839

15,702

16,313

24,592

27,356

40,835

14,745

16,020

12,006

21,083

10,835

14,383

25,519

9900

13,066

2020

Low improvement scenario 2030

2010

2020

Baseline scenario

Beijing

Region

Table 3 Premature deaths in different scenarios in China (Unit: person)

18,765

56,219

27,945

25,335

40,103

40,825

19,278

18,146

25,408

27,466

38,494

16,199

16,923

12,659

19,920

11,136

15,087

30,119

11,019

15,329

2030

10,434

37,838

19,699

21,422

28,713

35,589

12,082

13,181

18,303

24,032

36,115

14,207

13,595

9825

19,008

9014

11,490

22,376

7900

14,490

2010

15,390

48,051

25,745

24,621

35,963

38,301

16,346

16,996

23,141

27,856

38,924

15,758

15,671

11,971

20,174

10,696

14,406

27,465

9728

14,470

2020

High improvement scenario

(continued)

15,351

45,990

22,861

20,725

32,807

33,398

15,771

14,844

20,785

22,469

31,491

13,252

13,844

10,356

16,296

9110

12,342

24,639

9014

12,540

2030

An Analysis of Disease Burden Attributable … 159

333

7259

2187

2233

7713

464,636

Gansu

Qinghai

Ningxia

Xinjiang

Total

9185

Yunnan

13,154

7881

Guizhou

Shanxi

21,628

Sichuan

Tibet

1628

12,123

Chongqing

2224

631,953

11,393

3051

2953

11,026

18,286

690

14,254

12,548

31,764

17,955

844,923

16,765

4067

3962

15,600

25,107

1096

20,710

18,461

44,300

23,958

3005

464,636

7713

2233

2187

7259

13,154

333

9185

7881

21,628

12,123

1628

2010

575,793

10,823

2878

2814

10,445

17,298

629

13,192

11,756

29,747

17,012

1966

2020

Low improvement scenario 2030

2010

2020

Baseline scenario

Hainan

Region

Table 3 (continued)

616,044

13,040

2784

2306

9991

16,437

1134

18,202

13,907

33,574

15,291

3005

2030

464,636

7713

2233

2187

7259

13,154

333

9185

7881

21,628

12,123

1628

2010

562,663

10,823

2627

2184

8887

14,888

690

13,698

11,457

28,955

14,558

2224

2020

High improvement scenario

502,525

8397

2277

1887

8173

13,447

928

14,890

11,377

27,466

12,509

3290

2030

160 F. Yu et al.

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References 1. Yu F, Ma GX, Zhang YS, Cao D, Gao F, Wang JN (2013) Several issues on health impact assessment of air pollution in China. Nat Med J China 93(34):2695–2698 (in Chinese) 2. World Bank (2007) Cost of pollution in China: economic estimates of physical damages. Washington DC 3. Ostro B (2004) Outdoor air pollution: assessing the environmental burden of disease at national and local levels. World Health Organization (WHO Environmental Burden of Disease Series), vol 5, Geneva 4. Yang GH, Wang Y, Zeng YX, Gao GF, Liang XF, Zhou MG, Wan X, Yu SC, Jiang YH, Naghavi M, Vos T, Wang HD, Lopez AD, Murray CJL (2013) Rapid health transition in China, 1990– 2010: findings from the Global Burden of Disease Study 2010. Lancet 381(9882):1987–2015 5. Chen Z, Wang JN, Ma GX, Zhang YS (2013) China tackles the health effects of air pollution. Lancet 382:1959–1960 6. Zhang KD, Guo P (2010) The blue book of the aging population and the condition of the elderly in China. China Social Press 7. Wang ZZ, Sun TS, Li GP (2013) Regional differences and evolutions of population aging in China. Popul Res 37(1):66–77 8. Ma YT (2007) The increasing demographic dividend: the driving force of China’s leaping development in the 21th century. Chinese J Popul Sci 1:2–10 9. Office of the National Committee on Aging. A forecast of the development trend of China’s population aging. 2006 10. Cai F, Wang MY (2006) Labor shortage in an aging but not affluent society. China Opening J 1:31–39 11. Fang XC, Xie X, Huang ZM (2014) Population aging and economic growth in China. Shanghai J Econ 12:90–96 12. Wang Y (2015) Spatial econometric analysis of the impact of China’s population aging on economic growth. Soc Sci Res 5:73–78 13. Sui Z, Zhou XM (2014) The impact of labor supply on China’s economic growth under the background of population aging. Contemp Econ Res 2014(3): 33–37 14. Sun L, Wu SP (2015) An empirical study on the impact of China’s population aging on the consumption of residents. Stat Observ 9:98–101 15. Meng LG, Li CL, Guang H (2014) Predictions of China’s population structure based on the PDF model. China Popul Resour Environ 24(2):132–141 16. Ma GX, Wang JN, Yu F, Guo XM, Zhang YS, Li C (2016) Assessing the premature death due to ambient particulate matter in China’s urban areas from 2004 to 2013. Front Environ Sci Eng 10(5):1–10 17. Mu GZ, Zhang T (2011) The development trend of aging population in China and its strategic response. J Huazhong Normal Univ (Human Soc Sci) 2011(50) 5:29–36 18. Liu JF, Chen Z, Yang F et al (2014) The present situation and countermeasures of chronic diseases in the elderly in China. China Foreign Med Treatment 23:194–198

Research on Economic Policies for Centralized Disposal of Medical Waste Zheng Zhang, Liang Cheng, Ning Sun, Shunze Wu, and Yuantan Lu

Abstract With the development of medical care in China, the amount of medical waste is also increasing, the disposal and management of medical waste is particularly important. However, China has limited legislation and management experience in the treatment of medical waste. Especially after the outbreak of “SARS” in 2003, such problems became more prominent. Since then, CAEP has begun to carry out relevant research in the field of medical waste management and technology. We started the preparation work for the formation of “National Hazardous Waste and Medical Waste Disposal Facilities Construction Planning”, and promised to provide more than ten years of technical support. We also participated in the project of sustainable environmental management of medical waste in China, undertaking the sub-project of “Research on the Economic Treatment of Medical Waste Disposal” and “Study on the Construction and Operation Mode of Medical Waste Disposal Facilities”, at the same time providing technical support for the demonstration activities. We also participated in the compiling of “Technical Specifications for Steam Autoclave Centralized Treatment Engineering on Medical Waste” and “The Best Feasible Technical Guidelines of Medical Waste Disposal”, which cultivated a professional research team for our academy. Keywords Medical waste · Centralized disposal · Economic policy · Charging policy

1 Introduction In order to prevent and control the pollution of persistent organic pollutants (“POPs”), the international community has enacted the Stockholm International Convention on Persistent Organic Pollutants (“the Stockholm Convention”), which was formally signed by China on May 23, 2001, and took effect on November 11, 2004. To ensure the efficient implementation of the Stockholm Convention in the country, a National Z. Zhang · L. Cheng (B) · N. Sun · S. Wu · Y. Lu Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_6

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Working Group for the Implementation of the Stockholm Convention, led by the former State Environmental Protection Administration and consisting of 11 relevant ministries including the Ministry of Foreign Affairs, the National Development and Reform Commission, the Ministry of Science and Technology and the Ministry of Finance, was approved by the State Council in May, 2005, and the former State Environmental Protection Administration established a Special Office for the Implementation of the Stockholm Convention (“the Implementation Office”). On April 14, 2007, the National Implementation Plan for the Implementation of the Stockholm Convention (“National Implementation Plan”) was approved by the State Council, which marked the full implementation of the Stockholm Convention in China. The National Implementation Plan aims to reduce, eliminate and prevent the health and environmental risks posed by POPs, to sustain human health, and to maintain the safety of the ecological environment. With the goal of promoting sustainable development, eight preferred areas for development are identified, including the introduction and development of alternative technology, best available technology/best environment practice (“BAT/BEP”) and contaminated site remediation technology, control of dioxin emissions in key industries with BAT/BEP, development of project demonstration and comprehensive promotion. The national objectives stipulated in the National Implementation Plan are that by 2008, a management system of effectively implementing BAT/BEP in key industries which produce POPs unintentionally shall be basically established so as to achieve the application of BAT and the promotion of BEP in new sources of key industries, that by 2010, a more well-established management system of implementing BAT/BEP in existed sources of key industries which produce POPs unintentionally shall be established and the corresponding demonstration activities shall be accomplished, and that by 2015, BAT/BEP shall be widely applied in key industries and the increase trend of dioxin emissions shall be basically controlled. Medical waste incineration is identified in the National Implementation Plan as one of the key industries which produce POPs unintentionally with priority control. In order to prevent and control the POPs pollution caused by the medical waste incineration industry, China’s Sustainable Environmental Management for Medical Waste Project” was designed by the Ministry of Environmental Protection with the assistance of international agencies, and was jointly implemented by the Environmental Protection Cooperation Center and the United Nations Industrial Development Organization. Combined with the implementation of the National Plan on the Construction of Hazardous Waste and Medical Waste Disposal Facility, this project aims to incorporate the management concept of the whole process of medical waste lifecycle into China’s medical waste management and disposal practices, to fully promote the application of BAT/BEP required in the Stockholm Convention, and to improve the ability of managing and disposing medical waste in China, thus facilitating the environmentally sound management of medical waste. In view of several problems existed in China at that time such as ineffective guarantee of facility operation funds for medical waste disposal and insufficient incentive policies related to medical waste disposal, the economic policies for medical waste disposal is included

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in the overall design of the project as one important respect. The main consideration of this project is to figure out how to support disposal facilities to achieve expected performance with economic policies.

2 Status Quo of Medical Waste Disposal Industry and Its Economic Policies 2.1 Status Quo of Medical Waste Disposal Industry The development of medical waste disposal in China is undergoing a process “from decentralization to centralization” and this transformation reflects that China is witnessing a more standardized and industrialized medical waste disposal industry. The outbreak of SARS in 2003 acted as the “catalyst” for the rapid development of China’s medical waste disposal industry. Before the SARS outbreak, medical waste disposal was limited to dispersive disposal inside hospitals, and only a small number of cities adopted the model of centralized disposal of medical waste. At that time, the main features of medical waste disposal could be summarized as incompetent disposal and low centralized disposal rate; inadequate legal and regulatory system; low disposal level and serious secondary pollution; insufficient technical support; and a vague understanding of technology route for medical waste disposal. During the SARS outbreak, faced with the requirement of safe disposal of medical waste and the country’s disadvantaged medical waste disposal industry, the State Council attached great importance to the issue and organized relevant departments to conduct researches and propose solutions. In 2003, Medical Waste Management Ordinance (GWYL[2003] No. 380) was promulgated and implemented and in the same year, National Plan on the Construction of Hazardous Waste and Medical Waste Disposal Facility (“Plan”) was approved. The Ordinance established the direction of medical waste centralized disposal and industrialized development in legislation, and the Plan would put centralized disposal into practice; that is, 277 medical waste centralized disposal facilities were to be built in the country’s prefecture-level cities. At the same time, a series of regulations, standards and norms have been introduced to strengthen the functional management of medical waste and explore the industrialization for medical waste disposal. After more than ten years of rapid development, China’s medical waste disposal industry has been basically on the track. By the end of 2015, more than 90% of the facilities mentioned in the Plan were put into operation. A total of 288 medical waste business licenses were issued in the country among which 24 were for the disposal facilities of both hazardous waste and medical waste and 264 for disposal facilities of medical waste only, with disposal capacity of more than 2400t/d. The load rate of more than one third of the urban disposal facilities were 90% and one out of five of medical waste disposal facilities were in full load or overload capacity. Half of the facilities use incineration technology and the other half use non-incineration

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technology, with pyrolysis incineration and steam autoclave technology as the main technical solutions for medical waste disposal. Over ten engineering technical specifications for different disposal technologies were promulgated successively including centralized disposal and centralized incineration of medical waste, high temperature steam, chemical disinfection and microwave treatment. The technologies and the standard system for medical waste disposal were basically established.

2.2 Economic Policy Framework for Medical Waste Disposal The current economic policies for medical waste disposal mainly include fund investment, land supply, disposal charge and preferential tax among which, fund investment policy and land supply policy are mainly used in the construction phase of disposal facilities while disposal charge policy and preferential tax policy mainly serve the operation stage of disposal facilities.

2.2.1

Fund Investment Policy

The government has allocated national debt funds to support the construction of centralized disposal facilities for hazardous waste and medical waste: 30% of the total construction cost will be subsidized in eastern China; 60% in central China and 75% in western China. With the support of the national debt funds, the large-scale and organized construction of centralized disposal facilities for medical waste has been carried out smoothly. Not only the construction of medical waste disposal facilities was promoted, but also local funds were driven to flow into the construction field of medical waste disposal facilities, thus promoting the formation of medical waste disposal industry. By the end of October 2014, 197 centralized disposal projects for medical waste mentioned in the Plan were funded by a total of 1.36 billion yuan from the national debt fund, and attracted social capital of more than 2 billion yuan. About 70% of medical waste disposal facilities have used the national debt funds, and the construction of centralized disposal facilities in some prefectural cities such as Dongguan, Nantong and Wuhan are carried out with self-raised funds of enterprises. According to the different sources of funds, the investment modes of centralized disposal facilities for medical waste can be divided into three categories, namely, government investment, mixed investment and enterprise investment. In the government investment mode, the construction funds mainly come from the national debt funds and the local financial funds. After the completion of the facility, a designated public institution or enterprise will be responsible for its operation. This mode is commonly seen in the central and western regions of China, especially in the western cities. Most of the existing centralized disposal facilities for medical waste adopt the mixed investment model, with construction funds coming from financial and social funds. In the enterprise investment mode, the construction funds are all

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from social funds, and this mode is widely adopted in well-developed and highly market-oriented regions such as Jiangsu, Zhejiang, Guangdong and Fujian. Attracting social funds and dealing with the construction, operation and maintenance of centralized disposal facilities for medical waste in a market-oriented manner is an imperative approach for the development of the industry. However, owing to the public property attribute of centralized disposal facilities for medical waste, a single market mechanism is far from enough. At present, both domestic and foreign environmental infrastructure is usually franchised to social capital and in China, concession is used as an operation mode in centralized disposal facilities as well as a financing mode. According to the Measures for the Administration of Concession for Infrastructure and Public Utilities jointly issued by the six ministries and commissions in 2015, the concession for infrastructure and public utilities refers to the operation mode in which legal persons or other organizations inside or outside the People’s Republic of China were legally authorized by the Chinese government by means of competition to build and operate infrastructure and public utilities and earn profits, provide public products or services, with their rights, obligations and risk sharing clarified in agreements. Concession conveys the concept of equality and efficiency and it is conducive to attracting high-quality social resources to participate in the construction and operation of disposal facilities. However, in order to ensure the investment return of social funds, this model also has exclusive and monopolistic characteristics. Given that a prefecture-level city has only one centralized disposal facility for medical waste, once a certain enterprise obtain concession through competition and its disposal load does not meet the agreed proportion, other enterprises will be naturally prevented from entering the field in the concession period.

2.2.2

Land Supply Policy

In order to solve land selection and land acquisition difficulties during the implementation of the Plan, the former State Environmental Protection Administration proposed to the Ministry of Land and Resources that in accordance with the Article 6 of the Management Measures for Land Use Annual Plan (Ministry of Land and Resources Decree No. 26, November 1, 2004) promulgated by the Ministry of Land and Resources, the land use indicators that needed to be handled by the construction projects within the Plan would be collected and summarized and after the proposal of farmland transfer plan put forward before September 25 of the previous year was examined. After that, the indicators would be reported to the Ministry of Land and Resources for approval and land resources management department and the development and reform department where the land was located should be informed and include the indicators in addition to the year’s land use indicators. The Ministry of Land and Resources replied to the Administration in a document (GTZT [2005] No. 331) that: (1) Regarding the issue of land use indicators of construction projects, the Management Measures for Land Use Annual Plan (Order of the Land and Resources Department No. 26) stipulates that it would be examined and approved by the State Council and the relevant departments of the State Council and that the State Council

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would approve that the occupied indicators of land use plan of the construction project of independent location for farmland transfer would not make known to lower levels and indicators would be directly allocated when approving the land use of the construction project while the indicators of land use of other construction projects would be arranged by the local plans. Therefore, the land use indicators of specific construction projects in the Plan such as the independent site selection projects approved by the State Council and the relevant departments of the State Council shall be arranged by the country while indicators of other projects shall be included in the local plan indicators. (2) When preparing the annual land use plan, the environmental protection department would put forward proposals and suggestions on construction projects which would use land in the year, including those in the Plan, to the Ministry of Land and Resources. The Ministry of Land and Resources would take the suggestions into full account when comprehensively balancing the plans.

2.2.3

Charging Policy

The National Development and Reform Commission and relevant ministries and commissions jointly released the Notice on Implementation of Charging System for Hazardous Waste Disposal and Promotion of Industrialization for Hazardous Waste Disposal (FGJG [2003] No. 1874), which requires that the charging policy for hazardous waste disposal shall be prepared in accordance with the principle of “full compensation for cost (including collection and transportation cost) plus reasonable profits”, so as to ensure the normal operation of disposal facilities. The Notice also clarifies that hazardous waste and medical waste disposal charge belongs to business service charge, and the principles and methods of formulating charging standards. In the implementation of construction projects, each city has formulated its own management approaches and charging standards for medical waste according to the Notice, thus accelerate the pace of industrialized development of hazardous waste and medical waste disposal. The charging policy for medical waste disposal is at the center of the economic policy system. The reasons are as follows: (1) The construction period of medical waste disposal facilities varies from several months to several years, and the operation period can be as long as one or several decades. The economic policy adopted during the operation period has a great impact on the long-term operation of facilities while preferential tax policies are usually prepared based on the charging policies of waste disposal. (2) Investors recover cost and gain profit through the disposal charges. The preparation and implementation of the charging policy determines whether the invested funds can obtain reasonable returns and further affects investor’s enthusiasm in investing funds to medical waste disposal. (3) The preparation and implementation of the charging policy is closely linked to related stakeholders of medical waste disposal, which acts as the foothold of balancing interests of all parties as well as the point where contradictions are most easily intensified. Based on the above reasons, in-depth researches on the preparation and implementation of charging

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policy for medical waste disposal and proposals on practical and feasible improvement programs are necessary for improving the economic policies for medical waste disposal [1]. Therefore, the preparation and implementation of the charging policy for medical waste disposal will be introduced in Chap. 3 of this report.

2.2.4

Preferential Tax Policies

Preferential tax policies refer to the various means such as taxation, tax increase, tax exemption and tax deduction through which the country encourages people to engage in environmental protection activities and avoid behaviors that are harmful to the environment. There is no targeted preferential tax policy for China’s medical waste disposal industry, and preferential tax policies relating to the industry are listed below in Table 1. (1)

Business Tax/Value-Added Tax

It is stipulated in the Approval of the State Administration of Taxation on Levying Business Tax on Waste Disposal Charges (GSH [2005] No. 1128) promulgated by the State Administration of Taxation that waste disposal services provided by enterprises and individuals do not belong to the taxable services of business tax, and waste disposal charge collected from disposal of waste is exempt from business tax. According to this provision, before 2016, domestic waste disposal industry generally enjoyed provisions of business tax exemption, but due to the unclear policy of the medical waste disposal industry, the actual operations in different places were different. As a result, quite many cities did not enjoy the preferential policy with exemption from business tax. According to the Notice on Comprehensive Launch of Pilot Programs to Replace Business Tax with Value-Added Tax (CS [2016] No. 36), since May 1, 2016, pilot programs of replacing business tax with value-added tax have been comprehensively launched. (2)

Income Tax

Up to date, there is no clear policies on corporate income tax in the medical waste disposal industry. According to the provisions of Article 27 of the Enterprise Income Tax Law, for enterprises engaged in public sewage treatment and public waste treatment, tax is exempted in the first three years and reduced to half in the following 3 years since the year when the enterprise obtained its first operating income. The specific terms and conditions will be promulgated by the finance and taxation departments under the State Council and shall be implemented after the State Council’s approval. In this Article, public waste disposal enterprises are not clearly defined and the specific terms and conditions are not published, so the charging measures vary from place to place. As for other taxes such as property tax, land use tax, vehicle and vessel use tax and road maintenance fee, the charging items, calculation methods and local policies vary from different enterprises. In addition, according to Notice on Income Tax of Enterprise Fixed Assets with Accelerated Depreciation (GSF [2009] No. 81), for fixed assets with rapid upgrading

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Table 1 List of preferential tax policies Tax type

Name of document

Content

Preparation body

Business tax

Approval of the State Administration of Taxation on Levying Business Tax on Waste Disposal Charges (GSH [2005] No. 1128) (Invalid)

Waste disposal charges are free from business tax

State administration of taxation

Value-added tax Notice on Comprehensive Launch of Pilot Programs to Replace Business Tax with Value-Added Tax (CS[2016] No. 36)

Since May 1, 2016, pilot State administration of programs of replacing taxation business tax with value-added tax have been comprehensively launched in the country

Income tax

Income from qualified National people’s environmental congress protection, energy conservation and water conservation projects can enjoy tax preference Investments in the acquisition of special facilities for environmental protection, energy conservation, water conservation, safety production and other special facilities can offset the taxable amount based on a certain percentage As for an enterprise’s fixed assets, the total number of years of depreciation can be reduced or an accelerated depreciation method can be adopted High-tech enterprise can enjoy a preferential income tax rate at 15% (the normal tax rate is 25%)

Enterprise Income Tax Law of the People’s Republic of China (2007)

(continued)

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Table 1 (continued) Tax type

Environmental protection tax

Name of document

Content

Ordinance on the Implementation of Enterprise Income Tax Law of the People’s Republic of China (Order of the State Council No. 512, 2007)

Income from public State administration of waste disposal of the taxation enterprise can enjoy “Three-Year Exemption and Three-Year Half Reduction” 10% of money invested on the special equipment can be offset from the enterprise’s tax amount payable in the same year

Preparation body

Notice on Income Tax of Enterprise Fixed Assets with Accelerated Depreciation (GSF[2009] No. 81)

As for fixed assets with State administration of rapid upgrading of taxation products due to technology advancement and those with strong vibration and high corrosion all the year round, the total number of years of depreciation can be reduced or an accelerated depreciation method can be adopted

Environmental Protection Tax Law of the People’s Republic of China (2016)

Where an enterprise, National people’s public institution or any congress other producer or operator stores or disposes of solid wastes at any facility or site that meets the national and local environmental protection standards, it shall not be deemed as directly discharging pollutants to the environment, and shall not pay environmental protection tax

of products due to technology advancement and those with strong vibration and high corrosion all the year round, the total number of years of depreciation can be reduced or an accelerated depreciation method can be adopted. This income tax preferential policy was not widely implemented in the medical waste disposal industry. Medical waste disposal facilities usually use straight-line depreciation method with a decadetime limit. Based on the service life that mechanical equipment can reach after several overhauls and equally-shared value of equipment, this method calculates equipment

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depreciation cost in accordance with the stipulated depreciation rate. If enterprises apply for accelerated depreciation on their own, it is usually difficult to be approved. (3)

Environmental Protection Tax

The Environmental Protection Tax Law will take effect on January 1, 2018. It is stipulated in Article 4 that where an enterprise, public institution or any other producer or operator stores or disposes of solid wastes at any facility or site that meet the national and local environmental protection standards, it shall not be deemed as directly discharging pollutants to the environment, and shall not pay environmental protection tax on the corresponding pollutants. The environmental protection tax is an indirect tax preference for medical waste disposal enterprises that comply with the relevant standards, but currently the detailed implementation rules are not yet clear.

2.3 Major Problems of Economic Policies At present, three prominent problems exist in the economic policies for medical waste disposal in China: (1) Excessive reliance on market functions and inadequate performance of government functions medical waste centralized disposal facilities are built and operated in a market-oriented way, which greatly eases the government’s financial pressure, so that many local governments have benefited from that in the short term. However, some local governments lack a deep understanding of the essence of the market mechanism and have little expectation on market risks, they did not perform their duties in the implementation of the project. Most local governments have failed to give necessary economic policy support for medical waste disposal in remote areas, leading to simple disposal or loss of medical waste. (2) Insufficient support for the operation process which makes operation extremely difficult The long-standing problem of focusing on construction while ignoring operation in the infrastructure field virtually affects medical waste disposal facilities. Some medical waste disposal facilities are related to public welfare, therefore, in the operation process, especially in the early stage of operation, it is necessary for the government to give priority support by introducing economic policies in finance, tax, credit and other aspects. At present, only a very small number of cities offer financial subsidies on the operation of medical waste disposal facilities, and tax preferential policy related to medical waste disposal industry cannot be fully implemented due to the lack of operation rules. Some disposal facilities in China’s western region were built with national debt funds and have been left unused due to unguaranteed operation cost and absence of operators.

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(3) Insufficient support for the preparation of charging policy and implementation are faced with many difficulties First, the majority of provincial charging policies are absent and the charging policy transits directly from the national level to the municipal level, thus there lacks coordinated arrangement and unified guidance for disposal charge of medical waste at provincial level. In addition, the preparation of charging policy is not scientific and operational. In most charging standards, the management cost of medical institutions is not taken into consideration. There are no operation rules on how to include disposal charge into medical service cost. Moreover, it is quite difficult to implement the charging policy. Medical institutions are reluctant to sign disposal agreement with disposal enterprises, and part of the disposal charges are paid from the profit of medical institutions, resulting in default or less payment. However, there lack practical administrative approaches for disposal enterprises to protect their rights [1, 2].

3 Preparation of Charging Policy for Medical Waste Disposal and Evaluation of Its Implementation 3.1 Preparation of Charging Policy It is stipulated in Article 55 of the Law of the People’s Republic of China on the Prevention and Control of Environment Pollution Caused by Solid Wastes that in case that an entity fails to dispose of the waste within the specified period of time, or the disposal does not comply with the relevant State regulations, the competent environmental protection departments of the local people’s government above prefecture level shall assign other entities to dispose of the waste in accordance with relevant State regulations, and the entities discharging hazardous waste shall bear the disposal cost. This article embodies the principle of paid service for hazardous waste disposal, which provides legal guarantee for the establishment of the charging system. Before 2003, that is, before the implementation of the Plan, although China did not explicitly put forward the industrialized operation of medical waste disposal, paid service for medical waste disposal was carried out in several cities including Guangdong, Hangzhou, Fuzhou, Wuhan and Nanchang, and the charging standard and management method for medical waste disposal were prepared, laying a solid foundation for the establishment of the charging system for medical waste disposal in China. Since 2003, a series of documents relevant to the charging policy for medical waste disposal (Table 2) has been released at national level, and focuses vary from phase to phase. The changes are closely related to the development process of the medical waste disposal industry in China. In the preliminary stage, the charging policy focused on establishing a charging system for medical waste disposal. Guidance was offered

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Table 2 Documents relevant to the charging policy for medical waste disposal Release year Name of document

Content

2003

Medical Waste Management Ordinance Article 31 Medical waste centralized disposal enterprises charge medical and health institutions for medical waste disposal fees. Medical waste disposal fees paid by medical and health institutions in accordance with the provisions can be included in medical care cost

2003

Notice on Implementation of Charging System for Hazardous Waste Disposal and Promotion of Industrialization for Hazardous Waste Disposal (FGJG[2003] No.1874)

In accordance with the principle of compensation for hazardous waste disposal cost and reasonable profitability, the charging system for hazardous waste disposal shall be fully implemented so as to promote the virtuous circle in this industry. Charging management approaches shall be prepared at provincial level while the specific charging standards shall be made by the pricing department of prefecture-level cities

2012

Pollution Prevention Plan for Hazardous Waste during the “12th Five-Year” Plan Period

Supervise and urge medical institutions to incorporate medical waste disposal fees into medical service cost

2014

Notice on Further Strengthening Medical Waste Management

By the end of 2015, a sound charging system for medical waste disposal shall be established. The cost-sharing issue of medical waste disposal fees shall be solved by introducing medical insurance coverage and financial investment

on the decision-making body, preparation principle and procedure, and operational mechanism of the charging standard in some documents including the Medical Waste Management Ordinance and the Notice on Implementation of Charging System for Hazardous Waste Disposal and Promotion of Industrialization for Hazardous Waste Disposal (FGJG[2003]No. 1874) (“the Notice”). With the implementation of the Plan and rapid development of construction of medical waste centralized disposal facilities, charging standards for medical waste disposal were prepared all over the country. Around 2010, a large number of facilities for centralized disposal of medical waste shifted from the construction stage to the operation stage, and conflicts and problems existed in the charging policy occurred [1–3]. In light of these conflicts and problems, relevant plans and documents released in the “12th Five-Year” Plan period further elaborated on the requirements in several aspects including disposal cost sharing modes, thus greatly improved the charging policy.

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At present, charging policies for medical waste disposal have been established in over 200 prefecture-level cities with medical waste disposal facilities. Provincial charging management approaches for medical waste disposal have been introduced in more than 10 provinces including Guangdong, Fujian, Jiangsu, Hubei, Gansu and Jilin. Investigations reveal the charging policies (i.e., charging models, charging standards and bearing methods) in different places and details are mentioned hereinafter.

3.2 Implementation of Charging Policy 3.2.1

Charging Model

Generally, two charging models are adopted in the investigated places: in the first model, fees are mainly charged based on the number of beds, supplemented by weight classified into multi-levels while in the second model, fees are charged according to weight. (1)Model 1: fees are mainly charged based on the number of beds, supplemented by weight classified into multi-levels In this model, medical institutions with fixed beds charge in accordance with the number of beds, while medical institutions without fixed bed distinguish their weights or their types of medical institutions, adopting multi-level quota charging. There are a few cities in which fees are charged according to weight. For medical institutions with fixed beds, the disposal fees are calculated as follows. Disposal fee (yuan/month) = number of beds * bed usage rate * charging standard (yuan/bed·day) * number of days. In some areas such as Zunyi and Yanbian, as for whether medical institutions shall charge based on the number of beds, there is a minimum standard for the numbers. In Zunyi, it is stipulated that medical institutions with over 5 beds shall charge based on the number of beds, while in Yanbian, the minimum number of beds for adopting such a charging standard is 30. Medical institutions with less than 30 fixed beds shall charge in accordance with the standard of medical institutions without beds. As for medical institutions without fixed beds, there are three main charging methods: (1)

(2) (3)

In cities such as Nanyang, Weihai, Huangshan, Zunyi, and Yangzhou, fees are charged according to different types of medical institutions classified into multi-levels and quota; In most cities in Hunan Province, as well as Nanchang, Xiamen, and Liu’an, fees are charged according to weight classified into multi-levels and quota; In cities such as Yanbian and Tianjin, fees are charged according to weight. In cities like Rizhao, Nanyang and Qiqihar, both (1) and (3) are optional. Medical institutions and disposal enterprises shall determine which method

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to adopt. Viewing the charging methods of medical waste disposal at home and abroad, medical waste disposal fees are usually charged based on the number of beds, while medical institutions without beds adopt various charging methods, among which the weight-based method with multi-levels is more widely applied. In addition, fees are also charged according to unit weight, operation areas and different levels of medical institutions. There hasn’t been a mainstream charging method available in outpatient departments. As for whether to charge waste disposal in outpatient departments based on unit weight, number of outpatients, or to make it free, practices vary from city to city. As for the bed-number charging model, the verification of the number of beds is the most critical. In some cities fees are calculated based on the data provided by medical institutions, while in other cities the actual bed numbers and bed usage rate approved by the health department are referred to. In the actual operation, disposal enterprises are often placed in a disadvantaged position as medical institutions often conceal the real number of beds and the data from the health department cannot reveal the real conditions of bed increase in medical institutions. According to statistics, the disposal enterprises can benefit from providing services to large hospitals which pay the fees based on bed numbers. However, the disposal enterprises can barely make up the disposal cost if small-sized medical institutions also pay in this way. In some places, the waste collection rate of different medical institutions is directly stipulated in the charging document so as to protect the interests of disposal enterprises. (2)

Model 2: fees are charged according to weight

In this model, fees are charged according to the weight of medical wastes generated by medical institutions, regardless of the institution’s type or whether it has any beds. Disposal fee (yuan/month) = monthly weight of medical wastes generated by medical institutions (kg/month) * charging standard (yuan/kg). In this model, on the one hand, every single batch of medical waste needs to be weighed, this, to some extent, leads to increase in operation difficulties. On the other hand, loss of medical waste is likely to happen as medical institutions want to reduce disposal costs. This model is more suitable for cities with higher level of environmental supervision. This model is then improved as medical institutions are classified into multi-levels according to the average amount of wastes they generate per month and fixed fees are paid according to the classifications. The improved model is more practical as payment is fixed. Model 1 is adopted in most cities in China while Model 2 is adopted in a few regions. Beijing, Guangzhou, Tianjin and other cities with large amount of medical waste production prefer the charging method based on weight. Guangzhou adopted the bed-number charging method before 2014 and changed to the weight-based charging method afterwards. In Shanghai, both models are used: for medical institutions with beds, medical waste disposal fees are calculated according to the actual occupation of the number of beds, and for mental hospitals, nursing homes and community health service centers where there are beds but small amount of waste

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Table 3 Advantages and disadvantages of different charging methods Charging model Bed number-based Weight-based

Weight-based Quota-based with multi-levels

Advantages

With good Fees are charged operability, widely according to accepted actual amount generated, fair and reasonable

Weighing procedure is simplified and waste collection rate increased

Simple and easy, with stable charge income

Disadvantages

The actual number With poor of beds used is not operability, easy to identify likely to lead to waste loss

The actual waste amount is likely to be larger than approved waste amount, thus leading to increase of disposal cost for enterprises

It is quite difficult to make different standards for different medical institutions. Cost is hard to control

Remarks

The most commonly used

Commonly used

Commonly used

The least commonly used

Note Weight-based method with multi-levels is in fact an improved version of the weight-based method and hereby listed separately for comparison

production, the weight-based model is adopted. In Suzhou, it is stipulated that medical institutions at or above level II can choose from either model while other medical and health institutions shall adopt the weight-based model. In Xuzhou, medical institutions with more than 20 beds shall adopt the weight-based model. If the medical institution cannot weigh the wastes, payment based on the number of beds is also acceptable. Comparation of different charging methods can be seen in Table 3.

3.2.2

Charging Standard

Local charging standards vary greatly from city to city while there is not much difference within provinces. The price range of medical waste disposal charged based on bed numbers is 1.5– 3.3 yuan/bed·day, mostly in the range of 2.0–2.5 yuan/bed·day. For instance, it is 2.3 yuan/bed·day in Shanghai, 2.3–2.5 yuan/bed·day in Jiangxi, 2.0–2.5 yuan/bed·day in Hubei, 1.8–2.6 yuan/bed·day in Jilin. Charging standard in Henan is generally lower than 2.2 yuan/bed·day, while in Wenzhou and Ningbo, it is up to 3.2 yuan/bed·day and 3.3 yuan/bed·day. Some cities have further distinguished different types of medical institutions and adopt different charging standards. For example, in Nanyang, the charging standard for medical institutions with fixed beds in urban areas and counties

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is 1.9 yuan/bed·day, and 1.8 yuan/bed·day in townships. In Huangshan, medical institutions, are classified into county-level and above and township-level. The charging standard for the former is 2 yuan/bed·day while for the latter is 0.5 yuan/bed·day. The price range of medical waste disposal charged based on weight is 2.0– 5.0 yuan/kg. For instance, it is 2.0 yuan/kg in Hubei, 2.81 yuan/kg in Shanghai, 2.8 yuan/kg in Hangzhou, 3.0 yuan/kg in Tianjin, 3.5 yuan/kg in Xuzhou. In Jilin Province, some medical institutions without beds adopt the weight- based charging method, and the charging standard is quite high, mainly around 4.0 yuan/kg, and up to 5.0 yuan/kg in Yanbian. Quota-based charging method according to different levels of medical institutions: in Weihai, two levels of charging of 180 yuan and 70 yuan are implemented. In Huangshan, medical institutions without beds above county level charge at 50–100 yuan/month. In Zunyi, Yangzhou, Nanyang and other cities, medical institutions with different scales and at different levels are particularly divided and the corresponding quota charging standard is provided. Quota-based charging method according to weight: in Changsha, medical institutions that generates over 30 kg of waste per month shall pay 1,000 yuan, 20–30 kg 800 yuan, 10–20 kg 600 yuan, 5–10 kg 400 yuan, 2–5 kg 200 yuan and 0–2 kg 100 yuan. As for whether to collect waste disposal fees in outpatient departments and how much shall be charged, stipulations vary from city to city. In Nanchang and Liu’an, fees are collected according to the number of outpatients (yuan/person). In Rizhao, Weihai and Huangshan, fees are collected monthly according to fixed quota. In Changsha, Zunyi, Xiaogan and Jingzhou, medical institutions are exempt from payment. In Nanyang, Nanchang and Xiamen, 0.1 yuan/person is charged, in Tianjin it is 0.5 yuan/person and in Yangzhou it is 0.05 yuan/person for emergency department. Floating management is implemented in terms of the charging standards for medical waste disposal in some cities, that is, a benchmark price and a floating range of the charging standard are formulated by the Government. The charging policy in Hangzhou clearly shows that the charging standard is able to drop 10% to the maximum, and the specific floating range shall be jointly determined by the disposal enterprises and medical institutions. The charging policy in Ningbo takes into account the impact of transportation distance on disposal cost, allowing disposal enterprises to raise the fees up to 10% in cities with long transportation distance such as Cixi, Yuyao, Xiangshan, Fenghua and Ninghai. In Suzhou, the maximum charging standard a 10% downward range is stipulated in the bed number-based charging policy and the weight-based charging standard has a 10% fluctuation range.

3.2.3

Collecting Method

According to Article 31 of Medical Waste Management Ordinance, medical waste centralized disposal enterprises can charge medical and health institutions for

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disposal fees as per relevant national provisions. It is stipulated in the Industrialization Notice that hazardous waste disposal enterprises shall follow the provision of the price control department in the charging standard, sign a centralized disposal service agreement with medical institutions, and identify the responsibilities, rights and interests of the two sides. According to the provisions above, basically the same mode is adopted in collecting disposal fees, i.e., service contracts are signed between disposal enterprises and medical institutions; the number of beds, bed usage rate, the amount of medical wastes and other basic information and data are negotiated and determined by both parties and the disposal fees are directly paid by medical institutions to the bank accounts of disposal enterprises. It should be noted that the collecting method of medical waste disposal fees is quite different from that of urban sewage treatment fees which also belongs to urban environmental infrastructure. Urban sewage treatment fees and water charges are paid together by enterprises and individuals to a designated bank which turns in the money to the financial department. Then the financial department allocates the money to the construction department, and lastly, the construction department returns the money to the sewage treatment plant. Enterprises and individuals generating urban sewage don’t directly pay the sewage treatment plants and nor does the sewage treatment plants directly charge enterprise and individuals. The sewage treatment plants shall apply for operation funds from construction authorities and subsidies from local financial departments.

3.2.4

Bearing Method

The smooth implementation of charging policies largely depends on who bears the medical waste disposal fees. It is stipulated in the Medical Waste Management Ordinance that medical waste disposal fees can be included in medical service cost, but how to include or charge is not specified in detail. It is stipulated in the Notice that medical waste disposal fees can be included in medical service cost, which can be resolved by adjusting medical service prices, but there are no detailed provisions regarding the name of services to be adjusted or how the adjustments shall be made. In local charging documents, it is only stipulated that medical waste disposal fees shall be included in medical service cost, but there is no specific instructions for medical institutions. The investigation finds that different interpretations to the requirement of “being included in medical service cost and adjusting medical service price”, and the different phases of medical service price reform leads to different provisions on who bears medical waste disposal fees. There are three methods in practice: (1) Fees are included in the operation cost of medical institutions, but borne by patients. Medical waste disposal fees are actually borne by patients, and medical

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waste disposal fees are added to the charging list of patients in some cities such as Weihai in Shandong, Liu’an in Anhui and Tianjin. Approved by relevant authorities, medical waste disposal fees are collected by adjusting medical service price: for inpatients, medical waste disposal fees are added to the ward fees and in the transfusion clinics, disposal fees are added to the treatment fee. This method is well-accepted by medical institutions and medical waste disposal fees can be collected quite easily. (2) Fees are included in the operation cost of medical institutions but completely borne by medical institutions. In placed like Fujian Province, Beijing, Rizhao in Shandong, Changsha in Hunan and Yiyang, adjustments to medical service price lag behind. Disposal fees are included in the operation cost of medical institutions, and are fully borne by those medical institutions. In Fujian Province, it is stipulated that medical waste disposal fees shall be included in medical service cost, but cannot be collected directly from patients under the name of “hazardous waste (medical waste) disposal fee”. In the above cities, it is required that medical waste disposal fees cannot be collected directly from patients. The medical service price approved by the Price Control Department shall remain unchanged, while disposal fees shall be covered by medical institutions with their operation profits. Therefore, medical institutions are likely to resist this “extra” cost, which can easily lead to false reporting of the number of beds or arrears of charge. (3) Fees are borne by both patients and medical institutions. In some places, it is believed that medical waste disposal fees should be borne by medical institutions and patients rather than either party individually. This is a compromise method, and the specific practices vary from place to place. In Zhuzhou, Hunan, the medical waste disposal fees are mainly paid by hospitals, subsidized by public finance, and adequately undertaken by patients. In Zunyi, Guizhou, 1.85 yuan is charged for each bed and 1 yuan is paid by the hospital while the rest 0.85 yuan is paid by the patient. In Nanyang of Henan, Huangshan of Anhui, Xiaogan and Jingzhou of Hubei, it is required that disposal fees of medical waste generated from beds in medical institutions shall be borne by patients, while medical institutions without beds and clinics shall cover the expenses by themselves. In addition, it is stipulated in Nanyang that patients enjoying international assistance and free treatment approved by national policies are exempt from the disposal fees. This is to ensure the division of responsibility and ease public controversies. However, it is still difficult for medical institutions to raise their awareness of paying for medical waste disposal. As for whether disposal fees for waste disposal in outpatient departments shall be borne by patients, practices vary from city to city. In some places, the fees are already included in outpatient registration charges, while in other places, charges of this kind are explicitly prohibited. Investigations suggest that most outpatient cases don’t generate any medical wastes, and that only a few outpatient cases such as topical application of drug and drug changing for trauma and infusion produce a small amount of waste. Therefore, in accordance with the principle of “Polluter Pays”, most outpatient patients do not need to bear the disposal fees. Therefore, Nanyang’s policy that medical institutions bear the disposal fees is quite reasonable and the practices have been witnessed fruitful achievements in a certain range.

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Some cities in China are now carrying out final solutions to the medical waste disposal fees borne by patients. For example, in Huangshan of Anhui and Zunyi of Guizhou, the disposal fees borne by patients can be included in the basic medical insurance for employees, basic medical insurance for urban residents, and rural cooperative medical insurance to be reimbursed on a pro-rata basis. This approach can effectively alleviate the patients’ resistance to paying for disposal fees, which is conducive to the implementation of charging policy. There are few cities that currently provide financial subsidies for medical waste disposal. In Changde, Hunan, before medical waste disposal fees are included in the operation cost of medical institutions, the municipal government used to subsidize half of the disposal fees (disposal fee for each bed is 2 yuan and the government subsidizes 1 yuan). In Huaihua, Hunan, medical waste disposal fees in remote areas are funded by governments at prefecture and municipal level. In Zhuzhou, Hunan, the municipal subsidizes the cost according to the actual situation of medical waste disposal. In Jiyuan, Henan, 600,000 yuan is subsidized annually by the municipal finance department for medical waste disposal.

3.3 Major Problems Figure 1 reflects the relations between government departments and disposal enterprises and medical institutions and between disposal enterprises and medical institutions. It can be seen from the Figure that the Health Department supervises and manages medical institutions, that the Environmental Protection Department supervises and manages disposal enterprises, and that the Price Control Department

Fig. 1 How the charging policy works

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reviews and approves the charging standard for medical service in medical institutions and the charging standard for waste disposal in disposal enterprises. The relation between disposal enterprises and medical institutions is the interactive relation of waste collection and charge payment. Problems such as charging difficulty during the implementation process of the current charging policy are reflected in the various links shown in the Figure below.

3.3.1

Lack of Detailed Basis for Preparing Charging Standard

As there lacks adequate research and scientific accounting when preparing the charging standard, the current standard has not yet been recognized by the supply and demand sides. During the implementation of the charging standard, there exist many discrepancies between disposal enterprises and medical institutions. Disposal enterprises claim that the charging standard being implemented is quite low, making it difficult to achieve “guaranteed low profit”, while medical institutions, especially large medical institutions, think that disposal fees are quite high which makes them unwilling to pay according to the standard, and thus arrears often occur. There is omission in the cost accounting, and the cost accounting method is not clearly defined. The expressions about “cost” is not coherent, leading to different understandings of the concept and scope of the term. There are different expressions about “cost” in documents of different places, such as “operation and maintenance cost”, “disposal cost”, “operation cost” and so on. However, from the perspective of technological economics, the meaning and scope of these expressions are different, resulting in different interpretations to and practices of the concept and scope of “cost”. Environmental monitoring expenses are omitted in cost statistics while those expenses are very important for evaluating the disposal effectiveness of medical waste disposal enterprises and for implementing environmental supervision and regulation. According to relevant national provisions, medical waste disposal enterprises should carry out monitoring of dioxin emissions at least once a year. Air pollutants and pollutants discharged into the water shall be monitored in each quarter, and at the same time, the online monitoring system for atmospheric emission must be in normal operation, as the data obtained from online monitoring is an important basis for process adjustment. The monitoring and maintenance charges are quite an amount of expenditure for incineration disposal enterprises, but these expenses are not yet included in the cost accounting. Therefore, enterprises are reluctant in conducting monitoring work and maintenance of online monitoring equipment, which exerts adverse impact on the normal operation of enterprises. In addition, the goods consumption and management costs of medical waste collected separately within medical institutions are usually overlooked. Only a few regions such as Guangzhou and Ningbo allow medical institutions to retain 5–10% of disposal charges to cover the collection cost within medical institutions.

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The preparation of local charging standards of medical waste disposal is usually based on the declared cost of the only enterprise within the jurisdiction, or the charging standards of the neighboring areas are used as reference. Under such circumstances in which enterprises are barely stimulated to reduce cost, cost can be falsely high [4].

3.3.2

No Difference Shown in the Classification for Different Objects

Disposal costs of different types of medical institutions vary from different amounts of medical waste and transportation distances. At present, the charging standard in most cities adopts the bed-number based charging method, supplemented by classified quota divided into those with fixed beds and those without fixed beds. Only a few cities make further classifications. This charging method cannot reflect the differences in medical waste disposal costs. For example, as for mental hospitals with beds and general hospitals, the generation intensity of medical waste in mental hospitals is generally much lower than that of general hospitals. Thus, using the same charging standard is clearly unfair. A small number of cities take into account the impact various factors have on medical waste disposal costs, so they provide certain negotiation space for disposal enterprises and medical institutions, generally 10%~20% of approved charging standard but still distant from the actual cost difference.

3.3.3

No Specific Method for the Adjustment of Charging Standard

Factors like inflation lead to rising labor and fuel cost year by year, and correspondingly, medical waste disposal cost also increases. However, the adjustment period of charging standard identified by the government is generally 6 to 10 years, which means that the adjustment of charging standard lags way behind the changes in disposal cost. In Wuhan, for example, the current charging standard was formulated in early 2006 (WJFZ [2006] No. 23), and it has been implemented for more than 10 years, while within only two years from 2011 to 2013, unit disposal cost of medical waste in Wuhan has increased by about 8% [5]. At present, no specific stipulation has been made on the adjustment of the charging standard in relevant management methods for medical waste disposal fees all over the country. The charging policies have been implemented for more than ten years, but only a few cities once revised it and increased the fees to different degrees based on the previous charging standard.

3.3.4

Unreasonable Bearing Method for Disposal Fees

It is stipulated in the Medical Waste Management Ordinance and the Notice that medical waste disposal fees borne by medical institutions can be included in medical

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service cost, and medical institutions can adjust medical service price accordingly. However, no specific regulations have been made on the name of the services to be adjusted, how services will be adjusted or the specific practices of “being included in service cost”. Neither other documents nor local medical waste charging standards mentioned the details, resulting in the poor operation of this stipulation. At present, only a very small number of cities have identified the specific ways that patients bear disposal fees in accordance with the principle of “Polluter Pays”. In most cities, disposal fees are still borne by medical institutions, easily leading to false reporting of the number of beds and arrears. In addition, the bed-number charging model is quite common, and most cities do not charge medical waste disposal in outpatient departments. However, investigations suggest that the amount of medical wastes generated from outpatient departments is rather considerable. In 2013, the disposal cost of medical wastes in outpatient department in Huangshi Medical Waste Disposal Center alone was up to over 1 million yuan. In the National Health Service Price Specification (2012 Edition) released in September 2012, more than 9,000 medical service projects were involved, among which at least 4,000 medical service projects would generate medical waste [4]. It is not rational to simply attribute medical waste disposal charge to bed cost, which may mislead future classification and adjustment of bearing method of disposal fees.

3.3.5

Lack of Targeted Charging Policy in Remote Areas

China’s urban medical waste is basically included in the scope of centralized disposal, while safe disposal rate of medical waste in remote areas is still low with massive environmental and safety risks. Medical waste disposal in remote areas features long transportation distance, scattered distribution, low generation amount and high disposal cost. Without extra subsidies granted by the government, the only disposal enterprise in the neighborhood usually skip the disposal in those areas given limitations in transportation capability and cost. At present, one-package charging policy is adopted in most cities, while only a very small number of cities such as Nanchang and Huaihua have introduced a more detailed charging policy for remote areas. The inadaptation of policies has caused management vacancies of medical waste disposal in most remote areas.

3.3.6

Lack of Relevant Document Restraints in the Process of Charge Collection

Because of the unequal status between disposal enterprises and medical institutions, it is difficult for disposal enterprises to “ask for disposal payment”. Waste disposal charge has been characterized as operation service charge in China, so collection and payment between medical waste disposal enterprises and medical institutions is entirely a kind of market behavior. The charging policy can be implemented when

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the buyer and the seller act in accordance with the signed agreement. But in reality, current laws and regulations have mandatory provisions that medical institutions must hand over medical wastes to disposal enterprises for centralized disposal, and it is stipulated that medical institutions can adjust medical service prices to cover the fees. However, some medical institutions still have a negative attitude toward payment and some are even in arrears with disposal fees. Whether the medical institutions have paid for the fees is not subject to any restraints. Medical waste disposal enterprises are not law enforcement authorities, and they are often in a passive position when it comes to charge collection. Charge collection actually becomes “asking for charge” for disposal enterprises. There are vacancies in supervising the implementation of the charging policy. The Health Department, the Environmental Protection Department and the Price Control Department have played an important role in health supervision, pollution prevention and control, and preparation of charging standards. Due to the different functional positioning of each department, more attention is paid to whether medical institutions hand over waste to disposal enterprises for disposal, whether disposal enterprises are effective in the implementation of environmentally sound waste disposal, and whether there are arbitrary charges. However, investigations suggest that problems such as incomprehensive monitoring over the implementation of charging policy by relevant authorities and inexecution or insufficient execution of the charging policy by medical institutions are easy to be ignored. Under the market-oriented operation, if there are no effective monitoring measures taken to ensure medical institutions pay the charges in full in a timely manner, it will be more difficult to promote the industrialization of medical waste disposal.

4 Analysis of Interest Relations in Medical Waste Disposal The analysis matrix of the power/interest of various stakeholders involved in medical waste disposal is shown in Table 4. A brief contrast to the powers and interests of nine direct stakeholders in medical waste disposal is carried out, and the stakeholders are classified into 4 sections in the power/interest matrix (Fig. 2). Government departments mainly include the environmental protection department, the health department, the financial (tax) department, the price control department, the social security and the transportation department. (1)

According to the stakeholder theory, stakeholders in Section C shall be the focus of attention when preparing and implementing supporting economic policies for centralized disposal of medical waste as both their power and interest levels are high. The preparation and implementation of management systems such as Management Measures for Medical Waste Disposal needs to be promoted with joint efforts of the environmental protection and health departments, and the implementation of preferential tax policies and subsidies needs to be approved by the financial/tax departments. Therefore, it is necessary

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Table 4 Analysis matrix of the power/interest of stakeholders involved in medical waste disposal Stakeholder

Power

Interest

High/low

Specific performance

Very high

Formulate policies, High standards and plans for environmental protection, and monitor disposal facilities

Realize the objective of environmental protection and increase the implementation effectiveness of the plan

The health department Very high

Monitor medical Quite high institutions urge medical institutions to regulate waste management and improve medical waste collection rate, and promote stable and sustainable facility operation

The disposal of medical waste can be ensured and illegal discharges of waste by medical institutions are prevented

The price control department

High

Approve the charging Low standard for medical waste disposal and decide the profitability of disposal enterprises

Regularize charging behavior of medical waste disposal and promote the stable development of the disposal market

The financial (tax) department

High

Formulate and implement financial and tax policies

Collect certain tax revenues

Investor

Low

Apply for preferential Very high policies and take flexible measures to build partnerships with hospitals

Gain investment returns

Medical institution

Low

Apply for financial subsidies from the government department

Low

Avoid legal and regulation punishment due to improper waste disposal

Social public

Low

Participate in the promotion of medical waste disposal and clarify individual responsibilities and obligations

High

Enjoy improved environment made possible medical waste disposal

The environmental protection department

High/low

Quite high

Specific performance

(continued)

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Table 4 (continued) Stakeholder

Power

Interest

High/low

Specific performance

High/low

Upstream enterprise

Low

Develop economical Quite high and mature processing facilities and take the initiative in the development of the medical waste disposal industry

Gain corresponding returns from the development of the medical waste disposal industry

Practitioner

Low

Take active measures and enhance work skills

Realize stable career development along with the stable development of the industry

Quite high

Specific performance

Note Levels of power/profit in social security, transportation and financial departments are basically the same so details are not listed in the table

Fig. 2 Classification of relevant stakeholders in centralized disposal of medical waste

(2)

to ensure the stakeholders in Section C are the key participants in preparing and implementing supporting economic policies. Stakeholders in the Section D are the most difficult to deal with. The price control department only wants to ensure that the charging standard is reasonable and that there are no arbitrary charges. The price control department does not care about whether medical waste disposal enterprises have a reasonable

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(1)

profitability level, but the charging standard approved by the price control department often determines the profitability of disposal enterprises. Therefore, the stakeholders in Section D cannot be neglected. It will be best if the stakeholders in Section C can encourage those in Section D to take the initiative to serve the policy preparation and implementation process, as they are also the main participants in preparing and implementing supporting economic policies. The interests of stakeholders in Section B are closely related to the development of medical waste disposal industry, but they don’t have much power and have less influence on the preparation and implementation of supporting policies. When preparing and implementing supporting economic policies, they shall be kept informed of the latest updates such as the importance of environmentally sound medical waste disposal, the responsibility and obligation shouldered by them for medical waste disposal, and the legal basis for charging, etc. During the preparation of charging standards, opinions of disposal enterprises are necessary and their requirement on price adjustment should be promptly verified and confirmed in order to ensure that their position in the power/profit matrix remains unchanged, that is, they do not affect the policy preparation and implementation process. Stakeholders in Section A are a major obstacle toward the realization of strategic objectives, that is, the main obstacle to the implementation of supporting economic policies. Medical institutions certainly are not willing to bear corresponding medical waste disposal charges and they don’t have much decision-making power in the preparation of the charging standard, so they make “the least effort” in the supporting economic policies for medical waste disposal. During the implementation of policies, the responsibilities of each party are as follows: National Level

(2)

The departments involved at national level include the Ministry of Environmental Protection, the National Development and Reform Commission, the Ministry of Finance and the State Administration of Taxation. Among them, the Ministry of Environmental Protection is responsible for taking the lead to organize proposals for economic policies of medical waste disposal, coordinating with the National Development and Reform Commission to solve relevant issues in investment and financing policies and charging system for medical waste disposal, coordinating with the Ministry of Finance and the State Administration of Taxation to solve the specific issues related to tax preference, verifying and responding to the preferential measures proposed by the local finance and tax department, and formulating appropriate guidance on tax preference according to the actual needs. Provincial Level

(3)

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The departments involved at provincial level include the provincial environmental protection department, the health department, the financial department,

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the tax department, the social security department and transportation management department. It is recommended that the provincial environmental protection department should make joint efforts with other provincial departments to jointly issue management measures for medical waste and clarify the responsibilities and obligations of medical institutions and disposal enterprises, coordinate with the financial department to study the financial subsidies in the initial operation of medical waste disposal enterprises and the specific sharing model for medical waste disposal charges, coordinate with the social security department to study relevant issues such as the inclusion of medical waste disposal charge borne by patients into the health insurance, and coordinate with the transportation department to take measures to reduce or exempt the road/bridge tolls paid by medical waste transfer vehicles. Municipal Level The departments involved at municipal level are basically the counterparts of municipal departments. In some areas, the provincial departments perform monitoring and management functions while in other areas, the functions are performed by municipal departments. Municipal departments usually focus on implementation, and at the same time, make flexible stipulations in accordance with the real conditions of the city. The Municipal People’s Government is responsible for coordinating with various departments including the health, environmental protection, price control, finance, social security and construction departments to formulate relevant charging management approaches together, form joint supervision forces and improve the charging security. It is suggested that the health department should incorporate waste disposal into the examination and approval of medical license for medical institutions and that waste disposal contract is a must in the annual inspection. It is believed that this approach will urge medical institutions to pay for the charges and facilitate disposal enterprises to approve the number of beds and the utilization rate of beds. The environmental protection department should strengthen the monitoring and management of medical institutions to prevent waste loss. After the establishment of the “patients + medical institutions + finance” charge sharing model or other models, the municipal financial department should actively raise funds to subsidize medical waste disposal charges including medical waste transfer cost, fees charged in remote areas and fees occurred in serious epidemics. The specific amount should be determined according to the economic conditions of the region. It is recommended that the tax department offer the same level of preferential policies to medical waste disposal as those offered to domestic waste and sewage treatment. It is suggested that the municipal development and reform department and the price department should monitor the cost, and widely ask for opinions and implement hearing for the approval of charging standards for medical institutions at all levels. Charging standard should be formulated based on the actual situation in the region, and there should be differences in different sizes and grades of medical institutions. The payment rate should be increased as

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much as possible. A dynamic adjustment mechanism for the charging standard should be implemented where the charging standard needs to be adjusted timely according to the price changes of the raw materials. It is recommended that the municipal health department require medical institutions to explicitly include medical waste disposal charges into the charging system of medical institutions and adopt a separate charging code for disposal charge of medical waste so as to make the statistics more clarified. Separate accounting will be made available in medical institutions and the price control department should also regularly check the income and expenditure of medical institutions in case of misappropriation or less-paid medical waste disposal charges. Project Level The practitioner of the project, as the undertaker of medical waste disposal, shall fulfill the responsibilities and obligations stipulated in the laws and regulations. In order to ensure the environmentally sound disposal of medical waste, disposal procedures shall not be simplified and secret or reduced discharges shall be prohibited. Disposal enterprises shall take the initiative to improve the operation conditions to ensure the continued operation of disposal facilities. Payment incentive practices in Nanchang of Jiangxi, Xiaogan and Jingzhou of Hubei are encouraged to improve waste collection rate. For example, 10% of disposal charge in Nanchang of Jiangxi and no more than 5% of newly added disposal charge in Xiaogan of Hubei and Jingzhou are returned to medical institutions for classification and collection of medical waste, which to a certain extent, plays a positive role in encouraging payment.

5 Suggestions on Economic Policies for Medical Waste Disposal 5.1 Clarify Government Responsibility and Promote Innovation of Investment and Financing Mechanism (1)

Clarify Function Division of Environmental Protection between the Government and the Market Low profits in medical waste disposal are considered a social contract between disposal enterprises and the government. Therefore, during the transition period, it is essential for the government, as a defender of public interests, to financially subsidize the gap that the charging income of disposal enterprises is indeed insufficient to compensate for, including the cost of collection, transportation, transfer and terminal processing of medical waste, so as to cultivate the market. In the financial arrangement of the central and local government, operation fees should be gradually incorporated into the financial

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support priority so as to ensure the sustainable operation of disposal facilities. The use of funds should be shifted from the government investment to the government purchase. A fund usage mechanism that can well match the service demand of government purchase environment should be established to ease the government’s pressure of one-time investment and promote the investment of social capital, thus achieving the amplification effect of government funds. In the use and distribution of government funds, performance orientation should be reflected; performance goals should be set and the follow-up assessment of performance objectives should be strengthened. Performance assessment should be included in fund allocation and use so as to promote fund supervision and management. Encourage Diversified Investment and Financing and Innovation in Financial Service The investment and financing mechanism should be innovated so as to attract social capital to enter the field of medical waste disposal and to give full play to the respective superiority of the government and the market funds. Pilot project of issuing bonds of urban environmental facility construction should be carried out in order to help local areas enrich the fund sources under a reasonable size. Service methods and means of financial institutions should be improved; innovation in the product and service of environmental protection enterprises should be implemented, and financial products suitable for environmental protection projects should be developed. In addition, we should encourage environmental protection enterprises to raise funds by equity financing and project financing, support enterprises in the introduction of funds from international financial institutions in accordance with relevant provisions, and support eligible enterprises’ overseas listing and financing. Moreover, we should encourage the government, financial institutions and investment companies to set up investment funds for the environmental protection industry and provide financial support for pollution control projects and the development of environmental protection enterprises. Furthermore, we should improve the credit rating system of environmental protection enterprises and issue credit loans to eligible enterprises. Lastly, new financing guarantee models such as charging right pledge and franchise pledge should be piloted and promoted.

5.2 Make Economic Policy More Reasonable and Strengthen Policy Implementation (1)

Establish Adjustment Mechanism for Price Accounting It is recommended that some guidance documents including the accounting methods for charging standards and classification methods of medical waste disposal should be introduced at national level, that management methods of

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disposal charge should be formulated and improved at provincial level, and that monitoring and accounting of charging standard should be implemented at prefecture-city level, with specific reference of the implementation of the charging policy, thus forming a top-down and in-depth charging policy system. The price control department shall unify charge (price) composition and cost composition to ensure the accuracy of price accounting. According to the actual expenses in the operation of enterprises, the elements of cost should be further classified and the calculation method of fixed asset depreciation should be clarified. At the same time, cost monitoring of medical waste centralized disposal enterprises should be strengthened. Dynamic accounting and regular adjustment mechanism of charging standard should be established with clear price influencing factors. Taking economic development conditions into consideration, a detailed cost accounting should be conducted every 3 to 5 years and charging standard should be redefined. Cities without charging standard revision for more than 5 years should carry out cost accounting as soon as possible. Under the circumstance that government guidance price is currently implemented, floating management mechanism can be introduced when revising the standard, or on the existing basis, appropriate floating range can be enlarged, giving greater freedom of consultation to both supply and demand sides. Prepare Classified Charging Standard Based on the differences in level, size and operation of different medical institutions, charging standard will be further classified. Charging standard will be further classified for medical institutions with fixed beds based on their types. For medical institutions with fixed beds but less waste production such as mental hospitals, nursing homes and institutes of traditional Chinese medicine as well as township-level medical institutions whose medical waste production and medical income level are significantly different from urban hospitals, charging standard for fixed beds should be properly reduced. For specialized hospitals with a large amount of outpatients and a significantly small number of beds, corresponding charging standard should be formulated. Medical institutions without fixed beds should carry out different charging standards according to certain classification criteria. Medical institutions without fixed beds mainly include institutes of traditional Chinese medicine, outpatient departments, individual clinics, community health service stations, health-center clinics, dental clinics, tuberculosis control institutes, the Centers for Disease Control, maternal and child health center, blood bank and teaching and research institute, all of which need to develop corresponding charging standards. Specifically, quota and diversified standards can be set according to the weight of medical waste generated, or the types and business areas of medical institutions, or calculated according to weight with fixed price per unit weight. Preferential policies should be encouraged in special medical institutions. For example, in Wenzhou, Zhejiang it is stipulated in the charging policy for medical waste disposal (2009) that charge deduction for special beds should be carried out. In psychiatric hospitals, charges of the approved number of beds are collected

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as 50% and the exceeding part as 30%. Beds in children hospitals and children beds in general hospitals are collected as 60%, and as for private hospitals whose beds actually used are less than 40% of the approved beds, it is collected as 40% of the approved beds. Promote the Inclusion of Disposal Fees into Medical Service Cost

(4)

Reasonable determination of charge bearer and the proportion of each party are actually to seek a balance of interests among medical institutions, disposal enterprises and patients, and meanwhile the local government may in a certain period bears part of the fees with subsidies to maintain balanced interests of the three parties. To include medical waste disposal fees into medical service cost is the best way to address charging source of medical waste disposal. Medical waste disposal fees can be added to ward fees in the in-patient department or medical treatment fees in the transfusion department so as to be covered in medical insurance. In the cities where medical waste disposal fees are borne by medical institutions, medical service price should be adjusted as soon as possible to solve the source problem of disposal charge. Furthermore, medical institutions should have a comprehensive identification of medical service projects, and make scientific cost classification of medical waste disposal fees. At the same time, the cost of medical waste management and disposal should be fully taken into account, and should be included into medical service charges and be reflected in the allocation of disposal charges in the later period. Strengthen Policy Implementation The preparation and implementation of charging policy for medical waste disposal involves the environmental protection department, the health department and the development and reform department, which requires coordination and cooperation between multiple departments. It is recommended that the people’s governments at provincial and municipal level should organize relevant departments including the environmental protection department, the health department and the development and reform department to establish a joint management mechanism so as to convene meetings on problems encountered in the management of medical waste in a timely manner, actively discuss and formulate solutions and regularly carry out joint law enforcement inspection for medical institutions and disposal enterprises. Therefore, the generation, transportation and disposal of medical wastes and implementation of charging policies can be monitored; seamless cooperation between management departments such as the health department and the environmental protection department can be achieved and environmental risks can be reduced from the aspect of medical waste management. Relevant management practices in the region should be improved timely, and the joint responsibility that medical institutions are supposed to shoulder when their arrears of disposal charge cause unsafe disposal of medical waste should be clarified. The health department can adopt appropriate ways to intervene in the implementation of the charging policy. For example, full payment certificate of medical waste disposal can be regarded

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as a necessary element in the process of renewal of certificates and the annual inspection of medical institutions, so that medical institutions can be urged to pay for the full disposal charge timely in accordance with the standard.

5.3 Strengthen Preparation and Implementation of Economic Policies During Operation (1)

Develop Economic Policies for Medical Waste Disposal in Remote Areas

(2)

In view of the relatively slow progress in the centralized disposal of medical waste in remote areas, it is suggested that the government should introduce effective economic policies to promote the overall improvement of medical waste disposal. Provincial and municipal charging policies should distinguish the different situations of medical waste disposal between urban and remote areas, and charging standard and bearing methods of medical waste disposal in remote areas should be determined based on accounting the disposal cost of medical waste in remote areas. Local environmental protection department should coordinate with relevant departments to implement preferential policies for the industry of medical waste disposal and actively strive for deduction in taxes and tolls according to local conditions. Local finance departments can subsidize medical waste disposal in remote areas by investing in building transport facilities such as cold storage, or use awards instead of subsidies to improve the enthusiasm of enterprises for medical waste disposal in remote areas. In addition, the government can appropriately liberalize the exclusive franchise of medical waste disposal, thus attracting competitive and responsible enterprises to enter the disposal market in remote areas. Establish Environmental Margin System

(3)

Environmental margin system shall be jointly established by national and provincial governments to compensate medical waste disposal in case of accidents and emergencies to ensure safe disposal of medical waste under the circumstances. In the event of severe outbreaks of diseases, or disposal of some abandoned medical waste or wastes that the government determines to dispose of which requires significantly higher disposal cost, medical waste margins can be used to subsidize disposal enterprises. Accelerate Implementation of Relevant Preferential Policies It should be clarified that medical waste centralized disposal facilities belong to urban infrastructures and lay a solid foundation for the preparation of various policies of encouragement, concession, investment and financial subsidies. It is suggested that the relevant departments including the Ministry of Finance and the State Administration of Taxation should accelerate the preparation and implementation of relevant preferential policies and provide preferential policies for main taxes in accordance with the requirements of the Plan issued by

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the State Council. The local government should consider approving tax exemption or reduction in some disposal enterprises which has difficulties in paying property tax or urban land use tax and explore possibilities to reduce vehicle and vessel use tax. After performing the approval procedures, it is allowable to carry out tax deduction or tax exemption for property tax and land use tax, and the feasibility of deduction or exemption needs to be considered for vehicle and vessel use tax. It is recommended that the provincial transportation department should consider the deduction or exemption of road tolls in order to reduce the transportation cost of disposal enterprises and promote further expansion of medical waste collection network. Moreover, it is suggested that based on corporate credit ratings, preferential policies should be given to compliance and law-abiding disposal enterprises. Preferential tax policies should also be given to transfer of waste disposal and treatment technologies, introduction and implementation of advanced process, technology, equipment, materials and technological consultation, transfer and service in accordance with relevant provisions.

References 1. Sun N, Cheng L, Sun Y et al (2011) Thoughts and suggestions on the improvement of charging policies for centralized disposal of medical waste in China. China Popul·Resour Environ 21(3):195–198 2. Wang H, Chen J (2011) Problems existing with operators of medical waste disposal and countermeasures. Environ Pollut Prev Control 33(6):103–104 3. Wang Q, Wu S, Zhang Y, Lu R (2013) Thoughts on the improvement of policies on disposal and management of medical waste in China. China Environ Manag 5(2):49–53 4. Zhu J, Ren Z, Li Y et al (2016) Research on economic policies on medical waste disposal in Hubei Province. Environ Development 1:15–19 5. Li X, Liu T, Lv S et al (2014) Research report on technical and economic poicies on medical waste disposal in Hubei Province. Inner Mongolia University of Science and Technology, Inner Mongolia

Study on Electricity Substitution Plan for Residential Scattered Coal in Beijing–Tianjin–Hebei Region Ling Jin, Zhen Yan, Xiaojun Chen, Qian Tang, and Yu Lei

Abstract Beijing, Tianjin, Hebei and their surrounding areas are known as the most serious air pollution area in China. Relevant research showed that during heavy haze pollution episodes in winter, low source emissions, e.g. scattered coal combustion, contributed a lot to the concentration of PM2.5 .In order to promote civil scattered coal replacement and air quality improvement in Beijing–Tianjin–Hebei Region, CAEP research team have implemented this research to design the electricity substitution plan for civil scattered coal and analyze the corresponding economic costs and environmental effects, so as to provide decision-making reference for the government. This research was funded by the Energy Foundation. The project team carried out field visit to Beijing, Tianjin and Hebei Province, and investigated the basic status of civil coal using, the progress of energy substitution from coal to clean energy and the main obstacles. Three workshops on these issues were held in Beijing (in July 2016, March 2017 and August 2017 respectively), and relevant experts taking part in these discussions came from the Ministry of Environmental Protection, the National Energy Administration, Tsinghua University, Beijing Municipal Research Institute of Environmental Protection, Beijing Municipal Commission of Rural Affairs, Tianjin Development and Reform Commission and other relevant agencies. Keywords Scattered coal · Electricity substitution · Residential · Beijing–Tianjin–Hebei region

1 Introduction Scattered coal refers to the coal that is used in small coal furnaces or small coalfired boilers other than that used in large industrial facilities (power generation, refinery works, etc.). Although the consumption of scattered coal is far below the coal consumption in large industrial facilities such as power plants, iron and steel plants, and construction materials industry, the pollutants discharge per unit of coal L. Jin · Z. Yan · X. Chen (B) · Q. Tang · Y. Lei Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_7

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consumption contribute more to the air pollution than that of large coal-fired equipment. It is due to lack of pollution reduction facilities, poor quality of the coal and lower stack height. Therefore, air pollution derived from scattered coal combustion is a pressing problem that needed to be solved. In order to replace the scattered coal for civil use and improve the air quality in the heating season, Beijing, Tianjin and Hebei have invested a lot and taken many comprehensive measures in recent years, and gained certain effect. Beijing is an exemplary city which started early in controlling scattered coal pollution and has made fast progress. By the end of 2016, 384,500 households had adopted electric heating instead of coal furnace, and nearly no coal used in core areas in Beijing. This report summarized the experience and lessons in “coal to electricity” project of Beijing, in order to provide reference for other cities. At present, main obstacles in the control of civil scattered coal in Beijing–Tianjin–Hebei Region include huge financial investment, insufficient electric grid infrastructures, significant difference between the prices of natural gas, electricity and coal for heating purposes, and difficulty in changing the living habits of residents. There are many “coal to electricity” technologies applied at present. This report summarizes the current mainstream technologies, compare the costs, merits, drawbacks and suitable conditions of different electric heating technologies including separate air-source heat pump (including low-temperature air source hot-wind heat pump and low-temperature air source hot-water heat pump), ground source heat pump, thermal energy storage electric heater and direct electric heating technology. Cost is a main factor to consider in carrying out the “coal to clean energy” project in rural areas, we also compare the costs of different electric heating technologies and coal heating technologies. The heating costs mainly include initial investment, annual operation cost and maintenance cost. In this report we also put forward the general guideline, principle and technology roadmap of “coal to electricity” policy. “Coal to electricity” is one of the important ways to control the using of scattered coal and should be implemented under the general guideline and framework of scattered coal control. Scattered coal should be controlled following the principles of “adjusting measures to local conditions, implementing the policy by categories, advancing the implementation step by step, and taking multiple measures”. The “coal to electricity” project mainly aims at those household users who burn scattered coal for heating and live in urban and suburban areas, and villages outside the coverage of gas and heat pipe networks. In order to provide reference for policy making, we set two policy scenarios. There are self-defined objectives of each province in scenario 1, and more aggressive objectives in scenario 2. We have analyzed the scale and costs of implementing “coal to electricity” project in households in Beijing–Tianjin–Hebei region during the “13th Five-Year Plan”, and also analyzed the environmental, health and social benefit in different scenarios. At the end of this report, we make a few policy recommendations for the scattered coal control in Beijing–Tianjin–Hebei region.

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2 Scattered Coal Consumption and Air Pollution 2.1 The Definition and Types of Scattered Coal Scattered coal refers to the coal that is used in small coal furnaces or small coalfired boilers other than for the industrial centralized coal-fired facilities, e.g. power generators. According to its application fields, scattered coal can be subdivided into five categories: 1. scattered coal used in rural households, i.e., coal used by rural residents for heating and cooking; 2. scattered coal used in urban households, i.e., coal used by urban residents for heating and cooking; 3. scattered coal for agricultural production, i.e. coal used for running agricultural greenhouses and breeding in rural areas; 4. scattered coal used for commercial activities, i.e., coal used in catering, baths, etc.; 5. scattered coal for enterprises and public institutions, i.e., coal used for heating and running canteens in enterprises and institutions such as government organizations, schools and hospitals. Since over 80% of scattered coal is used in rural and urban households, this study focused on the pollution control of the first two types of scattered coal. Although the quantity of civil coal consumption is far smaller than the coal consumption in the key industries such as power generation, iron and steel, and construction materials industry, the pollutants discharge per unit civil coal consumption contributes more to air pollution than that of coal consumption in large coalfired equipment due to the lack of pollution reduction facilities and low pollutant discharge height. Therefore, reducing the air pollutants discharge from scattered coal combustion is essential.

2.2 Scattered Coal Consumption is the Main Source of Atmospheric Pollution in the North China in Winter Since the implementation of the Action Plan on Prevention and Control of Air Pollution (hereinafter referred to as the “Action Plan”) in China in 2013, pollution control measures and regulations have become stricter in the industry, transportation and other fields, which plays an important role in air quality improvement. The annual average concentration of PM2.5 in key areas showed a decrease trend, however, frequent heavy pollution still occurred in winter and the air quality in the heating season was not worse than the rest of the year. According to the data in the Green Book of Climate Change: Annual Report on Actions to Address Climate Change (2013), jointly issued by the Chinese Academy of Social Sciences and China Meteorological Administration, the hazy days in China showed obvious seasonal characteristics. The number of hazy days in winter accounted for 42.3% of the total hazy days all year around. according to the monthly monitoring data in Beijing, Tianjin, Hebei and the surrounding 45 cities from2013 and 2016, the concentrations of the four key pollutants, i.e., SO2 , NO2 , PM10 and PM2.5 , in the heating season (from November to February of the next year) were all higher than those in the non-heating seasons.

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The average concentrations of SO2 , NO2 , PM10 and PM2.5 in heating seasons from 2015 to 2016 was 2.4, 1.4, 1.4 and 1.8 times of that in the non-heating seasons, respectively (Figs. 1 and 2).

Fig. 1 The trend of air quality average concentration of 45 cities located in Beijing, Tianjin, Hebei, Henan and Shandong Areas between 2013 and 2016

Fig. 2 The comparison of air quality between the heating seasons and non-heating seasons of 45 cities located in Beijing, Tianjin, Hebei, Henan and Shandong Areas

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The study showed that coal-fired heating caused an increase in SO2 and PM concentration, and in heating seasons, the contribution of coal combustion pollution in some northern cities even exceeded the industrial source and transportation source during certain periods, becoming the major pollution source. The analytical study on the pollution sources in the Beijing–Tianjin–Hebei region conducted by Tsinghua University showed that the civil pollution source contributed 29% to the annual PM2.5 concentration in this region in 2013, and this number rose to 48% [1] in winter. The civil pollution became the primary contributor to PM2.5 in the Beijing– Tianjin–Hebei region in winter. In days of heavy pollution, the automotive exhaust emission contributed less especially when taking some emergency measures such as driving restriction and production halt and restriction, but the coal combustion contributed much more.

2.3 The Heating Methods Need to Be Upgraded The percentage of district heating adoption in the urban areas of north China is about 76%, and that in cities and counties is higher (88%), but that in the towns is relatively low, only 20% (Table 1). In terms of energy types used for heating in rural areas, among 160 million rural households in China, about 93 million [3] adopt distributed heating; 66 million households adopt coal heating and 27 million households adopt biomass heating or other methods (see Fig. 3). Except for the Beijing–Tianjin–Hebei region where briquette is used at a higher rate, most rural areas in north China use raw coal for heating and the rate of using clean briquette is low. In terms of heating facilities, the majority of the residents in rural areas in north China use inefficient stoves, small boilers and ‘home-made heating system’. Because the self-made heating facilities are still widely used, the inefficient and poor quality stoves have a big market share. The coal burned is mainly cheap poor quality bituminous coal, which aggravates air pollution (Fig. 4).

Table 1 Areas adopting district heating in the urban areas in the north in 2013 [2] Unit: 108 m2

Cities and counties

Towns

Total amount

Construction area

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20

120

Area of district heating

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Distric heating 1.3% No heating 40.3%

Coal 70.6%

Distributed heating 58.4%

Biomass and others 29.4%

Fig. 3 Heating methods and structure of energy use in China’s rural areas

Self-made heating facilities 34%

Commercialize d heating facilities 66%

Environmentfriendly energysaving stoves 23%

Inefficient and poor quality stoves 77%

Fig. 4 The percentage of existing heating facilities in China’s rural areas

In summary, controlling scattered coal and promoting cleaner heating methods in the north are important measures to alleviate air pollution in winter. On December 21, 2016, China’s General Secretary XI Jinping pointed out in the speech at the 14th session of the Central Leading Group on Financial and Economic Affairs that promoting cleaner heating methods in winter in north China is related to a warm household for the masses in the north and the reduction of haze days. It is an important part of the revolution of energy production and consumption, and the revolution of rural life style. Enterprises should play the key role in promoting cleaner heating methods with supports from the government, finding more affordable heating methods for residents. They should utilize clean energy as much as possible to improve the percentage of heating supply powered by clean energy, such as natural gas or electricity whichever is suitable.’

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3 Current Pollution Caused by Scattered Coal in Beijing − Tianjin—Hebei Region and the Related Control Measures 3.1 Current Consumption of Scattered Coal and Its Environmental Impacts on Beijing–Tianjin–Hebei Region Scattered coal is a main form of energy used for heating in Beijing–Tianjin–Hebei region in winter. Taking Hebei province as an example, scattered coal, coal-fired district heating, natural gas, electricity and geo-thermal accounted for 58.6, 30.4, 4.7, 2.4 and 2.1% of the total amount of energy used for heating in 2015, respectively, and the remaining was biomass. According to the investigation and estimation of the project team, in 2015, the consumption of scattered coal in households in Beijing, Tianjin and Hebei (including cities, towns and the countryside) were about 3.2 million tons, 1.42 million tons and 35.51 million tons respectively, a total of 40.13 million tons, accounting for 10.6% of the total coal consumption in these three municipal cities or province in 2015. The scattered coal consumption intensity per unit area in this region was 4.5 times of that in the country. Heavy pollution in winter was believed to be caused by huge amount of scattered coal consumption, poor coal quality and lack of pollution control measures. According to the environmental statistics in 2015, the emissions of SO2 , NOx , PM10 , PM2.5 , CO and VOCs from scattered coal burning in Beijing–Tianjin–Hebei region in 2015 were 30,000 tons, 50,000 tons, 320,000 tons, 255,000 tons, 4,422,000 tonsand109,000 tons, respectively, accounting for 18% of the total smoke and dust emission, 16% of the total SO2 emission and 3% of the total NOx emission. (According to the compiling explanation of the Technical Guidance for Compiling Air Emissions Inventory of Civil Coal [4], in the emissions of particulate matters by the using of civil coal, PM10 accounts for about 90% of smoke and dust. The scattered coal burning contributed to 9.9, 11.9 and 13.2% to the atmosphere PM2.5 concentration in the in Beijing, Tianjin and Hebei, respectively, more to the PM2.5 concentration in lower altitude.

3.2 Scattered Coal Control Policies in Beijing–Tianjin–Hebei Region and Progress of Their Implementation In order to replace the scattered coal for civil use and to improve the air quality in the heating season, Beijing, Tianjin and Hebei have made heavy investment to promote clean coal and coal substitution in recent years. By the end of 2016, the ‘coal to electricity’ project had been comprehensively progressed in Beijing where 384,500 households had adopted electric heating, and almost no coal was used in

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the core areas in Beijing. Tianjin had made great efforts to popularize smokeless briquette and advanced civil stoves and had successfully replaced scattered coal with clean briquette. Wuqing district, Tianjin carried out ‘coal to electricity’ project and 196,200 tons of scattered coal had been replaced. Hebei Province designated 18 counties around Beijing in Baoding and Langfang as non-coal-using areas, where 318,700 households had replaced coal with electricity or gas. Households in central Handan had all replaced coal with gas and such cities as Shijiazhuang, Xingtai had set up a number of ‘coal to electricity’ and ‘coal to gas’ clean energy demonstration projects. Beijing is a model city which started scattered coal control very early, and has made outstanding progress since ‘coal to clean energy’ project in 2003. By the end of 2015, the task of ‘coal to clean energy’ for 310,000 households in Dongcheng district and Xicheng district had been completed. In rural areas, 74,500 households had completed the transformation of ‘coal to clean energy’ since 2013. The introduction of a series of policies such as Intensified Measures for Prevention and Control of Air Pollution in Beijing, Tianjin and Hebei (2016–2017), Work Scheme for Accelerating the Replacement of Civil Scattered coal by Clean Energy in Beijing for the Period of 2016–2020 and the 2016Guiding Opinions on Promoting the ‘Coal to Clean Energy and Reduction and Replacement of Coal’ Project in Villages in the Rural Areas of Beijing has clarified the goal, deadline and direction of scattered coal control and driven the process of that efforts in Beijing. Beijing is making efforts to realize “non-coal-using” in its core areas and the plain areas in its four southern districts by the end of October 2017, and to completely adopt clean energy for heating in the rural plain areas of the whole city by 2020. The guideline of controlling scattered coal in Beijing is ‘using various forms of energy; simultaneously implementing various measures; step by step’. It has divided the civil scattered coal pollution control measures into two categories: ‘coal reduction’ and ‘coal replacement’. ‘coal reduction’ means replacing coal with such high-quality clean energy as electricity, natural gas, municipal heating power, solar energy and liquefied petroleum gas in the areas that meet the requirements. ‘Coal replacement’ means replacing the soft coal/scattered coal currently used by the residents with high-quality briquette of lower content of sulfur that emits fewer pollutants in the poor areas. Residents were encouraged to use systems such as low-temperature air sources pumps powered by geo-thermal and solar energy plus auxiliary energy which integrated different kinds of equipment based on the principle of ‘using various forms of energy, combining various kinds of heating forms and unifying different sources. The heating scheme for residents was based on local conditions, taking each rural household as an individual system and designing the heating plan for each household according to its requirements and actual conditions. Meanwhile, more financial subsidies were given to support the clean energy infrastructure construction. Taking the ‘coal to electricity’ project as an example, a series of policies were issued to support the promotion of the electric heating equipment, improving the insulation of farmer houses, external power and household wiring grid retrofit. For the retrofit of external power grid of 10 kV or less for households, the State Grid Beijing Electric Power Company would pay 70% and the Municipal Development and Reform Commission will pay 30% for

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the fixed asset investment. For household wiring retrofit and peak-valley electricity meter connected to the heating equipment (not included), cities and districts (counties) government would pay 60 and 40% respectively. For the heating equipment, the city and district (county) government would both one third of the total price. Residents who joined the ‘coal to electricity’ project would pay the electricity bills according to the peak-valley electricity price in the heating season, and the time for preferential electricity price is from 21:00 to 6:00 next day, during which users only need to pay 0.1 yuan/Kilowatt-hour after receiving subsidies. The cost of electric heating was basically equivalent to that of coal burning. The practical experience for controlling scattered coal in the Beijing–Tianjin– Hebei region can be summed up as the following six points: (1) Set up a cooperation mechanism among government departments, including the Development and Reform Committee, Ministry of Energy, Ministry of Finance, Ministry of Housing and Urban–Rural Development, Ministry of Agriculture, Ministry of Environmental Protection and State Power Grid. (2) Strengthen the infrastructure construction, such as the power grid and natural gas pipeline network. (3) The special fund for prevention and control of air pollution played a key role in offering subsidies for electricity price, gas price, heating facilities, power grid construction and clean briquette, and the subsidies from governments at all levels were put in place. (4) Heating schemes were designed for each household according to local conditions following the principle of ‘using various forms of energy, simultaneously implementing various measures, step by step’. (5) Standard relevant procedures and norms. Beijing released several guidelines for testing standards, bidding and tendering procedure, internal design and installation, choice of heating technology and requirement for maintenance. (6) Strengthen the supervision of the quality of scattered coal. In the Beijing–Tianjin– Hebei region, the sulfur content of the coal for civil use must not exceed 0.4%, and there are also requirements for its ash content and volatile matters. The main problems in the scattered coal control at present include: (1) Lack of top-level design and unified planning; (2) Insufficient supporting capacity of the infrastructure; (3) Lack of effective, sustainable economic incentives and rewarding mechanisms, and to the government, financial subsidies are too high; (4) It is difficult for the masses to change their habit of using coal for heating, so there were phenomena of getting the subsidies by cheating and using coal again after adopting electric heating; (5) Scattered coal is heavily used in a wide range of facilities without effective supervision methods.

4 Analysis of the Mainstream Technology for ‘Coal to Electricity’ The forms of electric heating in winter are divided into district electric heating and distributed electric heating according to the heating scales. District electric heating includes such technology as centralized heating pump and heat accumulating electric

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boiler. Distributed electric heating includes separate air-source heat pump (including the mainstream technology—distributed electric heating suitable for rural residence and low-temperature air source hot-water heat pump), ground source heat pump, thermal energy storage electric heater and direct electric heating technology. The merits and drawbacks of different electric heating technology and comparison of their suitable conditions are shown in Table 2. Due to the lower level of economic development in rural areas, people consider the initial investment and operation costs more. Money-saving should be taken as the primary factor when carrying out the ‘coal to clean energy’ project in rural areas. The heating costs mainly include: (1) Initial investment: cost for purchasing the heating equipment and installation fee, not including the end facilities for heating; (2) Annual operation cost, namely the fees for electricity or natural gas used by the equipment, and the main influencing factors are living habits of the users and the insulating condition of the house. The operation cost subsidies in Table 3 was calculated based on the subsidizing standard for electricity price in Beijing: the electricity price during valley period, which is from 21:00 to 6:00 the next day, is 0.1yuan/kWh after subsidizing and the price is 0.4883 yuan /kWh during other time period. (3) Maintenance cost. Comparison of costs of electric heating and other heating methods are shown in Table 3. Among the users’ choices of technology for ‘coal to electricity’ in the rural areas of Beijing, air source heat pump was the mainstream technology. 199,000 households in 574 villages in Beijing completed ‘coal to electricity’ in 2016, and among them, 151,000 households adopted air source heat pump, accounting for 76.28% of the total number of households, 44,300 households adopted thermal energy storage electric heater, accounting for 22.30%, 2,139 households adopted ground source heat pump, accounting for 1.07% and 688 households adopted other types of electric heating facilities, accounting for 0.35%.

5 ‘Coal to Electricity’ Scenarios and the Relevant Costs in Beijing–Tianjin–Hebei Region During the 13th Five-Year Plan Period 5.1 The General Guideline of Coal to Electricity ‘Coal to electricity’ is one of the important ways to control the using of scattered coal and should be implemented under a general guideline and framework. Scattered coal control is a systematic project, benefitting environmental protection, improving people’s livelihood and energy optimizing. Scattered coal should be controlled following the principles of ‘adjusting measures to local conditions, implementing the policy by categories, advancing the implementation step by step, and taking multiple measures. In the Beijing–Tianjin–Hebei region, the scattered coal should be controlled step by step, considering the urgency of air pollution prevention

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Table 2 Comparison of electric heating technology Description of technology

Merits

Drawbacks

Suitable conditions

Low-temperature air source hot-wind heat pump

High Coefficient of Performance (COP): (2.5–3.5), convenient to install and simple to control, can be opened at any time to use it, which can save energy, fast temperature increase and low failure rate

Direct wind blowing makes poor customer experience

Because it needs to be installed separately in each room and it is restricted by the limit of the outdoor power in rural residences; suitable for houses less than 5 rooms or within 150 square meters. Upgrading of the power grid is needed for popularization of the technology in the whole village

Low-temperature air source hot-water heat pump

High COP; heating the Limited water and the floor, good energy-conservation by customer experience behavioral habits. When using the automatic defrosting mode at low temperature, the water temperature will drop resulting in low indoor temperature. Electric heating is needed to raise temperature, causing a higher cost

Suitable for rural residence who have a high demand for heating, more rooms or large area to be heated. Upgrading of the power grid is needed for popularization of the technology in the whole village

Ground source heat pump

High COP (2.8- 3.8); lower demand for external power source and the heating source is steady; more comfortable and lower operation cost

High initial investment, complicated technology and more concealed construction, restricted by the engineering, construction and hydro geological conditions, difficult to repair in case of malfunction, insufficient soil concurrent heating will shorten its service life

Suitable for houses with large space areas and mobile underground geological structure in regions with stable geothermal resources

Thermal energy Simple to install, easy to COP ≤ 1, higher storage electric heater operate, no outdoor demand for power equipment and no noise supply, when heat storage is insufficient, electricity at non-preferential price is needed, raising the operation cost. The exothermic property of heat-storing materials is fixed and not controllable, slow to raise indoor temperature

Convenient to install but relies more on external power grid. It can be popularized in houses with lower rooms and small areas

(continued)

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Table 2 (continued) Description of technology

Merits

Direct electric heating Simple to install and technology flexible to operate, no noise

Drawbacks

Suitable conditions

COP ≤ 1; heavy energy consumption, high electricity bills, the electric capacity needs to be greatly expanded

It is generally used by residents who cannot install heat pumps and users in “villages in the city”. Beijing forbad its popularization in 2017

and control, the difficulty in progress of work, and the residents’ ability to shoulder economically. Beijing, Tianjin and eight cities in Hebei Province in the air pollution transmission channels should be highlighted. The eight air pollution transmission channel cities in Hebei Province are Shijiazhuang, Langfang, Baoding, Tangshan, Cangzhou, Hengshui, Xingtai and Handan. Following the principle of ‘urban areas first and then villages and towns’, adopt clean heating in urban areas, rural–urban continuums, industrial parks and key villages and towns, from plain areas to remote mountain areas, that is, implement the project from villages and towns with good infrastructure conditions to other villages and towns.

5.2 Application Scope and Technological Routes of ‘Coal to Electricity’ Coal to Electricity conversion in households is targeted at users who burn scattered coal for heating in urban and suburban areas, and villages outside the coverage of gas and heat pipe networks. Priority should be given to developing district heating with combined heating and power generation and the heating supplied by industrial afterheat. In the regions where the two patterns mentioned above are hard to cover, distributed electric heating should be promoted upon the local conditions, prioritizing the popularization and use of air source heat pumps and ground source heat pumps with higher coefficient of performance (COP), and the use of energy-storage electric heaters should be restricted. Moreover, directly-heated electric heating should be used with care since its energy efficiency ratio is low.

5.3 ‘Coal to Electricity’ Scenarios in Beijing–Tianjin–Hebei Region and Their Costs The scale and costs of implementing ‘coal to electricity’ conversion in households in the Beijing–Tianjin–Hebei region during the 13th Five-Year Plan were analyzed using a scenario analysis method, and the environmental, health and social benefits in

0.05–0.09 0.01–0.05

Heat supply by burning scattered coal

3.0–4.0

Air source heat pump + solar energy

Briquette

0.7–1.0

Thermal energy storage electric heating (Compressed brick type)

Coal

1.2–1.9

Electric boiler

0.6–0.8

1.3–1.9

Electric floor-heating system

Wall-mounted gas boiler

4.0–5.0

Ground source heat pump

Natural gas

3200–4900

2.5–3.5

Low-temperature air source hot-water heat pump

550–950

1200–2800

4000–5600

1300–2400

4900–6500

9700–13,000

6500–9700

1300–1600

1600–3300

yuan/Household

10,000 yuan/Household

Low-temperature air 1.2–1.8 source hot-wind heat pump

Electricity

Operation cost for each household in the heating season (subsidies are not included)

Initial investment of each household

Description of technology

Type of energy

Table 3 Comparative analysis of costs of electric heating and other heating methods

/

600–1200

2600–3500

800–1600

3200–4200

6000–8100

4100–5900

800–1000

2000–2900

1000–1800

yuan/Household

Operation cost for each household in heating season (subsidies are included)

/

/

/

3.6–7.2

7.2–18.0

7.2–10.8

7.2–10.8

3.1–3.6

3.6–4.0

3.6–4.0

Kilowatt/Household

Demand for electric power supply

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Table 4 ‘Coal to electricity’ objective scenario plans in the Beijing–Tianjin–Hebei Region in 2020 Region

Scattered coal consumption in 2015

Scenario 1: self-defined objective scenario in each province

Beijing

3.20 million tons, and ‘Coal to electricity’ is to 1.1 million be carried out for a total households of 0.674 million households, with 60% complementation

‘Coal to electricity’ is to be carried out for a total of 0.75 million households, with 70% complementation

Tianjin

1.42 million tons, and ‘Coal to electricity’ is to approx. 0.60 million be carried out for a total households of 0.35 million households, with 58% complementation

‘Coal to electricity’ is to be carried out for a total of 0.4 million households, with 67% complementation

8 transmission channel cities in Hebei Province

29.47 million tons, and approx. 9.49 million households

‘Coal to electricity’ is to be carried out for a total of 1.8 million households, with 20% complementation

Zhangjiakou, Chengde and Qinhuangdao

6.04 million tons, and / approx.1.94 million households

‘Coal to electricity’ is to be carried out for a total of 0.2 million households, with 10% complementation

Total

40.13 million tons, and approx.13.13 million households

‘Coal to electricity’ is to be carried out for a total of3.15 million households, with 24% complementation

‘Coal to electricity’ is to be carried out for a total of one million households, with 11% complementation

‘Coal to electricity’ is to be carried out for a total of 2.02 million households, with 15% complementation

Scenario 2: intensified objective scenario

different scenarios were also studied. With the indoor heating pollution reduction and atmospheric air quality improvement as the fundamental starting points, and considering the status quo of scattered coal consumption for civil use, energy resources and infrastructure conditions, air quality in different cities, and requirements on pollution control in the Beijing–Tianjin–Hebei region, we scenario plans for Coal to Electricity conversion in households in the Beijing–Tianjin–Hebei region during the 13th Five-Year Plan were set up. The ‘coal to electricity’ objective scenario plan in the Beijing–Tianjin–Hebei region in 2020is detailed in Table 3, where Scenario 1 is a self-defined objective scenario of each province, and Scenario 2 is an intensified objective scenario. Costs for each ‘coal to electricity’ scenario plan include three parts: (1) one-time investment in the heating equipment, which is about 21,000 yuan per household; (2) annual operation cost, which is about 3,300 yuan/year for each household, without considering feed-in tariffs; (3) costs for electricity grid retrofit at all or different levels, which is about 50,000 yuan per household according to research data from Beijing Power Grid. The results of the cost analysis for each ‘coal to electricity’ objective scenario plan in the Beijing–Tianjin–Hebei region in 2020 are detailed in Tables 4 and 5.

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Table 5 Cost analysis of ‘coal to electricity’ objective scenario plans in the Beijing–Tianjin–Hebei Region for 2020 Cost

Cost

Scenario 1: self-defined objective scenario of each province

Scenario 2: intensified objective scenario

One-time investment in heating equipment (100 million yuan)

425

662

Annual operation cost (without feed-in tariffs) (100 million yuan/year)

67

104

Investment in electricity grid retrofit (100 million yuan)

1012

1575

6 Analysis of Environmental, Economic and Social Benefits of ‘Coal to Electricity’ in Beijing–Tianjin–Hebei Region ‘Coal to electricity’ project in the Beijing–Tianjin–Hebei region will bring benefits in environmental, health, economic, and social aspects, including: (1) Environmental benefit. It will reduce the emissions of major air pollutants and greenhouse gases, resulting in improved atmospheric and indoor air quality. (2) Health benefit. It will reduce the respiratory and cardiovascular diseases triggered by air pollution caused by scattered coal combustion, and the premature deaths related to air pollution. (3) Social benefit. It will improve the life quality of residents, and people are able to experience more comfortable and safer winter heating. It will increase electricity consumption, reducing the abandonment of wind and solar power, stimulate the development of related industries, including renovation of rural power network, and promoting the development of related electric transmission and transformation equipment and indoor electricity meter manufacture. Based on the scenario plans, the benefit of the ‘coal to electricity’ project in the Beijing–Tianjin–Hebei region will greatly outweigh its investment cost.

6.1 Environmental Benefits from Civil Scattered Coal Reduction 6.1.1

Air Pollutants Emission Reduction

Civil scattered coal consumption has a great impact on local air quality, due to the large amount of consumption, low combustion efficiency, no pollutant abatement facilities, and low altitude emission. The implementation of ‘coal to electricity’ project will reduce the emissions from civil scattered coal burning, which will have a significant effect on the improvement of air quality, especially in winter.

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In scenario 1 and scenario 2, the quantity of civil scattered coal consumption would be reduced by 5.87 million tons and 9.26 million tons, respectively. The reduction potential of SO2 , NOx, PM2.5 and PM10 emission was estimated using an emission factor method. In scenario 1, SO2 , NOx, PM2.5 and PM10 would be reduced by 2.84 × 104 tons, 0.59 × 104 tons, 2.86 × 104 tons and 3.61 × 104 tons, respectively, accounting for 12.4, 11.7, 11.3 and 11.2% of total emissions from civil scattered coal combustion (Table 6). In scenario 2, the quantity of SO2 , NOx, PM2.5 and PM10 reduction would be 4.76 × 104 tons, 0.97 × 104 tons, 5.03 × 10 4 tons and 6.33 × 104 tons, accounting for 20.7, 19.4, 19.8 and 19.8% of total emissions from civil scattered coal combustion. Considering the proportion of civil scattered coal to the total coal consumption (13.6%), the PM2.5 emission intensity per unit quantity of scattered coal combustion (about 5 times of that in coal-fired power industry), the results of PM2.5 source apportionment in Beijing–Tianjin–Hebei region, the contribution of civil scattered coal combustion to PM2.5 concentration was estimated, and the decrease of PM2.5 concentration caused by civil scattered coal reduction was calculated. The results showed that in scenario 1 and scenario 2, the reduction of PM2.5 concentration in the Beijing–Tianjin–Hebei region would be 3.6 µg/m3 and 4.3 µg/m3 , respectively. In this research, we average the value of the PM2.5 reduction caused by the reduction of civil scattered coal in the municipal cities and province. However, ‘coal to electricity’ project is implemented in rural areas, the concentration of PM2.5 in rural areas will fall more than the city. In addition, the contribution of civil scattered coal burning in heavy pollution episodes is greater than in the normal days, therefore, the effect of the ‘coal to electricity’ project on PM2.5 reduction in heavy pollution days should be greater (Table 7). Table 6 Pollutant emission reduction in the two scenarios (104 tons) Scenarios

Region

PM2.5

PM10

Scenario 1

Beijing

0.73

Tianjin

0.32

0.16

0.55

0.70

0.07

0.24

0.31

Hebei Total

1.79

0.35

2.07

2.60

2.84

0.59

2.86

3.61

12.4%

11.7%

11.3%

11.2%

Beijing

0.81

0.18

0.61

0.78

Tianjin

0.36

0.08

0.28

0.35

Hebei

3.59

0.71

4.14

5.20

Reduction percentage % Scenario 2

Total Reduction percentage %

SO2

NOx

4.76

0.97

5.03

6.33

20.7%

19.4%

19.8%

19.8%

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Table 7 Annual average PM2.5 concentrations in different regions in the two scenarios Region

Annual average concentration of PM2.5 µg/m3

Contribution of coal combustion in PM2.5 source apportionment (Heavy air pollution) %

Contribution of scattered coal combustion to PM2.5 (Heavy air pollution) %

Decline of annual average concentration of PM2.5 µg/m3 Scenario 1

Scenario 2

Beijing

80.6

22.4(32.2)

9.9(14.2)

4.9

5.4

Tianjin

70.0

27.0(30.8)

11.9(13.6)

4.9

5.6

Hebei

77.0

30.0(34.0)

13.2(15.0)

1.1

2.0

Total

75.9

–

–

3.6

4.3

6.1.2

Green House Gas Emission Reduction

(1) CO2 emission reduction The combustion of coal, oil and other fossil fuels produce SO2 , NOx, PM10 , PM2.5 and other pollutants which caused the deterioration of air quality. Huge amount of greenhouse gas are also emitted during the combustion process. 90% of greenhouse gas in China comes from fossil fuel combustion, of which 68% comes from coal combustion [5]. Therefore, strengthening the management of civil scattered coal and replacing civil scattered coal with cleaner and more efficient energy is important for carbon reduction. In scenario 1, Beijing–Tianjin–Hebei region would reduce 641.2 × 104 tons of CO2 emission, of which Beijing, Tianjin and Hebei would reduce 218.4 × 104 tons, 82.9 × 104 tons and 339.9 × 104 tons, respectively. In scenario 2, Beijing–Tianjin– Hebei region would reduce 1017.5 × 104 tons of CO2 , of which Beijing, Tianjin and Hebei would reduce 243.0 × 104 tons, 94.8 × 104 tons and 679.8 × 104 tons CO2 respectively (Table 8). (2) Black carbon emission reduction Black carbon is produced by incomplete combustion of fossil fuels and bio fuels, which is a particulate matter with strong light-absorbing and it is one of the main components of PM2.5 . Black carbon hasa significant impact on climate change and human health, which is the second largest source of global warming. Civil scattered coal is the main source of black carbon emission [6], therefore to reduce black carbon emission, we must reduce the use of civil scattered coal firstly. According to the related research [7], the black carbon emission coefficient from coal-fired power plants is 0.0013 g/kg, while the coefficient of civil scattered coal is up to 3.05 g/kg, which is more than two thousand times of that of power plant. In scenario 1 and scenario 2, the emission of black carbon in the Beijing–Tianjin–Hebei region would be reduced by 0.76 × 104 tons and 1.35 × 104 tons, as shown in Table 9.

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Scenario 1

Beijing

218.4

Tianjin

82.9

Hebei

339.9

Scenario 2

Table 9 Black carbon reduction in the two scenarios scattered coal scattered coal scattered coal

CO2 reduction (104 tons)

Scenarios

Total

641.2

Beijing

243.0

Tianjin

94.8

Hebei

679.8

Total

1017.5

Scenarios

Region

Black carbon reduction (104 tons)

Scenario 1

Beijing

0.13

Tianjin

0.06

Hebei

0.57

Total

0.76

Beijing

0.15

Tianjin

0.07

Hebei

1.14

Total

1.35

Scenario 2

6.2 Other Benefits The ‘Coal to Electricity’ project will increase the power consumption, reducing the wind power and solar power abandoning. At present, there is a problem of power surplus in China. From 2010, the growth rate of electricity consumption was declining, especially from 2013, thermal power utilization hours decreased significantly. Wind power, solar power and other renewable energy power utilization hours also showed a rapid decline trend. In 2015, the situation of wind power and solar power abandoning was deteriorated. The wind power abandoning rate in Hebei Province was 10%, and in Inner Mongolia, which is the main area for power supply to the North China, the abandoning rates of wind power and solar power were 18% and 10%, respectively, of which 86% occurred in winter. ‘Coal to electricity’ project in Beijing–Tianjin–Hebei region will greatly promote the development of the relevant industries, such as equipment manufacturing and related service industry. In scenario 1 and scenario 2, the ‘coal to electricity’ project will bring the economic benefits of 112.1 billion Yuan and 1730.6 billion yuan, in the aspects of electric heating equipment manufacturing, equipment maintenance, building insulation and reinforcement and so on. The ‘Coal to electricity’ project will improve the quality of life of rural residents. Switching to electricity heating, the room temperature is stable, and the rural residents

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don’t have to take care of the coal stove in cold winter. The house is free of coal ash, and the rural residents will never be worried about gas poisoning, fire and other problems. The ‘Coal to electricity’ project will also make the villagers’ daily lifelike bath and cooking easy. Rural residents will get more comfortable, safe, clean and convenient life experience.

7 Suggestions on Policies of Scattered Coal Control in Beijing–Tianjin–Hebei Region (1)

(2)

(3)

(4)

(5)

(6) (7)

Take the improvement of air quality as the primary goal to promote the ‘coal to electricity’ conversion in north China, and focus on minimizing the scattered coal consumption. In the next five years, according to the requirements of air quality improvement, priority should be given to replacing scattered coal with clean energy in the Beijing–Tianjin–Hebei region and the surrounding areas where are densely-populated, with poor air quality and large scattered coal consumption. Various regions should investigate the basic situations of scattered coal consumption as soon as possible to figure out the quantity of scattered coal consumption and other basic information in different regions such as urban built-up areas, suburban areas, counties and designated towns, and villages. Make good top-level design. A systematic plan should be made, considering factors such as national oil and gas resources, electric power development plan, natural gas pipeline network retrofit and peak load regulation capacity, power network transmission and distribution capacity, urban heat supply network coverage, and energy saving reconstruction plan for residential buildings. Promote the ‘coal to electricity’ project step by step, give guidance by categories, and encourage the local areas to choose a suitable technical scheme on clean heating according to local conditions, e.g. local energy resources, heating demands, and people’s income level. The government should issue corresponding technological guidelines, standards and normative documents to standardize the design, model selection, installation and maintenance of the heating system. That is, using standard evaluation criteria to compare the technical indicators, prices, applicability, ways and intensities of policy support of various clean energy heating equipment. In doing so, the government can guide the residents to choose and use clean energy heating technology and equipment. Actively explore means of marketization, design and implement effective economic policies to attract residents to use clean energy for heating. Strictly control selling scattered coal of poor quality, improve the supervision mechanism of coal quality, and implement the regulatory responsibilities in coal mining, transportation, sell and use.

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References 1. Li X, Zhang Q, Zhang Y et al (2015) Source contributions of urban PM2.5 in the BeijingTianjin-Hebei region: changes between 2006 and 2013 and relative impacts of emissions and meteorology. Atmos Environ 123:229–239 2. A Research Report on Annual Development of China’s Building Energy Conservation 2015, China Architecture & Building Press 3. Report on Development of China’s Heating Stove Industry 2016 4. Technical Guidance for Compiling Air Emissions Inventory of Civil Coal 5. Zhu LIU (2015) China’s Carbon Emissions Report 2015. Sustainability Science Program and Energy Technology Innovation Policy research group, Belfer Center Discussion Paper #2015– 02. Harvard Kennedy School of Government, Cambridge, MA [R], 2–3 6. IPCC (2007) Climate change 2007: synthesis report. Contribution of working groups i, ii and iii to the fourth assessment report of the intergovernmental panel on climate change. IPCC, Geneva, Switzerland, 104 pp; Bond, T. C. et al. (2013), Bounding the role of black carbon in the climate system: A scientific assessment 7. Nan Z, Li Q, Shaodong X (2013) Spatial distribution of black carbon emissions in China. Chin Sci Bull 58. https://doi.org/10.1007/s11434-013-5820-4 8. Haidong KAN, Bingheng CHEN (2002) Analysis of exposure response relationships of air particulate matter and adverse health outcomes in China. Environ Health 19(6):422–424 9. Desheng H, Shiqiu Z (2013) Health benefit evaluation for PM2.5 pollution control in BeijingTianjin-Hebei region of China. China Environ Sci 33(1):166–174 10. Pei LI, Jinyuan XIN, Yuesi WANG et al (2012) Study on the impact of atmospheric particulate matter pollution on population mortality in Beijing. Chinese Meteorol Soc 5(1):2–11 11. National Health and Family Planning commission (2016) Statistical yearbook 2016 of China health and family planning. Peking Union Medical College Press, Beijing 12. World Health Organization (2006) Air quality guidelines for particulate matter, ozone, nitrogen dioxide and sulfur dioxide[R]//Global Update 2005. World Health Organization, Summary of risk assessment. Switzerland 13. Ting G, Guoxing L, Meimei et al X (2015) Health economic loss evaluation of ambient PM2.5 pollution based on willingness to pay. J Environ Health 08:697–700

Cost–Benefit Analysis of Yellow-Label Vehicles Elimination Policy in the Beijing-Tianjin-Hebei Region Hongqiang Jiang, Jia Zhou, Xi Cheng, Yaling Lu, and Wei Zhang

Abstract Cost–benefit analysis is an important means for policy formulation, implementation and adjustment. The study presents a cost–benefit analysis of the policy to eliminate yellow-label vehicles in the Beijing-Tianjin-Hebei region. It estimates the costs and environmental and health benefits of scrappage subsidy program and ban program under the baseline scenario and the controlled scenario, compares results between the two programs and analyzes the economic impact of scrappage subsidy program. It calculates the costs based on the social cost method, the environmental benefits based on the emission factor method and air quality model, the health benefits based on method of environmental health assessment, and the economic and social benefits based on the input–output method. The results show the policy played an important role in reducing pollutant emissions and improving environmental quality in the region during 2008–2015. It reduced the concentration of NOx by 2.5% and PM2.5 by 0.84% in Beijing, 3.2% and 1.15% in Tianjin and 7.98% and 0.78% in Hebei, respectively. The net benefits derived from scrappage subsidy program reached 20.34 billion yuan and from ban program 92.722 billion yuan, and totaled 113.06 billion yuan. The policy also exerted a positive impact on the macro economy. It approximately increased the vehicle consumption by 182.25 billion yuan, total output 829.01 billion yuan, gross domestic product 234.42 billion yuan, and residents’ income 981.0 billion yuan, and created about 14.2 million jobs. Keywords Cost–benefit analysis · Yellow-label vehicles · Scrappage subsidy program · Ban program · Beijing-Tianjin-Hebei region

1 Introduction China’s motor vehicle population is rapidly growing year by year. The consequent exhaust emissions have become an important cause of air pollution, particularly haze and photochemical smog [1–3]. Vehicles contributed about 30% of PM2.5 in megacities such as Beijing and Shanghai and densely populated eastern areas, and even H. Jiang · J. Zhou (B) · X. Cheng · Y. Lu · W. Zhang Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_8

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more than 50% in extremely adverse weather conditions [4]. At the same time, motor vehicle emissions pose a direct threat to public health as most of the motor vehicles travel in densely populated regions [5–7]. In 2014, there were 9.842 million yellowlabel vehicles (YLVs) in China. They represented 6.8% of the national motor vehicles, but emitted 45.4%, 49.1%, 47.4% and 74.6% of the carbon monoxide (CO), hydrocarbon (HC), nitrogen oxides (NOx ) and particulate matter (PM) respectively [8]. The Action Plan for Air Pollution Prevention and Control considered eliminating YLVs as an important measure in 2013. Yet, the policy evaluation remains blank despite overall studies on the Action Plan [9–11]. Through a case of the Beijing-TianjinHebei region, this study uses cost–benefit analysis to quantify the policy impact in a comprehensive and objective manner, covering costs, benefits and economic impact.

2 Methodology and Data Sources 2.1 Research Scope The YLV elimination policy mainly encompasses scrappage subsidy program and ban program, so cost–benefit analysis is conducted for each program. Provinces (autonomous regions and municipalities) across the country have launched their respective YLV elimination policies, which differ widely in many aspects, such as date of entry into force of scrappage subsidy program and ban program, subsidy standards and ban coverage. The Beijing-Tianjin-Hebei region is identified as the study area, because the earliest policy of its kind has yielded the greatest pollutant emission reductions and environmental quality improvements through the most complex process. 2.1.1

Scrappage Subsidy Program

It is a natural process to purchase, use and phase out motor vehicles. The scrappage subsidy program accelerates the entire process and serves to scrap motor vehicles early (by shortening the service life). Therefore, two scenarios are set. The baseline scenario is the natural elimination of motor vehicles, and the scenario I is YLV scrappage subsidy program (including natural elimination of motor vehicles). This study as an ex-post assessment uses the real-time data from the Beijing-Tianjin-Hebei region for natural obsolescence of motor vehicles. Table 1 describes the YLV subsidy scenarios and Table 2 outlines the impact matrix of scrappage subsidy program for analyzing the impact of scrappage subsidy program on different groups. Table 1 YLV elimination scenarios

Classification

Description

Baseline scenario

Natural elimination

Scenario I

Scrappage-involved early elimination

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Table 2 Impact matrix of scrappage subsidy program Target

Positive impact

Government

Negative impact Costs for subsidies; management costs

— Residents

Income from subsidies Environmental (health) benefits

Businesses

New-vehicle sales

Loss of YLV residual values New-vehicle purchase costs —

Society

Environmental (health) benefits

Management costs; YLV residual values

The government formulated and implemented the scrappage subsidy program to reduce YLVs emissions. It meant different costs and benefits for different groups. For the whole society, the costs included the supervision & management costs (government expenditure) and the residual values of scrapped vehicles (personal expenditure), and the benefits included environmental benefits and consequent health benefits. The government needed to provide subsidies and cover management costs. Residents borne the costs of YLV residual values and new-vehicle purchases, but enjoyed the subsidies and environmental and health benefits. Businesses also benefited from the scrappage subsidy program through the purchase of new cars by residents.

2.1.2

Ban Program

Ban program was an important component of the YLV elimination policy. In order to control air pollution, we must restrict or even ban such high emission vehicles on road. Beijing, Tianjin and Hebei separately analyzed the costs and benefits of the ban policy, in light of the sharp differences in the prescribed time and scope of and compliance with such ban. Table 3 shows the impact matrix of the ban program for analyzing the impact of scrappage on different groups. The social costs of the ban policy covered supervision & management, and transfer to other means of transportation; while the social benefits included environmental benefits (health benefits) and travel cost savings derived from the ban program. Table 3 Impact matrix of the YLV elimination policy Target

Positive impact

Negative impact

Government

–

Supervision and management costs

Residents

Environmental (health) benefits Ban-related transportation savings

Expenses on changing to other means of transportation

Businesses

–

–

Society

Environmental (health) benefits; Ban-related transportation savings

Supervision & management costs; expenses on changing to other means of transportation

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The government borne the cost of supervision & management. Residents payed for transportation by other traffic patterns. However, Residents saved YLV-based transportation expenses and obtained environmental benefits and health benefits. The ban program had no effect on enterprises, regardless of costs or benefits.

2.2 Technical Roadmap Under the technical framework of cost–benefit analysis of environmental policy, the cost effectiveness and economic impact of the YLV elimination policy in the Beijing-Tianjin-Hebei region is evaluated, including the scrappage subsidy program and ban program. The costs are calculated based on the social cost, environmental benefits based on the emission factor and air quality modeling, health benefits based on environmental health assessment, and economic and social benefits based on the input and output. The technical roadmap is as shown in Fig. 1.

Fig. 1 Framework for cost–benefit analysis of the YLV elimination policy

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2.3 Analytical Methods 2.3.1

Costs

(1) Residual value of YLVs (Ccv ): The residual value of medium and small-sized YLVs is the corresponding amount of subsidies for phasing out such vehicles, and the residual value of large YLVs, the amount of such subsidies at higher standards in order to better meet the real market. Ccv = Psm × Vsm × (1 − σ ) + Pbc × Vbc × 1−σ

(1)

wherein C cv is the residual value of YLVs (yuan). C sm and C bc represent the residual values of medium and small-sized YLV models and large YLV models respectively (yuan). Psm and V sm denote the subsidy standard (yuan per vehicle) and number of medium and small-sized YLV models respectively and Pbc and V bc , large YLV models. σ stands for natural elimination rate of motor vehicles. (2) Natural elimination rate of motor vehicles (σ): σ =

V i−1+V x−V i Vi

(2)

where σ is the natural elimination rate of motor vehicles; V i−1 and V i represent the motor vehicle population in the year i−1 and V i in the year i respectively; V x denotes the number of newly registered motor vehicles in the year i. (3) Amount of subsidies in the Beijing-Tianjin-Hebei region C pi : C pi =



Pt ji × Vt ji

(3)

t=1 j=1

wherein C pi is the amount of subsidies for phasing out YLV early in the region i (yuan), Ptji represents the subsidy standard for the model j in the regioni during the period t (yuan per vehicle) and V tji the number of eliminated YLVs in the regioni during the period t; i denotes Beijing, Tianjin and Hebei respectively. (4) Number of YLV models in the Beijing-Tianjin-Hebei region: V jt = V ×

H jt H

(4)

wherein V jt means the number of eliminated model j YLVs during the period t and H jt the total number of model j YLVs during the period t; V represents the total number of eliminated YLVs and H, the total number of motor vehicles in the environment statistics.

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(5) New-vehicle purchase cost (C n ): It equals to the product of the vehicle purchase coefficient and the average new-vehicle purchase cost minus the amount of subsidies received. Cn = α × Cg − C p

(5)

wherein C n is the new-vehicle purchase cost (yuan); α is the vehicle purchase coefficient after receiving subsidies and C g average new-vehicle purchase cost after receiving subsidies (yuan); C P indicates the amount of subsidies received (yuan). (6) Average new-vehicle purchase cost after receiving subsidies (C g ): Cg =

1 

Ci × λi × V

(6)

i

wherein C n represents the cost of purchasing vehicle i (yuan per vehicle) and λn the scale factor for such cost; i can be 1, 2, 3; V indicates the total number of eliminated YLVs. (7) Ban-related transportation cost (C d ): also the cost of changing to other means of transportation. It equals to the product of the number of banned YLVs, the average occupancy of motor vehicles, and the expenses of transportation by other means. Cd = θ × Vd × Pb × M

(7)

wherein C d is the ban-related transportation cost (yuan); θ is the average occupancy of motor vehicles (persons per vehicle); V d represents the number of YLVs banned from road; Pb means the average annual expenses on public transportation per person (yuan per person per kilometer); M indicates the average annual mileage of motor vehicles (kilometer).

2.3.2

Benefits

Environmental Benefits (1)

Total pollutant emission reductions The total pollutant emission reductions are pollutant emissions reduced through the implementation of the YLV elimination policy in the Beijing-TianjinHebei region. They are calculated according to the Technical Guidelines for Compiling Air Pollutant Emission Inventory of On-road Vehicles (Trial) (hereinafter referred to as the Guidelines) [12] and the Methods for Measuring Air Pollutant Emissions from Motor Vehicles in Urban Areas (hereinafter referred

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to as the Methods). In line with the Guidelines, the emission factor is used to calculate the standard YLV pollutant emissions, which are deemed as emission reductions of such eliminated vehicles. 1.

Annual YLV pollutant emissions The equation for calculating pollutant emissions from motor vehicles based on the emission factor is written as follows:  Ei = Pi × E F j × V K T j × 10−6 (8) i

2.

E i denotes the corresponding annual emissions of CO, HC, NOx , PM2.5 and PM10 of model i vehicles in the Beijing-Tianjin-Hebei region, expressed by tons (emissions before the adoption of China I standards are considered as YLV emission reductions in this study). EF i represents the amount of pollutants discharged by model i vehicles per unit of mileage, namely the emission factor, expressed by grams per kilometer (the emission factor is determined based on the data measured in Beijing, Tianjin and Hebei. If there are no measured data, the method described below is used with consideration to the actual situation of natural climate and motor vehicles). P means the population of model i vehicles in the region (number of YLVs eliminated in Beijing, Tianjin and Hebei in this study). VKT i means the average annual mileage traveled of model i vehicles, expressed by kilometer per vehicle. i indicates the model of motor vehicles with different levels of pollution control. Emission factor (EFi) The emission factor EF i is determined according to vehicle models. It varies depending on regions, pollution control levels and vehicle models. E Fi j = B E F j × ψ j × γ j × λi × θi

(9)

EF ij represents the emission factor of model i vehicles in the region j and BEF i the integrated baseline emission factor of model i vehicles. Ψ j is the environmental correction factor for region j, γ j the correction factor for average velocity in the region j, λi the correction factor for degradation of model i vehicles, and θ i the correction factor for other conditions of model i vehicles (such as load factor and oil quality). This study only needs to determine the corrected emission factor of YLVs (before the adoption of China I standards) based on the actual situation of Beijing-Tianjin-Hebei region. (a) Integrated baseline emission factor (BEF) The integrated baseline emission factor (BEF) of gasoline, diesel and other fuels is provided by the Guidelines. It takes into account

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(b)

the average mileage travelled of motor vehicles of different kinds in 2014 and also the typical urban traffic conditions (30 km/h), weather conditions (temperature of 15 °C and relative humidity of 50%), fuel quality (sulfur content of gasoline and diesel at 50 ppm and 350 ppm respectively and no ethanol content for gasoline) and load factor (50% for diesel vehicles in typical traffic conditions). Targeted emission factors can be determined based on field research in cities of the Beijing-Tianjin-Hebei region or relevant materials and literature. Environmental correction factor (Ψ j ) The environmental correction factor includes the correction factors for temperature, humidity and altitude, written as follows: Ψj=ΨTemp×ΨRH×ΨHeight

3.

(10)

(c)

Ψ Temp represents the temperature correction factor, Ψ RH humidity correction factor, and Ψ Height altitude correction factor. Multi-year mean temperature and humidity are used herein as the vehicle emission inventories are calculated on a yearly basis. Correction factor for traffic conditions (γ j )

(d)

The correction factor for traffic conditions is determined according to the local average velocity of vehicles, which is divided into four intervals ( 80 km/h). The average velocity is calculated according to the field survey or statistical data of each city in the Beijing-Tianjin-Hebei region. The average velocity for buses is usually modified to < 20 km/h. Degradation correction factor (λi )

(e)

The degradation correction factor is used to correct the degradation of vehicles during 2015–2018 based on 2014. Correction factor for other conditions (θ i )

The correction to other conditions of use mainly consider the impact on motor vehicle emissions brought by sulfur content of fuels, ethanol content of ethanol-gasoline blends, and load of diesel vehicles. No correction is made in this study considering the low SO2 emission of motor vehicles, unavailability of data about ethanolgasoline blends, and little effect of diesel vehicle load on emission factors. Level of activity The level of activity considers the number and average annual mileage travelled (VKT ) of YLVs eliminated in the cities of Beijing-Tianjin-Hebei region. The calculations are separate for different models and fuels. The

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numbers of eliminated YLVs by fuels are estimated based on modelspecific numbers. The average annual mileage traveled (VKT ) uses the value of experience provided by the Guideline. (2)

Environmental quality improvements The benefits of environmental quality improvements are estimated based on the MEIC inventories and the pollutant emission inventories established on the basis of regional environmental statistics, WRF three-dimensional meteorological fields, and Models-3 Community Multiscale Air Quality (CMAQ) model.

Health Benefits According to the theory of environmental health assessment, the health benefits of air pollution control are assessed typically through two steps: first to analyze and estimate the endpoint-specific health effects (environmental health risk assessment) brought by the reduction of air pollutant concentrations, and then to monetize such health effects (environmental health valuation) and calculate the economic benefits of health improvements. In view of the differences in policy content and results, the health benefits of the YLV elimination policy are examined separately for Beijing, Tianjin and cities in Hebei Province, covering the period from the year of starting policy implementation to 2015. In specific, the PM2.5 concentrations of cities each year are modeled and measured in the baseline scenario and the controlled scenario. According to exposed population, the health effects are identified using the exposure–response model and further monetized. The sum of health benefits in various cities is the overall health benefits of the YLV elimination policy in the Beijing-Tianjin-Hebei region. (1)

Environmental health risk assessment 1.

Air pollution factors that affect health

2.

The exhaust emitted by motor vehicles contains 150–200 compounds 0.3– 2 m near ground within the range of human breath. These emissions, particularly CO, HC, NOx and PM emissions, pose a serious threat to human health. A large number of epidemiological studies at home and abroad confirm that PM is the most harmful air pollutant for human health. PM can damage the respiratory and cardiovascular systems of exposed population. With a smaller diameter, PM2.5 is even more harmful as it can adsorb heavy metals and microorganisms on the surface and penetrate into the cell and blood circulation. Therefore, PM2.5 is chosen as the pollution factor to evaluate health effects in this study. Health endpoints In order to evaluate the economic loss caused by long-term chronic health effects of air pollution, respiratory diseases and cardiovascular diseases,

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Table 4 Health endpoints of air pollution

Category

Indicator

All-cause mortality

Mortality under chronic effects Mortality under acute effects

Hospitalization

Respiratory diseases

Sick leave

Chronic bronchitis

Cardiovascular diseases

3.

which have strong correlation with air pollution, are selected as health endpoints according to the principles of selection. The measurable indicators mainly include mortality, inpatient attendance, outpatient attendance, unexplained attendance and sick leave, as detailed in Table 4. Exposure–response relationship The dose (exposure)–response function is used to characterize the impact of air pollution on human health. It indicates that the level of air pollution is statistically associated with exposed population. After controlling for other confounders, regression analysis is conducted to estimate the coefficient of correlation (β) between unit change of concentration of major pollutants and health endpoints of exposed population. The existing studies suggest that the relative risk (RR) of health endpoints of air pollution basically has a linear or logarithmic linear relationship with the concentration of a specific pollutant [13]. The linear relationship is expressed as: R R = exp[β(C − C0 )]

(11)

The logarithmic linear relationship is expressed as: R R = exp[α + βln(C)]/exp[α + βln(C0 )] = (C/C0 )β In order to avoid the case that C 0 equals 0, both the numerator and the denominator are added 1: R R = [(C + 1)/(C0 + 1)]β

(12)

wherein C represents the current concentration of a specific atmospheric pollutant and C 0 the baseline (clean) concentration (threshold); RR is the relative risk of human health effects of air pollution; β is the exposure–response coefficient, indicating the percentage (%) of increase in mortality or prevalence specific to health outcome for each unit of increase in atmospheric pollutant concentration.

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Environmental health valuation Regarding the valuation of environmental health, the willingness-to-pay (WTP) approach is favored in the western developed countries, while the cost of illness approach and the revised human capital approach are adopted in developing countries with incomplete market economy. In this study, environmental health is valuated based on income loss and direct medical cost. The economic loss from premature deaths associated with pollution is estimated using the revised human capital approach, and the medical cost using the cost of illness approach. The result obtained should be the minimum health losses caused by air pollution. 1.

Cost of illness approach

2.

The cost of illness refers to all disease-related direct and indirect costs, including medical expenses for outpatient, emergency and inpatient visits, medical expenses of self-treated unaccounted patients, loss of income (converted by daily per capita GDP) due to sick leave, and indirect costs such as transportation and accompanying expenses. Revised human capital approach The revised human capital approach uses per capital GDP to measure the contribution to GDP in statistical life year when estimating the economic loss from premature deaths caused by pollution. Unlike the human capital approach, this approach examines the contribution of human resources to social and economic growth from the perspective of whole society rather than individuals (avoiding the problem of whether human beings are healthy laborers or the elderly and the disabled). Premature deaths from pollution reduce human resources and further their contribution to GDP during the statistical lifetime. Therefore, for the entire social economy, the loss of a statistical life year means a loss of GDP per capita. The revised loss of human capital is equivalent to the sum of GDP per capita in the lost life years. The economic loss of premature deaths associated with pollution is calculated as follows: Per capita human capital (HC m ) is calculated as follows.   (1 + α)i Ced pv = G D P pci = G D P pc0 Ped (1 + r )i i=1 i=1 t

HCm =

t

(13)

wherein C ed represents the economic loss from premature deaths associated with pollution. Ped denotes the number of premature deaths associated with pollution. And t the average loss of life years due to premature pv death associated with pollution. G D Ppci means the present value of per capita GDP in the year i and GDPpc0 per capita GDP in the base year. r is the social discount rate and α is the annual growth of per capita GDP.

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(3)

Assessment of health benefits of the YLV elimination policy in the BeijingTianjin-Hebei region Combined with the types and characteristics of air pollutants emitted by motor vehicles, the health benefits of air pollution control in this study consist of three parts. (a) all-cause premature deaths and associated economic loss caused by air pollution (ECa1 ), and the economic loss is measured using the human capital approach. (b) Increased inpatient attendances and waiting days for respiratory and cardiovascular diseases resulting from air pollution, and associated economic loss (ECa2 ) which is measured using the cost of illness approach. (c) new cases of chronic bronchitis associated with air pollution and the economic loss (ECa3 ) which is evaluated through disability-adjusted life years (DALY) [14]. As the basic evaluation approach requires a lot of data, funding and time, the reference method can be used due to time and data constraints. The overall health benefits (ECa Total ) are calculated as follows: ECa Total = ECa 1 + ECa 2 + ECa 3 1.

(14)

Economic loss from all-cause premature deaths associated with air pollution (ECa1 ) The value for current health outcomes (in the controlled scenario) is calculated based on the air pollution levels, health endpoints and exposureresponse functions of cities. The hazard of air pollution to human health is the health outcome value of the baseline scenario minus the health outcome value of the controlled scenario). Ped = 10−5 ( f p − f t )Pe = 10−5 · ((R R − 1)/R R)· f p ·P e EC a1 = Ped · H C mu = Ped ·

t 

pv

G D P pci

(15)

(16)

i=1

wherein Ped represents the number of all-cause premature deaths associated with air pollution in the baseline scenario, expressed by 10,000 persons. f p denotes the all-cause mortality in the baseline scenario and f t all-cause mortality in the controlled scenario (baseline value). Pe means the exposed urban population, expressed by 10,000 persons. RR stands for attributable relative risk of all-cause mortality associated with air pollution. t is the average loss of life years due to all-cause premature deaths caused by air pollution, which is calculated to be 18 years based on rates of death from air pollution-related diseases by age groups [15]. HC ma means per capita human capital of urban population, expressed by 10,000 yuan pv per person; G D Ppci means urban per capita GDP in the year i. The data

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come from China Statistical Yearbook 2016 [16] and Hebei Economic Yearbook 2016” [17]. Economic loss from hospitalization for diseases associated with air pollution (ECa2 ) Peh =

n n   ( f pi − f ti ) = f pi · i=1

i=1

ci · βi /100 1 + ci · βi /100

EC a2 = Peh · (C h + W D · Cwd )

3.

(17) (18)

wherein n mean diseases associated with air pollution, such as respiratory diseases and cardiovascular diseases. f pi represent the current inpatient attendances at the current level of air pollution, expressed by 10,000 person-times. β i is regression coefficient (%) which is the percentage of change in health hazards with unit concentration of pollutants i.

ci denotes the difference between the actual pollutant concentration and the threshold pollutant concentration for health hazards (μg/m3 ). C h stands for hospitalization costs, including inpatient hospital costs, transportation costs, and nutrition costs, expressed by yuan per case. WD refers to waiting days. The 5th national healthcare service census conducted in 2013 found three waiting days for respiratory diseases on average. C wd refers to the cost of waiting days, equal to per capita GDP divided by 365 (yuan per day). Economic loss of DALY from chronic bronchitis caused by air pollution (ECa3 ) Foreign researchers believe that chronic bronchitis have extremely great damage to human bodies. Patients with chronic bronchitis will suffer the disease for lifetime and with disease progression, eventually lose the ability to work and enjoy life. Therefore, the DALY approach usually replaces the cost of illness approach for evaluating the economic loss from chronic bronchitis. The related studies have shown the DALY weight of 32% for chronic bronchitis, which means 32% of average human capital. EC a3 = γ · Ped · H C mu = γ · Ped ·

t 

pv

G D P pci

(19)

i=1

wherein t represents the average loss of life years due to premature deaths from chronic bronchitis associated with air pollution, which is 23 years according to the mortality of chronic bronchitis and emphysema (COPD) by age groups; γ represents the DALY coefficient for chronic bronchitis, which is 0.32.

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Economic and Social Impact Assessment

According to the macroeconomic theory, the YLV elimination policy will spur the demand for new vehicles through subsidies for YLV owners. The new-vehicle production process will simulate the upstream and downstream industries, such as upstream products including engines and tires and downstream services including transportation, marketing and finance. The upstream and downstream industries will then drive other industries such as steel and rubber through industrial chains, which eventually will inject a stimulus to the entire national economy. The input– output model can capture the impact of changes in the demand for final products on different indicators of the national economy (gross output, GDP, residents’ income, and employment) (Fig. 2). Calculation model An input–output model is a mathematical method that represents the complex relations between different economic sectors, which can be used for economic analysis, policy simulation, planning demonstration and economic forecasting. An input–output table prepared for input–output analysis is a checkerboard pattern that

Fig. 2 Economic impact analysis mechanism for the YLV elimination policy

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describes the source and destination of various product inputs. It is formed by intersected input and output tables. The input table reflects the value of various products, including material consumption, remuneration and surplus products, and the output table reflects the distribution and use of various products, including investment, consumption and export. Input–output tables can be used to reveal the quantitative interdependence and mutual restraint between the various sectors of the national economy. The direct consumption coefficient (aij ), also known as input coefficient or technical coefficient, means the quantity of product i consumed per unit of product j. The total consumption coefficient (bij ), means the quantity of product i consumed indirectly or directly (i.e. completely consumed) per unit of product j. According to the above balance and direct consumption coefficient, the input– output table is used to set up an input–output model by lines, which can reflect the production and distribution of products among sectors and describe the balance of value between the final products and the total output. The equation is written as follows: n 

ai j · x j + yi = xi ; (i = 1, 2, ..., n)

(20)

j=1

It can be further written in matrix: (I − A)X = Y

(21)

X = (I − A)−1 Y

(22)

wherein A represents the direct consumption coefficient matrix, X the total output, and Y the final products. The input–output model reflects the economic mechanism by which the final products drive the total output.

2.4 Data Sources (1) Subsidy standards The standards for YLV elimination subsidies during different periods in Beijing, Tianjin and 11 cities in Hebei Province are clarified based on the analysis of the national vehicle trade-in policy and national and local YLV elimination policies. (2) Number of eliminated vehicles The number of YLVs eliminated with scrappage each year in Beijing, Tianjin and 11 cities in Hebei Province are identified through the analysis of annual local government

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Fig. 3 Costs for the scrappage subsidy program in the Beijing-Tianjin-Hebei region, 2008–2015

work reports, annual statistical bulletins of national economic and social development, and news published on the official websites of the ministry of environmental protection and ministry of public security.

3 Result Analysis 3.1 Scrappage Subsidy Program 3.1.1

Costs

From 2008 to 2015, the costs for subsidies under the scrappage subsidy program (YLV residual values) amounted to 13.687 billion yuan in the Beijing-TianjinHebei region, including 2.62 billion, 2.555 billion and 8.512 billion yuan for Beijing, Tianjin and Hebei respectively. Government costs (subsidies) attained 10.207 million yuan as a whole, which read 1.519 million, 2.396 million and 6.292 million yuan for Beijing, Tianjin and Hebei respectively. New-vehicle purchase costs reached 182.25 billion yuan, which read 35.806 billion, 39.886 billion and 112.39 billion yuan for Beijing, Tianjin and Hebei respectively (Figs. 3, 4 and 5).

3.1.2

Environmental Benefits

Owning to the implementation of the scrappage subsidy program, the CO, HC, NOx , PM2.5 and PM10 emissions from vehicles during 2008–2012 were cut by 113,072.60, 12,718.32, 15,239.55, 1,260.48, and 1,392.96 tons in Beijing respectively. The figures read 91,757.03, 11,840.53, 20,046.12, 1,755.30 and 1,938.90 tons for Tianjin during

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Fig. 4 Costs for subsidies under the scrappage subsidy program in Beijing, Tianjin and Hebei, 2008–2015

Fig. 5 Costs for subsidies under the scrappage subsidy program in the Beijing-Tianjin-Hebei region, 2008–2015

2012–2015. The emission reductions of these five pollutants during 2013–2015 registered 464,278.80, 67,078.78, 139,149.70, 13,445.15 and 14,791.84 tons in Hebei (Fig. 6). With the implementation of the scrappage subsidy program, the annual NOx concentration in Beijing were reduced by 0.32–1.39 ug/m3 , PM2.5 0.35–1.52 ug/m3 , and PM10 0.18–0.79 ug/m3 during 2008–2012. The reductions in Tianjin reached 0.24–2.10, 0.44–2.62, 0.06–1.05 ug/m3 respectively during 2012–2015. Hebei

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decreased the annual NOx concentration by 0.24–7.69 ug/m3 , PM2.5 0.01–1.92 ug/m3 , and PM10 0.02–1.13 ug/m3 during 2013–2015. Beijing saw the most significant air quality improvement in 2010 with the NOx concentration lowered by 2.44%, PM10 1.26% and PM2.5 0.83%. In Tianjin and Hebei, such improvement reached a record high in 2015 when the NOx , PM10 and PM2.5 concentrations fell by 5.00%, 2.26% and 1.50% in Tianjin respectively and 6.08%, 0.44% and 0.64% in Hebei (Fig. 7).

Fig. 6 Emission reductions from the scrappage subsidy program and the proportion in motor vehicle emissions in the Beijing-Tianjin-Hebei region

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Fig. 6 (continued)

3.1.3

Health Benefits

From 2008 to 2015, the number of premature deaths (including chronic and acute deaths) was narrowed by 4,015 in Beijing, representing about 45.7% of the total reduction of the Beijing-Tianjin-Hebei region. The figure read 1,005 in Tianjin and 3,769 in Hebei, accounting for about 11.7% and 42.6% of the regional total reduction respectively. From 2008 to 2015, Beijing brought down hospitalized people (including with respiratory and cardiovascular diseases) by about 49,500, Tianjin 11,900 and Hebei 40,500, which accounted for 48.6%, 12.0% and 39.4% of the regional reduction of hospitalized people respectively. From 2008 to 2015, Beijing lessened the number of patients suffering from chronic bronchitis by 12,000, representing 45.7% of the regional reduction. The number approximately dropped by 11,300 in Tianjin and 3,000 in Hebei on average (Fig. 8). The health benefits in the Beijing-Tianjin-Hebei region totaled 34.03 billion yuan, 93% of which can be attributed to the reduction of premature deaths and chronic bronchitis. The health benefits associated with less premature deaths, chronic bronchitis and hospitalization registered 14.25 billion, 17.47 billion and 22.9 billion yuan respectively. Generally, the decline of chronic premature deaths generated far greater health benefits than that of acute premature deaths (Fig. 9).

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Economic and Social Benefits

The YLV elimination in the Beijing-Tianjin-Hebei region added new-vehicle consumption by 182.25 billion yuan. It drove an increase of 829.01 billion yuan in country’s total output, including 182.25 billion yuan in a direct way and 646.76 billion yuan in an indirect way, which accounted for 22.0% and 77.4% respectively. This contributed to a GDP growth of 234.42 billion yuan, of which the direct and indirect impacts attained 371.1 billion and 197.24 billion yuan respectively. As a result, the income of residents rose by 98.10 billion yuan, of which the direct and

Fig. 7 Proportion of pollutant concentration reductions brought by the scrappage subsidy program in Beijing, Tianjin and Hebei

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Fig. 7 (continued)

Fig. 8 Health endpoints reduced by the scrappage subsidy program in the Beijing-Tianjin-Hebei region, 2008–2015

indirect rises reached 12.61 billion and 85.39 billion respectively. 142,000 jobs were created, 3,000 in a direct way and 13,7000 in an indirect way. Overall, the YLV elimination policy gave a direct stimulus to the automobile industry, and played a positive role in the macro economy by driving national economic growth through the industrial chain (Table 5).

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Fig. 9 Value of health endpoints reduced by the scrappage subsidy program in the Beijing-TianjinHebei region, 2008–2015

Table 5 Macro-economic impact analysis of the YLV elimination policy Indicator

Direct impact

Indirect impact

Total impact

Total output (100 million yuan)

18 22.5

6467.6

8290. 1

Value added (100 million yuan)

371.1

1972.4

2344.2

Residents’ income (100 million yuan)

126.1

853.9

981.0

Nonfarm employment (10,000 persons)

0.3

13.7

14.2

3.2 Ban Program 3.2.1

Costs

From 2008 to 2015, the social cost for the YLV ban policy amounted to 5.806 billion yuan in the Beijing-Tianjin-Hebei region, which included 1.355 billion yuan in Beijing, 1.694 billion yuan in Tianjin and 2.757 billion yuan in Hebei (Figs. 10 and 11).

3.2.2

Environmental Benefits

Due to the YLV ban policy, CO, HC, NOx , PM2.5 and PM10 emissions from vehicles in Beijing were cut by 69,654.87, 7,852.78, 9,531.60, 804.33 and 888.95 tons during 2008–2012 respectively. The numbers read 80,047.6, 10,425.01, 18,178.28, 1,581.95 and 1,747.39 tons for Tianjin during 2012–2015. The emission reductions of these

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Fig. 10 Costs for the ban policy in Beijing, Tianjin and Hebei, 2008–2015

Fig. 11 Costs for the ban policy in the Beijing-Tianjin-Hebei region, 2008–2015

five pollutants in Hebei reached 288,687.30, 42,184.90, 88,812.40, 8,588.65 and 9,448.11 tons during 2013–2015 (Fig. 12). With the implementation of the ban policy, the annual NOx concentration in Beijing were reduced by 0.03–1.27 ug/m3 , PM2.5 0.04–1.37 ug/m3 and PM10 0.02– 0.41 ug/m3 during 2008–2012. The reductions in Tianjin reached 1.03–1.50, 1.50– 2.75, 0.26–0.79 ug/m3 respectively during 2012–2015. Hebei decreased the annual NOx concentration by 0.05–4.04 ug/m3 , PM2.5 0.01–1.70 ug/m3 and PM10 0.02–1.07 ug/m3 during 2013–2015. Beijing saw the most drastic reductions of NOx and PM10 concentrations in 2008 and PM2.5 in 2009, which read 2.59%, 1.12% and 0.74% respectively. In Tianjin, the largest magnitude of decline in the NOx and PM10 concentrations registered 3.57% and 2.62% (in 2012) and PM2.5 0.95% (2014). In Hebei, such improvement reached

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a record high in 2013 when the three concentrations fell by 3.65%, 0.30% and 0.46% respectively (Fig. 13).

3.2.3

Health Benefits

From 2008 to 2015, the number of premature deaths (including chronic and acute deaths) was narrowed by 809–4287 (2,860 on average) in Beijing, representing about 37.9% of the total reduction of the Beijing-Tianjin-Hebei region. The figure read

Fig. 12 Emission reductions from the ban policy and the proportion in motor vehicle emissions in the Beijing-Tianjin-Hebei region

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Fig. 12 (continued)

1,148 in Tianjin and 3,535 in Hebei, accounting for about 15.2% and 46.9% of the regional total reduction respectively. From 2008 to 2015, Beijing brought down hospitalized people (including with respiratory and cardiovascular diseases) by 8000–42,000, Tianjin 12,600 and Hebei 35,100, which accounted for 41.3%, 15.5% and 43.2% of the regional reduction of hospitalized people respectively. From 2008 to 2015, Beijing lessened the number of patients suffering from chronic bronchitis by 3000–18,000 (8,600 on average), representing 47.9% of the regional reduction. The number approximately dropped by 3,400 in Tianjin and 10,600 in Hebei on average (Fig. 14). The health benefits in the Beijing-Tianjin-Hebei region totaled 28.3 billion yuan, 94% of which can be attributed to the reduction of premature deaths and chronic bronchitis. The health benefits associated with less premature deaths, chronic bronchitis and hospitalization registered 11.94 billion, 14.63 billion and 1.73 billion yuan respectively. Generally, the decline of chronic premature deaths created far more health benefits than that of acute premature deaths (Fig. 15).

3.2.4

Cost Savings

From 2008 to 2015, the cost savings derived from the ban policy in the BeijingTianjin-Hebei region totaled 70.226 billion yuan. To break it down, the figures read 14.938 billion, 18.680 billion and 36.608 billion yuan for Beijing, Tianjin, and Hebei respectively (Fig. 16).

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3.3 Results From 2008 to 2015, the YLV elimination policy (including scrappage subsidy program and ban program) in the Beijing-Tianjin-Hebei region involved total costs of 19.49 billion yuan and produced total benefits of 132.55 billion yuan. The net benefits reached 113.06 billion yuan, of which 20.34 billion yuan were derived from the scrappage subsidy program and 92.722 billion yuan from the ban policy. As far as scrappage is concerned, Beijing stayed top in net benefits and cost-effectiveness ratio (7.27:1). As to the ban policy, Beijing presented the highest cost-effectiveness ratio of 20.88: 1, though it failed to maximize the net benefits.

Fig. 13 Proportion of pollutant concentration reductions brought by the ban policy in Beijing, Tianjin and Hebei

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Fig. 13 (continued)

Fig. 14 Health endpoints reduced by the ban policy in the Beijing-Tianjin-Hebei region, 2008–2015

From 2008 to 2015, Beijing’s NOx emission reductions brought by the YLV elimination policy represented 5.97% of motor vehicle emissions in the region, Tianjin 16.40% and Hebei 14.05%. They accounted for 2.57%, 3.25% and 5.09% of the regional NOx emissions respectively, contributing to 2.50%, 3.20% and 7.98% of the decline in regional NOx concentrations. Beijing’s PM2.5 emission reductions represented 11.15%, of motor vehicle emissions in the region, Tianjin 13.96% and

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Fig. 15 Value of health endpoints reduced by the ban policy in the Beijing-Tianjin-Hebei region, 2008–2015

Fig. 16 Cost savings derived from the ban policy in the Beijing-Tianjin-Hebei region, 2008–2015

Hebei 16.71%, accounting for 1.02%, 1.34% and 0.80% of the regional PM2.5 emissions respectively. They brought down the regional PM2.5 concentrations by 0.84%, 1.15% and 0.78% respectively. The YLV elimination policy in the region added new-vehicle consumption by 182.25 billion yuan, resulting in an increase of 835.17 billion yuan in China’s total output, 234.42 billion yuan GDP, 98.10 billion yuan residents’ income and 142,000 people employment. The policy contributed to different degrees to economic sectors.

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Fig. 17 Cost–benefit analysis results of the YLV elimination policy

It exerted the most impact on the automobile manufacturing industry by adding about 207.2 billion yuan, representing 25% or so of the total output. As a whole, the YLV elimination policy directly boosted China’s automobile industry and promoted national economic growth through industrial chain, thus playing a positive role on the macro-economy (Fig. 17).

3.4 Uncertainty Analysis Uncertainties may arise from the following aspects: (1)

(2)

(3)

(4)

Calculation boundary. Given the large scope of the Beijing-Tianjin-Hebei region and limited costs for management and vehicle transformation, administrative costs, indirect costs and benefits are not included in the calculations. Data. There are wide differences among regions in the quantities and pollutant emissions of YLVs with different models, conditions and standards. Due to data constraint, the number of YLVs eliminated in the cities of the BeijingTianjin-Hebei region each year is estimated based on the annual total and the 2012 model ratio in the three places. Parameter coefficients. There are uncertainties in the proportion of owners that buy new cars and the natural elimination rate, mileage traveled and occupancy of yellow-label vehicles. Time and scope of the ban policy. Launched at different time, the ban on YLVs on road expanded the scope over time in cities of the Beijing-Tianjin-Hebei region. The policy applies to such vehicles from other areas, and in some cases,

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(6)

(7)

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it does not cover the whole region or the whole year. Therefore, there may be certain error in the cost–benefit analysis of this policy. Dose–response factor. A group of parameters from existing studies at home and abroad has been used for calculating environmental and health benefits. This may lead to uncertainty in the results, due to differences in the types and concentrations of air pollutants and the size and characteristics of exposed population. Input data for the input–output model. It is assumed that 90% of the YLV owners purchase new cars, which may be inconsistent with the reality in the cities of the Beijing-Tianjin-Hebei region. Input–output model. The 2012 input–output model has been used for static economic impact assessment of the YLV elimination policy, but the dynamic changes in industrial structure and correlation coefficient among years may add uncertainty in the results. In addition, uncertainties may also arise from such parameters as labor occupancy coefficient. Nevertheless, experiences prove such errors have little effect on the results.

4 Conclusions and Suggestions 4.1 Conclusions From 2008 to 2015, the YLV elimination policy (including scrappage subsidy program and ban program) in the Beijing-Tianjin-Hebei region involved total costs of 19.49 billion yuan and produced total benefits of 132.55 billion yuan, making net benefits of 113.06 billion yuan. The results show that the policy has played an important role in reducing pollutant emissions and improving air quality in region, and the benefits have far outweighed the costs. Meanwhile, the policy has exerted a positive impact on the macro economy by increasing GDP, income and employment.

4.2 Suggestions First, economic instruments should be maintained to advance the elimination of old vehicles. The YLV elimination policy will yield greater net benefits if implemented earlier. The results will turn better in urban areas with relatively dense population, large exposed groups and high per capita GDP. Second, the ban and restriction policy should be strictly implemented. It is suggested to improve the legislation, strictly develop, and enforce the ban on on-road YLVs and the restriction on on-road old vehicles in a larger scope. Motor vehicles in violations of such regulations will face serious penalties. Policy instruments such as Fuel-related pollution charges and differentiated parking fees are expected to accelerate the elimination of yellow-label vehicles and old vehicles. Third, it is necessary to raise the standards of subsides for

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phasing out yellow-label vehicles and older vehicles. Fourth, the YLV management needs to be strengthened, especially considering the transfer of such vehicles to other areas. To address the transfer of pollution with YLVs, the supervision of the used car market should be strengthened and the transaction of such vehicles restricted. Fifth, publicity and education should be intensified to encourage car owners to use energy-efficient low-emission vehicles and public transportation.

References 1. Schuetzle D (1983) Sampling of vehicle emissions for chemical analysis and biological testing. Environ Health Perspect 47(47):65 2. Fraser MP, Cass GR, Simoneit BRT (1999) Particulate organic compounds emitted from motor vehicle exhaust and in the urban atmosphere. Atmos Environ 33(17):2715–2724 3. Hitchins J, Wolff R, Gilbert DML (2000) Concentrations of submicrometre particles from vehicle emissions near a major road. Atmos Environ 34(1):51–59 4. Ye SH, Zhou W, Song J et al (2000) Toxicity and health effects of vehicle emissions in Shanghai. Atmos Environ 34(3):419–429 5. Buckeridge DL, Glazier R, Harvey BJ et al (2002) Effect of motor vehicle emissions on respiratory health in an urban area. Environ Health Perspect 110(3):293–300 6. Seagrave J (2004) Relationship between composition and toxicity of motor vehicle emission samples. Environ Health Perspect 112(15):1527–1538 7. Nelson PF, Tibbett AR, Day SJ (2008) Effects of vehicle type and fuel quality on real world toxic emissions from diesel vehicles. Atmos Environ 42(21):5291–5303 8. Ministry of Environmental Protection of China (2015) Annual report on motor vehicle pollution control in China. Beijing 2015:14 (in Chinese) 9. Wang JN, Lei Y, Xue WB et al (2014) Environmental effects of the action plan for air pollution prevention and control and the cost-benefit analysis. Chin Ref Environ Decis Make 9(20):1–36 (in Chinese) 10. Zhang W, Wang JN, Jiang HJ et al (2015) Potential economic and environmental impact of the action plan for air pollution prevention and control. Res Environ Sci 1:1–7 (in Chinese) 11. Lei Y, Xue WB, Zhang YSH et al (2015) Health benefit assessment of the action plan for air pollution prevention and control. Chin J Environ Manage 5:50–53 (in Chinese) 12. Ministry of Environmental Protection of China (2014) Technical guidelines for compiling air pollutant emission inventory of on-road vehicles (Trial). Beijing (in Chinese) 13. World Health Organization (2005) Air quality guidelines global update 2005. WHO Regional Office for Europe, Copenhagen 14. Yu F, Guo XM, Zhang YSH, et al (2004) Assessment of health and economic losses caused by air pollution in China 24(12): 999–1004 (in Chinese) 15. Han MX, Guo XM, Zhang YSH (2006) A study of human capital loss of urban air pollution. China Environ Sci 26(4):509–512 (in Chinese) 16. Compilation Group of China Statistical Yearbook (2016) China Statistical Yearbook 2016. China Statistics Press, Beijing (in Chinese) 17. Compilation Group of Hebei Economic Yearbook (2016) Hebei Economic Yearbook 2016. China Statistics Press, Beijing (in Chinese)

Indicators-Based Environmental Performance Assessment for China’s Total Emission Reduction Policy During the 11th FYP (2006–2010) Weishan Yang, Dong Cao, and Xuetao Zhao

Abstract This report is product of cooperation project between Chemicals Branch, DTIE, UNEP and CAEP, MEP, China under Small-Scale Funding Agreement (No.NF/4030–10-62–2201) signed in 27th Jan, 2011 with 30,000USD funds from UNEP to CAEP (Phase I) and a continuation SSFA was (No.NF/4030–10-85) signed in 26th, Nov, 2012 with 28,500 USD funds from UNEP to CAEP as supporting (Phase II). In phase I, the project aims to adopt international best practice and policy evaluation tools to assess policy performance of China’s Total Emission Reduction Policy in the period of 2006–2010 (11th FYP) at national level and pilots study in provincial level. While in the research, the project has adopted DPISR conceptual framework to form an indictaors-based evaluation system to assess the policy performance at implementation stage. In phase II, the project has three research tasks: 1 Revise the indictaors-based evaluation system at national level according to the new requirements of the policy in 12th FYP (2011–2015) in which two complusory reduction pollutants became to four; 2 Establish indictaors-based evaluation system for provincial and municipal level based on statistical characteristics; 3 Develop indictaors-based evaluation system for sectoral level, the pilot study was carried out in textile sector. Upon the project completion in 2013, it has quantified Total Emission Reduction Policy performance at national level between 2006 and 2010 and proposed a series of mature methods for assessing performance of emission reduction policy at provincial, municipal and sectoral level. Keywords SO2 · COD · DPSIR · Environmental performance assessment · Pollutants control

List of Acronyms and Abbreviations COD DPSIR

Chemical Oxygen Demand Driving forces Pressure States Impacts Responses

W. Yang · D. Cao (B) · X. Zhao Chinese Academy of Environmental Planning, Beijing 100012, China e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 J. Wang et al. (eds.), Environmental Policy and Reform in China, https://doi.org/10.1007/978-981-16-6905-7_9

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European Environment Agency Environmental Indicator Environmental Performance Assessment Five Years Plan International Institute for Applied Systems Analysis Integrated Model to Assess the Global Environment Ministry of Environmental Protection Organization for Economic Co-operation and Development Regional Air Pollution Information and Simulation Dutch National Institute for Public Health and the Environment Sulfur Dioxide United Nations Environment Programme

1 Introduction The “Planning of the Eleventh Five Year Plan for National Economic and Social Development of the People’s Republic of China” proposed the restrictive indicators of 10% total emission reduction of major pollutants in the 11th Five Year Plan period: in 2010, discharge of chemical oxygen demand (COD) and sulfur dioxide (SO2 ) in the country will drop 10% respectively compared with 2005, i.e. discharge of chemical oxygen demand will be reduced from 14.142 million tons in 2005 to 12.728 million tons and emission of sulfur dioxide reduced from 25.494 million tons in 2005 to 22.944 million tons. To fully achieve the emission reduction goal set in the Eleventh Five Year Plan, the State Council formulated the “Comprehensive Work Plan of Saving Energy and Diminishing Pollution”, in accordance with which the Ministry of Environmental Protection (MEP) gradually established and developed the emission reduction system including emission reduction evaluation, monitoring, statistics, examination, dispatching, direct reporting, filing, early warning and information disclosure and, jointly with the departments concerned, promulgated and implemented a series of policy documents including “Energy Saving Environmental Protection Power Generation Dispatching Method (Trial Implementation)”, “Method for Managing the Operation of Desulphurization Facilities for Coal Fired Power Generating Units and Electricity Price” and “Interim Measures on State Revenue Special Fund Management for Emission Reduction of Major Pollutants”. Governments at all levels further changed their concepts, improved emission reduction mechanism and system and developed a top down emission reduction implementation mechanism. With joint efforts made by all parties, pollution emission reduction made significant progress. In 2010, total discharge of chemical oxygen demand in China was 12.381 million tons and total emission of sulfur dioxide was 21.851 million tons, reduced 12.45% and 14.29% respectively compared with 2005, both over fulfilling the 10% emission reduction goal.

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The “Planning of the Twelfth Five Years Plan for National Economic and Social Development” further proposed the total emission control target in the Twelfth Five Year Plan period: in 2015, energy consumption and carbon dioxide emission per unit GDP will drop 16% and 17% respectively, COD and SO2 drop 8% respectively and ammonia nitrogen and nitric oxides drop 10% respectively. Minister Zhou Shengxian pointed out, in the signed article “Deeply advance the reform and innovation of environmental protection system and actively explore China’s new environmental protection road”, that in meeting the requirements of the Outline, the overall consideration for China’s environmental protection work in the Twelfth Five Years Plan period is: focus on the theme of scientific development, the main line of changing economic development pattern and the new requirements for improving ecological civilization level to actively explore a low cost, high benefit, low emission and sustainable new environmental protection road; lay stress on solving the prominent environmental problems that affect scientific development and impair the masses’ health to plan as a whole the relations between total emission reduction and environmental quality improvement, environmental risk prevention and balanced urban and rural development, further optimize economic development and guarantee the improvement of people’s livelihood. Improving environmental quality has become the basic destination and important goal for the environmental protection work in the Twelfth Five Year Plan period. Hence the Twelfth Five Years Plan has proposed new requirements for pollution emission reduction work: firstly, in emission reduction contents, ammonia nitrogen and nitric oxides are added to the pollutants for total emission reduction and the range of total emission reduction is enlarged. Secondly, in emission reduction goals, it is required that not only the total emission control goal should be accomplished but also the total emission reduction work should be linked with environmental quality improvement, environmental risk prevention and balanced urban and rural development. Thirdly, in emission reduction approaches, total emission reduction shall embody the requirements for building a low cost, high benefit, low emission and sustainable new environmental protection road. To further increase the pertinence of pollution emission reduction policies and enhance the performance of pollution emission reduction policies, it is urgently needed to analyze the emission reduction work effect in the Eleventh Five Year Plan period in a comprehensive and objective way, recognize and summarize the actual experience and weak link of total emission reduction work to set the stage for designing the emission reduction policies and schemes for the Twelfth Five Years Plan period and exploring the low cost, high benefit, low emission and sustainable new environmental protection road. Based on the above goals, the Department of International Cooperation and the Department of Total Pollutants Control of the Ministry of Environmental Protection and the Chemicals Branch of United Nations Environment Programme have jointly initiated China Pollution Emission Reduction Performance Assessment Program.

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This report is one of the main outputs of this program and it mainly introduces the learning results of international experience and the performance assessment methods of the Eleventh Five Year Plan emission reduction policy established in accordance with China’s actual conditions. Finally, it provides a comprehensive analysis of pollution emission reduction conditions and effects in the Eleventh Five Year Plan period based on the available data and puts forward suggestions on the formulation and implementation of the total emission reduction policies in the Twelfth Five Year Plan.

1.1 Main Contents of the Eleventh FYP Emission Reduction Policies 1.1.1

Emission Reduction Goal

In order to improve China’s environmental quality, reduce environmental pollution emission, adjust industrial structure, change development pattern, solve regional environmental problems and mitigate the contradictions between environmental pollution and economic development, the Party Central Committee and the State Council promptly proposed the restrictive indicators of 10% total emission reduction of major pollutants in the 11th Five Year Plan period: in 2010, emission of chemical oxygen demand and sulfur dioxide in the country will drop 10% respectively compared with 2005, i.e. discharge of chemical oxygen demand will be reduced from 14.14 million tons in 2005 to 12.7 million tons and emission of sulfur dioxide reduced from 25.49 million tons in 2005 to 22.95 million tons (Table 1), to set the stage for implementing the scientific concept of development and promote a harmonious society. Table 1 Major pollution emission reduction indicators in 11th FYP period Indicators

2005

2010

Reduction goal

COD discharge (10,000t)

1414

1270

−10%

SO2 emission (10,000t)

2549

2295

−10%

Proportion of water quality worse than Grade 26.1 V in surface water monitored sections (%)

43

2 percentage points

Proportion of air quality equal to or above Grade II over 292 days in major cities (%)

69.4

75

5.6 percentage points

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Emission Reduction Measures Established clearly work-divided target-related responsibility system and supervision and evaluation system

In order to achieve the 11th FYP pollution reduction goal, all provinces (regions and municipalities) established a leading group for energy conservation and pollutant discharge reduction led by the main leaders of provincial governments to exercise strict evaluation and accountability and form a vertically interlocked and departmentally coordinated pollution emission reduction work mode. Strengthened government responsibilities and decomposed reduction task level by level to decompose rigid and quantified reduction indicators to governments and enterprises at all level. Adopted the three major systems including “scientific pollution emission reduction statistical system”, “accurate emission reduction monitoring system” and “strict emission reduction evaluation system” to scientifically, promptly, accurately and comprehensively reflect the emission condition and change trend of major pollutants and promptly tracked the emission change of major pollutants in all regions and from major enterprises to develop an energy conservation and emission reduction targetrelated responsibility system with definite goals and clear responsibilities where one level monitors and evaluates the other. (2)

Comprehensively used multiple means to implement emission reduction responsibilities

In the Eleventh Five Year Plan period, China took several pollution emission reduction measures such as facility reduction, structural reduction and management reduction and effectively guaranteed the accomplishment of the 11th FYP pollution emission reduction goal. For facility reduction, in 2010, 107 million kW installed capacity of coal fired desulphurization units was added and installed capacity of thermal power desulphurization units reached 578 million kW and its proportion in the total number of thermal power units increased from 12% in 2005 to 82.6%; 19 million m3 daily municipal wastewater treatment capacity was added and daily municipal wastewater treatment capacity reached 125 million m3 and municipal wastewater treatment rate increased from 52% in 2005 to over 75%; 170 FGD units for steel and iron sintering machines were built and operated and its proportion in the total of sintering machines increased from 0% in 2005 to 15.6% in 2010. For structural reduction, totally 72.1 million kW small thermal power units were decommissioned and the task of decommissioning 50 million kW was accomplished 1.5 years ahead of schedule. Elimination of backward production capacity was carried out for high energy consuming and high emission industries such as iron & steel, cement, coking and paper making, alcohol and monosodium glutamate, including 110 million tons of iron making capacity, 68.6 million tons of steelmaking, 330 million tons of cement, 93 million tons of coke, 7.2 million tons of paper making, 1.8 million tons of alcohol, 0.3 million tons of monosodium glutamate and 38 million weight cases. In 2010, the proportion of installed capacity of >300 MW thermal power units in the national electrical power industry increased from 47% in 2005 to over 70%

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and coal consumption for thermal power supply dropped 9.5% and COD pollution discharge load per unit product in the paper making industry dropped 45%. For management reduction, the state revenue provided more than 10 billion Yuan in the Eleventh Five Year Plan period to support the construction of the “Three Major Systems” for pollution emission reduction and the environmental protection supervision and management capacity in the country. 343 pollution source monitoring and control centers were built to automatically monitor and control 15,000 enterprises and more than 100,000 sets of monitoring and law enforcement equipment were arranged; thus environmental supervision and management ability was markedly enhanced. China Southern Power Grid Co. Ltd and many provinces carried out energy conservation, emission reduction, power generation and dispatching to evaluate the operation rate of coal fired desulphurization units and deduct desulphurization electricity price and operation rate increased from less than 60% in 2005 to more than 95% in 2010. Compliance rate of SO2 and COD from key pollution sources under national monitoring program was 92% and 94% respectively, up 22% and 34% compared with 2005. (3)

Strengthened the systems and capacity guarantee for determining and implementing the goal set in the plan

In order to accomplish the pollution emission reduction goal set in the Eleventh Five Year Plan, the “Guidelines for Preparing the Total Emission Reduction Plan for Major Pollutants (Trial Implementation)” and the “Detailed Rules for Calculating Total Emission Reduction of Major Pollutants (Trial Implementation)” were printed and issued and the environmental management systems such as emission reduction evaluation, statistics, monitoring, examination, dispatching, direct reporting, filing, information disclosure and early warning were adopted to ensure continuous advance of emission reduction. To ensure that emission reduction data was true and creditable, the Ministry of Environmental Protection organized forces biannually to examine emission reduction on the spot in all regions and it stipulated that local emission reduction results could not be openly released until approved by the Ministry of Environmental Protection. “Regional Restricted Approval” by enhancing project admittance conditions has controlled new pollution from the development source. Carried out special environmental protection activities and severely investigated and prosecuted environmentally unlawful act. Organized several national training sessions for pollution emission reduction work and technical training sessions for examination methods and detailed accounting rules and trained more than 2,000 persons (times) of leaders and administrative and technical personnel at all levels responsible for emission reduction in the national environmental protection system. Governments at all levels strengthened pollution emission reduction management and law enforcement capacity building and focused on the need of pollution emission reduction work to enhance pollution emission reduction management and law enforcement force. (4)

Completion condition of emission reduction

Guaranteed by a series of emission reduction policy measures, China over-fulfilled the pollution emission reduction goal set in the Eleventh Five Year Plan. In 2010,

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Fig. 1 Pollution emission reduction in eleventh five year plan period

China’s COD discharge was 12.381 million tons, down 12.5% compared with 2005. SO2 emission was 21.851 million tons, down 14.3% compared with 2005 (Fig. 1). Installed capacity of desulphurization units in the country reached 461 million kW and annual desulphurization capacity was 12 million tons. The proportion of installed capacity of desulphurization units in total installed capacity of thermal power rose from 12 to 71% and municipal wastewater treatment rate rose to 75%. The proportion of water quality better than Grade III in main water system monitored sections increased from 41% in 2005 to 59.9% in 2010, proportion of water quality worse than Grade V in surface water monitored section dropped to 16.4% and proportion of air quality equal to or above Grade II over 292 days in major cities exceeded 95%, all achieving the goal set in the Eleventh Five Year Plan. Average concentration of permanganate indicators in surface water monitored sections dropped 24% compared with 2005 and the proportion of main environmental protection cities with air quality equal to Grade II increased from 40.7 to 67.3%.

1.2 Significance for Performance Assessment Performance assessment is an open and effective environmental management tool and an important link in environmental policy execution process. Appropriate indicators are used to measure and assess the environmental effects gained after environmental policies are implemented so as to measure the advantages and disadvantages of regional environmental policies, reveal the change situation of environmental policies, enhance public environmental consciousness and guide environmental policies to sound development. Environmental performance not only refers to the environmental effect generated from environmental management activities but also contains cost factor input to improve environmental conditions, thus being a concept that embodies environmental protection efficiency.

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Under the economic development circumstance that China’s average GDP growth rate exceeds 10%, Chinese Government has implemented the 11th FYP pollution emission reduction policies and over fulfilled the pollution emission reduction tasks for COD and SO2 pollutants etc. However, except the emission reduction indicators of pollutants like COD and SO2 have made this achievement, what improvements have been made by the implementation of emission reduction policies in pollution control ability, environmental quality, enterprise production and pollution control technological advance and industrial and national economic structural optimization Scientific and rational indicators need to be chosen to measure the effects gained from the implementation of pollution emission reduction performance. At the same time, implementation and completion of any polices need costs. In order to achieve the 11th FYP pollution emission reduction task, Chinese Government took measures like facility reduction, structural reduction and management reduction to increase investments in treatment of pollution industries, eliminate backward production capacities of a series of industries including thermal power, coking, cement, paper making, alcohol, monosodium glutamate and citric acid and set up special funds for pollutants emission reduction to support the “Three Major Systems” for countrywide pollution emission reduction and environmental protection supervision and management capacity building. In order to scientifically reflect the efficiency of pollution emission reduction policies, it is necessary to calculate various costs and fees for pollution emission reduction so as to compare the effects and costs of pollution emission reduction, analyze the “efficiency” of pollution emission reduction in depth and systematically and provide a better scientific basis for China to choose various policies to carry out pollution emission reduction in the Twelfth Five Year Plan period. Thirdly, as resource environment and global climate change crisis is increasing gradually, international communities and domestic public pay higher and higher attention to environmental problems and environmental protection departments and especially informatization and networkization development gradually reduces information transmission. Sudden and regional pollution problems can very easily trigger the extensive attention of social public to pose huge pressure to government sectors. Although China has accomplished the 11th FYP pollution emission reduction task, the people hold different views on the improvement of environmental quality brought about by pollution emission reduction. For this reason, public satisfaction with environmental quality needs to be surveyed to truly reflect the efforts made by environmental protection departments to improve environmental quality on the one hand, and assess the real effects of environmental quality improvement by a series of environmental policies including total pollutants control on the other hand. By disclosing the assessment results to the public to increase public right to learn the truth, it is possible to effectively release the pressure from the international community and domestic public and eventually promote the smooth progress of environmental protection work.

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2 Methodology for Assessing the Performance of Emission Reduction Policies 2.1 Driving Force-Pressure-State-Impact-Response (DPSIR) Framework DPSIR indicator framework originally known as the Stress-Response framework developed by two scientists working at Statistics Canada, Friend and Rapport (1979). In 1991 in OECD this model has evolutes to PSR (Pressure-Stress-Response) framework within added new features of Pressure indicators. With the development of the large environmental models such as RAINS (Regional Air Pollution Information and Simulation) [1] and IMAGE (Integrated Model to Assess the Global Environment) by IIASA (International Institute for Applied Systems Analysis) [2] and RIVM (Dutch National Institute for Public Health and the Environment) respectively, the DPSIR model became further formalized. The new features including a more precise differentiation between driving forces, pressures, the resulting state of systems, the impacts (among others on the economy) and policy responses. Later the EEA helped to make this final DPSIR framework more widely known in Europe since 1995. From 2001 EEA started published its indicators on web. In a systematic and analytic view, DPSIR framework helps understanding environmental changes caused by societal activities. First social and economic developments as Driving-forces exert Pressure on the environment and, therefore, the State of the environment changes, such as the provision of adequate conditions for health, resources availability and biodiversity. Consequently, the changes lead to Impacts on human health, ecosystems and natural system that may trigger a societal Response that affect back on the Driving forces or on the state or impacts directly. DPSIR is not only a more complicated framework but also a more comprehensive and sophisticate framework. Driving forces describe the social, demographic and economic developments in societies and the corresponding changes in lifestyles, overall levels of consumption and production patterns. Primary driving forces are population growth and developments in the needs and activities of individuals. These primary driving forces provoke changes in the overall levels of production and consumption. Through these changes in production and consumption, the driving forces exert pressure on the environment. Pressure indicators describe developments in release of substances (emissions), physical and biological agents, the use of resources and the use of land by human activities. The pressures exerted by society are transport and transform through variety of natural processes to manifest themselves in changes of environmental conditions. State indicators give a description of the quantity and quality of physical phenomena (such as temperature), biological phenomena (such as fish stocks) and chemical phenomena (such as atmospheric CO2 concentrations) in a certain area. State indicators, for instance, may describe the forest and wildlife resources present,

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the concentration of phosphorus and sulfur intakes, or the level of noise in the neighborhood of airports. Pressure on the environment cause the state of the environment changes. These changes then have impacts on the functions of the environment, such as human and ecosystem health, resources availability, losses of manufactured capital, and biodiversity. Impact indicators are used to describe changes in these conditions. Response indicators refer to responses by groups (and individuals) in society, as well as government attempts to prevent, compensate, ameliorate or adapt to changes in the state of the environment. DPSIR system can macroscopically help the mankind understand the relation between social activities and environmental change. Firstly, social and economic development is defined as driving force, the source of environmental pressure, and it forces environmental condition to change. For example, the appropriate conditions provided for health, resource availability and biodiversity all cause changes. These changes bring impact to human health, ecosystem and natural system that may trigger social response which in turn directly affects driving force or state or impact. DPSIR is not only a complicated cycle framework but also a comprehensive and complete logic framework. As the most direct response of the government to environmental problems, it is seen from Fig. 2 that the change of environmental policies can change environmental pressure, state and impact and further cause the driving force to change, which eventually leads to the adjustment of human production and consumption behaviors. To measure the effect of energy conservation and emission reduction

Fig. 2 DPSIR framework

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policies, in addition to analyzing whether the energy conservation and emission reduction goal set by our country is achieved, It is necessary to judge whether environmental supervision ability is strengthened, environmental quality is improved, economic development mode is changed and mechanism including environmental protection in comprehensive decision making is established. Emission reduction goal and pollutants emission reduction amount reflect environmental pressure change, environmental quality reflects state change, environmental supervision ability reflects direct effect of response, economic development mode change reflects the impact of emission reduction policies on the driving force that causes environmental change, and including environmental protection in comprehensive decision making reflects the comprehensive effect of various policies. Therefore, performance analysis of emission reduction policies can be interpreted by a complete DPSIR framework.

2.2 DPSIR-Based Performance Descriptive Indicators 2.2.1

EEA and DPSIR Formation

The European Environment Agency (EEA) is an agency of the European Union. The European Union adopted the regulation establishing the EEA in 1990. It came into force in late 1993 immediately after the decision taken to locate the EEA in Copenhagen. Work started in earnest in 1994. In EEA’s classification system, all DPSIR indicators belong to Descriptive Indicators category which named Type A by EEA. Other categories are including Type B. Performance Indicators Type C. Efficiency Indicators Type D. Policy-effectiveness indicator Type E. Welfare Indicators Therefore, DPSIR framework should not cross confusing with ABCDE classification system. However, in some case, DPSIR indicators not represent the characteristics of descriptive indicators only, but also contain some features of other type of indicators. For instance, an Impact indicator could on behalf of either descriptive indicators (A) or policy-effectiveness indicators (B) at the same time (more details will discuss later) (Table 2).

2.2.2

Global Well-Recognized Environmental Indicators

Many international organizations e.g. OECD (Organization for Economic Cooperation and Development) [3, 4] UNEP (United Nations Environment Programme) [5] and EEA (European Environment Agency) [6–8] publish their own environmental indicators respect for various environmental issues annually or biannually. Sometimes the expression and/or unit of the indicators may slightly change in order to adapt the new situations and trends. EEA and OECD have selected for taking a closer look of their environmental indicators. The table below is showing statistics of indicators development from both

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Table 2 Terminology and typology of EEA Name

Type in EEA system

Descriptive indicators A

Contents

Feasible in environmental performance assessment?

Implication

Driving-force indicators

Yes

Describe environmental status and logical chain behind it

No

Make prediction on environmental progress

Pressure indicators Stress indicators Impact indicators Response Indicators Performance indicators

B

They measure the distance between current environmental situation and the desired situation (target)

Efficiency indicators

C

They provide insight No in the efficiency of products and processes. Efficiency in terms of the resources used the emissions and waste generated per unit of desired output

Identify the efficiency of environmental services

Policy-effectiveness indicator

D

Policy effectiveness Yes indicators relate the actual change of environmental variables to policy efforts. As such, they are a link between response indicators on one hand and state, driving force, pressure or impact indicators on the other

Check the effectiveness of environmental improvements

Total welfare indicators

E

N/A

Evaluate economic contribution environment

No

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Table 3 Summary of indicators from OECD and EEA Organization

Number of core set of indicators

Number of specific indicators

First year publish

Scale

OECD

10

Around 30

2001

30 countries globally

EEA

10

37

2004

27 EU countries

organizations. Beware that OECD is not an environment-oriented organization so the number of OECD’s indicators in the table only represent environmental indicators in OECD indicator stock. Indicators development of OECD and EEA Source from: OECD 2008 and EEA 2005. The table below details the core environmental indicators extracted from both EEA (2004) and OECD (2008) publications. Many overlapped issues can observe from the table. Core environmental indicators in EEA Source from: EEA 2005 and OECD 2008. One of the core indicators leading many different specific indictors in which specifically target environmental issue. Additionally, EEA puts more effort on indicators identification and classification than OECD. Based on DPSIR framework, UNEP has designed a set of relatively complete assessment indicator system for pollution emission reduction performance assessment (Refer to Table 3), pointed out the application method of the indicator system (Table 4) and emphasized that performance assessment of pollution emission reduction policies can be accomplished by description of a single indicators and additionally the impact of emission reduction policies can be quantitatively assessed by combinatory analysis among different indicators.

2.3 Establish Emission Reduction Performance Indicators System 2.3.1

Build the Indicators System

The DPSIR indicators system provided by UNEP is relatively comprehensive but in terms of China’s actual conditions, the data need for building this framework can not be fully met. Firstly, some indicators have not started statistics in the present statistical system in China and the data needed can not be obtained. Secondly, some indicators with data available are not closely related to the 11th FYP emission reduction performance and not suitable for being included as performance assessment indicators. See Table 4. After the indicators that are unrelated and lack data support are removed, the obtained indicators system is regarded as the DPSIR indicators system that tallies

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Table 4 Core environmental indicators in EEA and OECD

Core environmental indicator

EEA

OECD

1

Air pollution and ozone depletion

Air quality

2

Biodiversity

Biodiversity

3

Climate change

Climate change

4

Terrestrial

Ozone layer

5

Waste

Waste generation

6

Water

Freshwater resources

7

Agriculture

Forest resources

8

Energy

Energy resources

9

Fisheries

Fish resources

10

Transport

Freshwater quality

with China’s national conditions (Table 5). In addition, considering that China’s pollution response measures not only include environmental protection treatment investment but also include increase of pollution treatment facility operation efficiency brought about by personnel training and supervision strengthening„ the indicators of annual average load rate of treatment facilities in wastewater treatment plants and the comprehensive desulphurization efficiency of desulphurization facilities in the electric power industry are added to the indicators of the response part. For the adjusted indicators, refer to Tables 6, 7 and 8.

2.3.2

Indicators Definition and Calculation Method

(1)

Proportion of total investment in pollution treatment in GDP: refers to the proportion of investment in environmental pollution treatment in the current year gross domestic product. Removal rate of industrial sulfur dioxide: refers to the proportion of removal amount of industrial sulfur dioxide in production amount of industrial sulfur dioxide. Production amount of industrial sulfur dioxide = emission amount of industrial sulfur dioxide + removal amount of industrial sulfur dioxide. Annual average operation rate of industrial wastewater treatment facilities: refers to the proportion of wastewater amount actually treated by industrial wastewater treatment facilities in designed treatment capacity. Calculation equation:

(2)

(3)

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Table 5 DPSIR-based performance analysis indicators system Indicators classification Driving force

Social and economic activities

Industrial

Characteristic indicators

Specific indicators

Industrial development

Added value of heavy pollution industries Proportion of coal consumption

Domestic

Urbanization, e.g. Motor vehicle car consumption and quantity urban runoff increase Per capita energy consumption Urbanization rate

Natural interference

Pressure

Agricultural

Use of fertilizer and pesticide and their discharge to rivers

Consumption of chemical fertilizer and pesticide

Volcanic eruption

Volcanic eruption

Volcanic eruption frequency and intensity

Eutrophication

Natural eutrophication

Water body eutrophication frequency and extent

Emissions inventory

Effluent reaction and deposition

Effluent destination

Air

Effluent release Emission of SO2 , and/or total emission NOx, COD and total ammonia nitrogen Effluent release/emission from departments and/or cities

SO2 emission from industrial sector

Effluent concentration in air (average, short term, long term)

Proportion of SO2 that forms sulfuric acid in air in total SO2

Effluent concentration in water body (average, short term, long term)

Proportion of compounds that incur chemical reaction in wastewater in total compounds

Effluent concentration and emission amount in air compared with other types of effluents

Annual average precipitation of acid rain containing sulfate radical

NOx emission from industrial sector

(continued)

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Table 5 (continued) Indicators classification

State

Characteristic indicators

Specific indicators

Water

Effluent concentration and discharge amount in water compared with other types of effluents

Proportion of water with COD beyond standard that flows to underground drinking water source, in total wastewater discharge

Soil

Effluent concentration and discharge amount in soil compared with other types of effluents

Increased proportion of various pollutants in soil due to discharge of pollutants

Emission concentration (annual base, air quality)

Annual average concentration of SO2 , PM10 and NOx

Chemical composition of air

Proportion of SO2 and NO2 in air

Meteorological conditions

Annual average monsoon intensity (atmospheric pollutant transfer speed)

Hydrologic regime

COD-contaminated water body transfer speed

Water area biodiversity indicators

Number of biologic species per unit water area

Toxic substance accumulation

Concentration of toxic substance

Habitat conditions

Urban air quality grade

Basic account

Ecosystem potential

Number of acid rain affected cities Vulnerability stress and natural interference Impact

Direct loss

Human health

Energy consumption per unit GDP

Contaminated water Number of related and polluted air are disease outpatients related to diseases for treatment in hospital (continued)

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Table 5 (continued) Indicators classification

Characteristic indicators

Specific indicators

Treatment in emergency department

Number of outpatients in emergency department

Pollutant concentration in soil and aquatic system

pH change rate

Quantity of affected aquatic animals, plants, phytoplankton and zooplankton

Quantity of affected aquatic animals, plants, phytoplankton and zooplankton

Resource

Reduce water availability

Number of water deficient cities or wastewater irrigation area

Human health

Diseases and bad health cause loss of working time

Economic loss from loss of working time due to health reason

Ecosystem

Acid rain changes soil pH and leads to death of soil-dependent microorganisms and other organisms

Economic loss from land deterioration

Endangered species are extinct or lost

Economic loss due to biodiversity reduction

Reduce air visibility (smog)

Losses from traffic accidents

Acid rain causes damage to building materials, sculptures and monuments

Economic loss due to damage of building materials, sculptures and monuments

Acid rain causes damage to metal (copper, bronze) statues and other irreplaceable materials

Economic loss due to material damage

Impact on tourism

Economic loss due to attraction reduction of tourism

Ecosystem

Indirect loss

Resource

(continued)

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Table 5 (continued) Indicators classification

Characteristic indicators

Specific indicators

Real estate

Economic loss due to reduction of investment in real estate

Fishing capacity decrease

Economic loss due to reduction of fishery production

Contaminated water Economic loss from and polluted air are loss of working time related to diseases for due to health reason treatment in hospital Response

Economic response

Management response

Increase pollution Number of control infrastructure desulphurization construction facilities and wastewater treatment plants Facility investment

Total investment in pollution treatment facilities

Government subsidy for industry

Subsidy amount related to emission reduction

Increase pollution treatment capacity

New wastewater treatment capacity and new desulphurization facility desulphurizing capacity

Ecological efficiency Proportion of energy substitute saving and conventional product environmental protection products Industrial technological improvement

Proportion of enterprises that carry out cleaner production

Emission standard and limit

Newly issued pollutants emission standard/limit

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Table 6 Policy performance assessment method Class

Policy effect indicators

Function

Independent descriptive indicators

Response

Measure government work effort

State

Check environmental quality improvement

Pressure

Measure environmental pressure change

Response-pressure

Measure emission reduction goal accomplishment

Response-state

Measure whether environmental quality is improved

Pressure-driving force

Measure whether economic structure is optimized

Combined descriptive indicators

Industrial waste water treatment amount ÷ 365 ÷ treatment capacity of industrial waste water treatment facilities × 100%

(4)

. Annual average operation rate of municipal wastewater treatment plants: refers to the proportion of wastewater amount actually treated by municipal wastewater treatment plants and centralized wastewater treatment equipment in industrial zone in the current year in the design treatment capacity. Calculation equation: Annual average operation rate of municipal waste water treatment plants = (waste water treatment amount ÷ 365) ⎞⎤ ⎡⎛ design treatment capacity of ⎟⎥ ⎢⎜ wastewater treatment plants ⎟⎥ ⎢⎜ ÷ ⎢⎜ ⎟⎥ × 100% ⎣⎝ + treatment capacity of centralized ⎠⎦ treatment equipment ÷ 10, 000

(5)

. Comprehensive desulphurization efficiency of electric power industry: refers to the ratio of removal amount of sulfur dioxide from production and supply of electric power and thermal power to production amount of sulfur dioxide in the current year in Annual Report of Environmental Statistics.

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Table 7 DPSIR indicators framework provided by UNEP Indicators classification Driving force

Social and economic activities

Industrial

Domestic

Agricultural

Natural Volcanic interference eruption

Characteristic indicators

Specific indicators

suggestions

Industrial development

Added value of heavy pollution industries

Included; COD and SO2 emission intensity of industrial added value of first 5 heavy pollution industries are adopted

Proportion of coal consumption

Not included; recommended as analysis indicators

Motor vehicle quantity

Not included; key point of emission reduction in 12th FYP period, can be used as analysis indicators

Per capita energy consumption

Not included; recommended as analysis indicators

Urbanization rate

Not included; recommended as analysis indicators

Use of fertilizer and pesticide and their discharge to rivers

Consumption of chemical fertilizer and pesticide

Not included; key point of emission reduction in 12th FYP period, can be used as analysis indicators

Volcanic eruption

Volcanic eruption frequency and intensity

Not included

Urbanization, e.g. car consumption and urban runoff increase

(continued)

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Table 7 (continued) Indicators classification

Characteristic indicators Eutrophication Natural eutrophication

Pressures Emissions inventory

suggestions

Water body eutrophication frequency and extent

Not included; difficult to distinguish from natural and artificial eutrophication

Effluent release and/or total emission total

Emission of, NOx, SO2 and COD COD and ammonia included nitrogen

Effluent release/emission from departments and/or cities

SO2 emission from Included as industrial sector analysis indicators

Effluent concentration in air (average, short term, long term)

Proportion of SO2 that forms sulfuric acid in air in total SO2

Not included; lack of data support

Effluent concentration in water body (average, short term, long term)

Proportion of compounds that incur chemical reaction in wastewater in total compounds

Not included; lack of data support

Air

Effluent concentration and emission amount in air compared with other types of effluents

Annual average Not included; precipitation of lack of data acid rain containing support sulfate radical

Water

Effluent concentration and discharge amount in water compared with other types of effluents

Proportion of water Not included; with COD beyond lack of data standard that flows support to underground drinking water source in total wastewater discharge

Effluent reaction and deposition

Effluent destination

Specific indicators

NOx emission from Included as industrial sector analysis indicators

(continued)

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Table 7 (continued) Indicators classification Soil

State

Basic account

Ecosystem potential

Characteristic indicators

Specific indicators

suggestions

Effluent concentration and discharge amount in soil compared with other types of effluents

Increased proportion of various pollutants in soil due to discharge of pollutants

Not included; lack of data support

Emission concentration (annual base, air quality)

Annual average concentration of SO2 , PM10 and NOx

Not included as urban air quality grade includes the above factors

Chemical composition of air

Proportion of SO2 and NO2 in air

Not included; lack of data support

Meteorological conditions

Annual average monsoon intensity (atmospheric pollutant transfer speed)

Not included; lack of data support

Hydrologic regime

COD-contaminated Not included; water body transfer lack of data speed support

Water area biodiversity indicators

Number of biologic Not included; species per unit lack of data water area support

Toxic substance Concentration of accumulation toxic substance

Not included; lack of data support

Habitat conditions

Included; the proportion of air quality equal to or above Grade II over 292 days in major cities is used for comprehensive reflection

Urban air quality grade

(continued)

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Table 7 (continued) Indicators classification

Impact

Direct loss

Characteristic indicators

Human health

Ecosystem

Resource

Specific indicators

suggestions

Number of acid rain affected cities

Included; the number of cities with acid rain occurrence among the monitored cities is adopted

Vulnerability stress and natural interference

Desertification area Not included; not closely related to this assessment

Contaminated water and polluted air are related to diseases for treatment in hospital

Number of related disease outpatients

Included; economic loss due to air pollution is adopted for comprehensive reflection

Treatment in emergency department

Number of outpatients in emergency department

Included; economic loss due to air pollution is adopted for comprehensive reflection

Pollutant pH change rate concentration in soil and aquatic system

Not included; lack of data support

Quantity of affected aquatic animals, plants, phytoplankton and zooplankton

Quantity of affected aquatic animals, plants, phytoplankton and zooplankton

Not included; lack of data support

Reduce water availability

Number of water deficient cities or wastewater irrigation area

Not included

(continued)

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Table 7 (continued) Indicators classification Indirect loss

Characteristic indicators

Specific indicators

suggestions

Human health

Diseases and bad health cause loss of working time

Economic loss from loss of working time due to health reason

Included; economic loss due to air pollution is adopted for comprehensive reflection

Ecosystem

Acid rain Economic loss changes soil pH from land and leads to deterioration death of soil-dependent microorganisms and other organisms

Not included; lack of data support

endangered species are extinct or lost

Economic loss due to biodiversity reduction

Not included; lack of data support

Reduce air Losses from traffic visibility (smog) accidents

Not included; lack of data support

Acid rain causes damage to building materials, sculptures and monuments

Included; economic loss due to air pollution is adopted for comprehensive reflection

Resource

Economic loss due to damage of building materials, sculptures and monuments

Acid rain causes Economic loss due Not included; damage to metal to material damage lack of data (copper, bronze) support statues and other irreplaceable materials Impact on tourism

Economic loss due to attraction reduction of tourism

Not included; lack of data support

Real estate

Economic loss due to reduction of investment in real estate

Not included; lack of data support (continued)

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Table 7 (continued) Indicators classification

Response Economic response

Management response

Characteristic indicators

Specific indicators

suggestions

Fishing capacity Economic loss due decrease to reduction of fishery production

Not included; lack of data support

Contaminated water and polluted air are related to diseases for treatment in hospital

Economic loss from loss of working time due to health reason

Included; economic loss due to air pollution is adopted for comprehensive reflection

Increase pollution control infrastructure construction

Number of desulphurization facilities and wastewater treatment plants

Reflected by desulphurizing capacity and wastewater treatment capacity

Facility investment

Total investment in Included pollution treatment facilities

Government subsidy for industry

Subsidy amount related to emission reduction

Not included; lack of data support

Increase pollution treatment capacity

New wastewater treatment capacity and new desulphurization facility desulphurizing capacity

Included

Ecological efficiency substitute conventional product

Proportion of Not included; energy saving and lack of data environmental support protection products

Industrial technological improvement

Proportion of enterprises that carry out cleaner production

Emission standard and limit

Newly issued No new pollutants emission standards or standard/limit limitations are issued

Not included; lack of data support

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Table 8 Emission reduction performance assessment indicators system tallying with China’s national conditions Comprehensive indicators

Specific indicators

Indicators No

Policy response

Proportion of total investment in pollution treatment in GDP (100,000,000 Yuan)

(1)

Removal rate of industrial sulfur dioxide (%)

(2)

Municipal domestic wastewater treatment rate (%)

(3)

Annual average operation rate of industrial wastewater treatment facilities (%)

(4)

Annual average operation rate of treatment facilities in wastewater treatment plants (%)

(5)

Comprehensive desulphurization efficiency of electric power industry (%)

(6)

Eliminated quantity of backward production capacities (100,000,000 Yuan)

(7)

Stable network connection proportion of on-line monitoring facilities in key national monitored enterprises (%)

(8)

Environmental pressure

COD discharge (10,000 t)

(9)

SO2 emission (10,000 t)

(10)

Environmental state

Proportion of air quality equal to or above Grade II over 292 days in major cities (%)

(11)

Proportion of cities with acid rain occurrence among monitored cities (%)

(12)

Proportion of water quality worse than Grade V in surface water monitored section (%)

(13)

Proportion of water quality better than Grade III in main water system monitored sections (%)

(14)

Public satisfaction with urban environmental protection (%)

(15)

Economic loss due to atmospheric pollution (100,000,000 Yuan)

(16)

SO2 emission intensity per 10,000 Yuan industrial added value in heavy pollution industries (kg/10,000 Yuan)

(17)

COD discharge intensity per 10,000Yuan industrial added value in heavy pollution industries (kg/10,000 Yuan)

(18)

CO2 emission reduction due to close-down of backward production capacities (100,000,000 t)

(19)

Comprehensive impact

Global environment

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Comprehensive desulphurization efficiency = removal rate of sulfur dioxide ⎛ ⎞ removal amount of ⎜ ⎟ ÷ ⎝ sulfur dioxide + emission amount ⎠ × 100% of sulfurdioxide

(6)

(7)

. Eliminated quantity of backward production capacities: calculated on the basis of product value produced by eliminated production capacity. The target value of eliminated backward production capacity is calculated in accordance with the directory of eliminations listed in the Comprehensive Work Plan on Energy Conservation and Emission Reduction during 11th Five-Year Plan Period issued by the State Council. Stable network connection proportion of on-line monitoring facilities in key national monitored enterprises: refers to proportion of COD monitoring equipment and SO2 monitoring equipment (sets) quantity in the key national monitored enterprises that already carry out automatic monitoring, in stable network connection with environmental protection departments. Calculation equation: Stable network connection proportion of online monitoring facilities in key national monitored enterprises = (COD monitoring equipment (sets) quantity in stable network connection with environmental protection departments) + SO2 monitoring equipment (sets) quantity in stable network connection with environmental protection departments + number of key national monitored enterprises that already carry out automatic monitoring × 100%

(8) (9) (10)

*Since Annual Report of Environmental Statistics 2010 no longer involves the related indicators of SO2 /COD monitoring equipment (sets) quantity in stable network connection with environmental protection departments, the calculation equation of this indicators for 2010 data is: the number of key national monitored enterprises that already carry out automatic monitoring ÷ number of key national monitored enterprises that already have network connection for automatic monitoring. COD discharge: refers to the actual COD discharge amount at the end of the current year. SO2 emission: refers to the actual SO2 emission amount at the end of the current year. Proportion of air quality equal to or above Grade II over 292 days in major cities: refers to the proportion of major cities with annual air quality equal to or above Grade II over 292 days in the total number of major cities.

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(11)

(12)

(13)

(14)

(15)

(16)

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Proportion of cities with acid rain occurrence among monitored cities: refers to the proportion of monitored cities with acid rain occurrence in the total number of monitored cities in the current year. Proportion of water quality worse than Grade V in surface water monitored section: refers to the proportion of surface water monitored sections with water quality worse than Grade V in the total number of surface water monitored sections. Proportion of water quality better than Grade III in main water system monitored sections: refers to the proportion of monitored sections of the seven major water systems with water quality better than Grade III in the total monitored sections of the seven major water systems. Public satisfaction with urban environmental protection: refers to the overall evaluation of the public for urban environmental protection conditions. It is calculated from the satisfaction average of all evaluated cities on the basis of results of the annual “Urban Investigation” public satisfaction survey conducted by the Department of Pollution Prevention and Control of the Ministry of Environmental Protection. As this indicator was included in Urban Investigation for the first time in 2007, there are no 2005 and 2006 data. Economic loss due to atmospheric pollution: the loss due to atmospheric pollution is calculated for value mainly by the losses to human health, agriculture, buildings and cleaning caused by atmospheric pollution. Loss of human health due to atmospheric pollution mainly includes three aspects: loss of early death due to pollutant PM10 , loss of excessive inpatients related to respiratory system and circulatory system, and disability loss; agricultural loss mainly includes loss of agricultural production reduction and quality reduction due to SO2 and acid rain; loss of building corrosion mainly includes loss of service life reduction of various building materials due to acid rain. Cleaning cost mainly includes outdoor cleaning cost and indoor cleaning cost due to pollutants like dust. As SO2 is the emission reduction indicators in the Eleventh Five Year Plan period, this report only calculates the loss of agricultural pollution and loss of building corrosion related to SO2 . Atmospheric pollution loss indicators data is from the environmental and economic accounting program organized by Chinese Academy for Environmental Planning. SO2 emission intensity per 10,000Yuan industrial added value in heavy pollution industries: refers to the SO2 emission intensity of 10,000Yuan industrial added value of the first 5 heavy pollution industries in SO2 emission in the current year. The first five industries in SO2 emission include: electric power, steam and hot water production and supply industry, nonmetallic mineral product manufacturing industry, chemical feedstock and chemical product manufacturing industry, ferrous metal smelting & processing industry and nonferrous metal smelting & processing industry. COD discharge intensity per 10,000Yuan industrial added value in heavy pollution industries: refers to the COD discharge intensity of 10,000Yuan industrial added value of the first 5 heavy pollution industries in COD emission

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(18)

2.3.3

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in the current year. The first five industries in COD discharge include: papermaking and paper product industry, food processing industry, chemical feedstock and chemical product manufacturing industry, beverages manufacturing industry and textile industry. CO2 emission reduction due to close-down of backward production capacities: refers to synergistic CO2 emission reduction produced by closing down enterprises with backward production capacity. Calculation method is to convert the eliminated production capacity into energy consumption according to the list of eliminated backward production capacities in the Comprehensive Work Plan of Saving Energy and Diminishing Pollution issued by the State Council and then make an estimation by using the carbon emission factor per unit product. Calculation result indicates that by the end of 2010, if the related measures in the “Comprehensive Work Plan of Saving Energy and Diminishing Pollution” can be accomplished as scheduled, emission of 2.4 million tons of SO2 and 0.4 million tons of COD can be reduced through structural reduction and additionally, emission of 240 million tons of CO2 can be reduced. If facility measures are considered, 149 million tons of CO2 is added and 26 million tons of CO2 reduced by management reduction is subtracted and then net reduction of CO2 by the emission reduction measures is 117 million tons. Determination of Indicators’ Target Value

For environmental performance assessment, determination of the policy target for all indicators is particularly important. Rational and effective policy target is the bridge to link the actual environmental performance reflected by all indicators with the expectation of policy regulation and control and also is the important parameter for standardized data processing, which has important impact on faithfully and fairly measuring the environmental performance level. For determination of all indicators target values, there are many trains of thoughts. Some can have the final target determined, some can only have phased target determined and others can only have the target of proper change determined. In this study, different methods are applied for different indicators: Plan target value method: the target value determined in the 11th FYP for Environmental Protection is the main goal of pollution emission reduction work and the basis for assessing the effect of pollution emission reduction work. The target values of such indicators as COD and SO2 emission amount, the proportion of air quality equal to or above Grade II over 292 days in major cities, proportion of water quality worse than Grade V in surface water monitored section (%), proportion of water quality better than Grade III in main water system monitored section (%), proportion of total investment in pollution treatment in GDP, quantity of eliminated water-related backward production capacity and quantity of eliminated air-related backward production capacity are determined in accordance with the “National Eleventh Five Year Plan for Environmental Protection”.

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Standard target value method: target value is determined in accordance with related national standards or requirements. For example, public satisfaction with urban environmental protection, COD discharge intensity of heavy pollution industries and SO2 emission intensity of heavy pollution industries adopt the target values required in the “Construction Indicators of Ecological County, Municipality and Province (Revision)”. Public satisfaction with urban environmental protection adopts the evaluation target value for ecological cities and the other two indicators adopt the evaluation target value for ecological provinces. Theoretical (ideal) target value method: the theoretically or empirically attainable level is used as the target, e.g. annual average operation rate of industrial wastewater treatment facilities, comprehensive desulphurization efficiency of electric power industry and stable network connection proportion of on-line monitoring facilities in key national monitored enterprises (%) (Table 9).

2.3.4

Data Standardization Method

Target value standardization method is used to convert indicator value into a standardized value between 0 and 100 by comparing the indicator value with target value.  Xi/Ai Xi < A Pi = When data is the greater the better (1) 1 Xi > Ai  Ai/ Xi Xi < A Pi = When data is the smaller the better (2) 1 Xi > Ai where, Pi is standardized value of the indicator, Xi is original value of an indicator and Ai is the standard value of the indicator.

2.3.5

Determination of Indicators Weight

For any link of the DPSIR, it is obviously impossible to emphasize which one is more important. As part of a complete logic framework, each type of indicator is indispensable. Emission amount is both the result of driving force and the direct cause for environmental quality change. This applies to the other indicators. Therefore, in determining the assessment weight, the general Analytical Hierarchy Process or Expert Investigation Method is not used. Instead of, all factors or various emission reduction effects are considered to be equally important, i.e. equal weight method is used as the indicator weighing basis and this is simpler and more direct. Of course, for policy response indicator and policy effect indicator, the sum of respective weights meets the conditions of equaling 1.

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Table 9 Indicators’ target values and weight Comprehensive indicator

Specific indicators

Policy response

Environmental pressure

Environmental state

Indicator No

Weight

Target value

Remarks

Proportion of total (1) investment in pollution treatment in GDP (100,000,000 Yuan)

1.35%

11th FYP

Removal rate of industrial sulfur dioxide (%)

(2)

100%

Theoretical value

Municipal domestic wastewater treatment rate (%)

(3)

100%

Theoretical value

Annual average operation rate of industrial wastewater treatment facilities (%)

(4)

100%

Theoretical value

Annual average operation rate of treatment facilities in wastewater treatment plants (%)

(5)

100%

Theoretical value

Comprehensive desulphurization efficiency of electric power industry (%)

(6)

100%

Theoretical value

Eliminated quantity of backward production capacities (100,000,000Yuan)

(7)

14,355

Stable network (8) connection proportion of on-line monitoring facilities in key national monitored enterprises (%)

100%

Theoretical value

COD discharge (10,000t)

(9)

1270

11th FYP

SO2 emission (10,000t)

(10)

2295

11th FYP

Proportion of air quality equal to or above Grade II over 292 days in major cities (%)

(11)

75%

11th FYP

(continued)

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Table 9 (continued) Comprehensive indicator

Comprehensive impact

Global environment

Specific indicators

Indicator No

Proportion of cities with acid rain occurrence among monitored cities (%)

Target value

Remarks

(12)

100%

Theoretical value

Proportion of water quality worse than Grade V in surface water monitored section (%)

(13)

43%

11th FYP

Public satisfaction with urban environmental protection (%)

(15)

90%

Evaluation indicator for ecological municipalities (revised)

Economic loss due to (16) atmospheric pollution (100,000,000 Yuan)

424.85

Green GDP accounting result

SO2 emission (17) intensity per 10,000Yuan industrial added value in heavy pollution industries (kg/10,000 Yuan)