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China’s EIA Industry Rife with Fraud

A farce played out at an environmental impact assessment (EIA) firm in the southern city of Shenzhen when inspectors called round in early October, this year.

The firm had applied to renew its license to carry out EIAs—reports that are supposed to provide detailed appraisals of the likely environmental consequences of constructing projects like factories or dams. Two inspectors from Guangdong province’s environmental authorities and a staffer from the Shenzhen environmental committee carried out an on-site audit. On the day of the audit, EIA engineers and other staff were summoned to the firm’s office. The auditors questioned the engineers individually about which projects they had worked on, where, and so on. But the engineers had no answers. Even more absurdly, some were unable to name the street the firm’s offices were on. When the auditors tried to turn the engineers’ computers on, they did not work. The reason: the engineers all had main jobs elsewhere and do not usually work at the EIA firm. Yet they are registered there as qualified engineers. A study of the 11 Chinese provinces with the highest number of EIA engineers found this practice is common, and can cover entire companies, while Southern Weekend newspaper’s investigation suggests 16 percent of EIA engineers may be falsely registered. (The study excluded Hubei and Jiangsu, as these two provinces have already been audited by the Ministry of Environmental Protection.)

Government Action

China’s Ministry of Environmental Protection has dealt with 100 companies since 2012 that had EIA engineers with false registrations. On July 31, the Ministry named 62 falsely registered engineers at 31 companies. It revoked the engineers’ qualifications and banned three companies from carrying out further assessments. The other EIA firms received reductions in the scale or scope of assessments they are permitted to undertake, or were given a temporary three-month ban from EIA work, during which they must rectify the situation.

These audits were linked to investigations by environmental group Chongqing Liangjiang Voluntary Service Centre. Early this year, the group simply carried out internet searches to compile a list of over 100 civil servants in the environmental sector who were also registered as working at EIA companies, and submitted this to the Ministry. He Hongzhi, an EIA engineer from Shenzhen with 10 years’ experience, has also made a number of similar complaints.

Whistle-Blower's Inside View

“It’s safer for the company if the engineers it registers are local and can be called into the office when necessary, and if they know the local environment,” He explained. “But the engineers prefer to be registered as far away as possible, as they’re less likely to be caught.” The earlier-mentioned case in Shenzhen involved engineers from other locations who had been rushed to the city and not had time to familiarize themselves with the company’s work.

The Southern Weekend newspaper’s own internet searches found 834 cases where EIA engineers registered as working at an EIA body had the same exact name as employees of other environmental work units—such as government departments and their subsidiaries, research institutes, and universities. Of these EIA registrations, 255 people or 16 percent of the total, work for environmental authorities.The civil service rank of these engineers ranged from clerk and technician to chief engineer, dean, or department head.

For example, the Sichuan Luzhou Environmental Sciences Institute had five EIA engineers, all with identical names to employees of the Luzhou Environmental Protection Monitoring Station. A deputy head of the station also has the same name as an engineer registered as working at the Sichuan Guohuan Environmental Consulting Co. Such overlap in names is commonly seen at environmental bureaus, monitoring stations, and regulatory teams.

As of September 22, the Ministry’s data center listed 11,169 registered EIA engineers, 5,349 of them in the provinces mentioned above.

In Beijing, a particular feature of the situation in the city is that a huge number of EIA engineers appear to be registered at companies elsewhere around China—189, or 71 percent of apparent fake registrations, spread across 24 provinces. This fits in with non-local registrations becoming more common as the process becomes more risky.

The efficiency of this method was partially confirmed by the Ministry’s response to Chongqing Liangjiang’s reports. Authoritative government checks are needed to confirm whether fake registrations do in fact explain the duplicate names. But the Ministry’s list of 62 fake registrations included 55 civil service employees—so when names of employees of environmental bodies are found to be in use elsewhere, there is a high chance this is due to a fake registration.

High Earnings for Fake Inspectors

The phenomena of fake registrations started with a new government policy in 2005.

From that year, China started to hold an annual qualification exam for EIA engineers, and new methods for carrying out EIAs came into force—EIA bodies had to be licensed and employ certain numbers of qualified EIA engineers to be permitted to undertake particular categories of EIA. A “Class A” body had to employ 10, with at least three qualified in the categories of EIA it undertook.

Civil servants from the Chinese Academy of Environmental Sciences and its institutes, which were licensed to carry out EIAs, and from bodies which were not so licensed, such as environmental monitoring stations, all took those exams.

One of the first civil servants to take the exam was Xu Honggang, another whistle-blower, who worked for an environmental protection bureau in the north of China. He recalls that at the time all those taking the exam were civil servants: “Although there were strict rules on who could take the exam, we just found a company to stamp our application and handed in a fake CV and our ID card. Nobody checked to see if it was real.”

As environmental monitoring stations cannot carry out EIAs, their employees who had qualified as EIA engineers then had to register elsewhere. And while the Chinese Academy of Environmental Sciences and its institutes did carry out EIAs, they did not offer extra payments to staff doing this work—so again, they were better off registering elsewhere. At the time, this could bring in 50,000 to 60,000 yuan of extra income a year, and explains why most of the falsely registered EIA engineers come from these bodies.

Some EIA bodies don’t have a single EIA engineer in place. According to Xu, “they don’t want full-time engineers as the salary would be well over 100,000 yuan a year. Just find someone to register as being at your company, and it costs you 40,000 to 50,000 yuan.”

Unqualified Sub-contractors

“Actually, a more serious issue is the use of unlicensed companies,” said Xu, who has written to the Ministry about the practice.

In these cases, an unlicensed company contracts to undertake an EIA, and on completion finds a licensed firm to sign it off and affix the company seal. In Shenzhen, that costs only several hundred yuan, down from over 1,000 yuan. In some cases, fees are charged on a monthly or annual basis—a company registers as a licensed EIA firm, but sub-contracts to unlicensed firms and stamps their documents. Annual income can reach 500,000 to 600,000 yuan.

Some licensed EIA organizations can make millions of yuan each year by sub-contracting out work. He Hongzhi explained that many EIA companies in Shenzhen are not licensed—he’s even done it himself.

“The outcome is that the licensed company doesn’t have to take responsibility, so they just say whatever is necessary to get the EIA to pass. That means the report is full of problems, but nationwide it’s very rare for responsibility for that to be chased up, mostly it just gets ignored.”

Xu, now a Shenzhen expert on EIAs, says it is hard to establish a direct link between unlicensed firms and environmental damage and worries more about implementation: “Many EIA reports have detailed environmental protection measures, but the builder doesn’t implement them, or does so badly and below standard. Or standards are met, but then the project is badly managed or equipment is left idle. And the environmental authorities don’t do anything about it. So it makes no difference how good your EIA is. The actual damage caused by these fake registrations is very small—the actual problem is the behavior of the companies and the authorities.”

“EIAs are only carried out carefully for big projects now,” Xu added. “But as long as nobody dies, then potential long-term environmental harm is ignored.”

This article was originally published in Southern Weekend newspaper. Xu and He’s names were changed.