Recently, China’s Ministry of Environmental Protection (MEP) in conjunction with the National Development and Reform Commission (NDRC), the People’s Bank of China (PBC) and other 28 government branches detailed the new “Memorandum of Cooperation On the Penalties Imposed on Enterprises Involved in Fraudulent Environmental Protection Activities”
The official document of the Memorandum hasn’t been released yet. The vice minister of MEP, Runqiu Huang introduced some major contents of the Memorandum to the press. According to Mr. Huang, the scope of the penalties will cover production and operation units that have records of seriously dishonest behaviors in areas of environmental protection. Both administrative government departments and financial institutions have participated in developing the Memorandum, so the penalties will impact industry in a number of ways, including restriction of market entry for products, restriction of administrative approvals, restriction of financing channels, withdrawal of preferential policies, stricter supervision and examination, etc. As the leading department MEP will compile lists of enterprises that are to be punished at regular intervals and hand out the lists to other departments and branches. The lists will also be open to public. The penalties from each department and branch and the results of the penalties will be notified to the public at regular intervals.
The Memorandum is a radical and harsh move that will impact enterprises that seriously violate environmental protection regulations. The environmental protection authorities have long been frustrated by difficulties encountered during law enforcement. Administrative and financial measures were supposed to be the 2 fiercest weapons that the authorities had at their disposal. However, many legal articles have had no impact due to difficulties involved in imposing penalties, coordinating the efforts of multiple government departments and prohibitively excessive bureaucratic red tape. Under the Memorandum implementation and imposition of penalties is greatly facilitated and will force enterprises to take the law and regulations more seriously.
However, the definition of “records of serious dishonest behaviors in areas of environmental protection” hasn’t been announced by Mr. Huang. No doubt the definition and criteria needs subtle handling so as not to unduly impact the economy. The industry has to wait for the release of the finalized legal text.
