China’s Polluters Hit with Biggest-Ever Fines

Two days before a new environmental law came into effect, six polluting companies in Jiangsu were ordered by the province’s highest court to pay 160 million yuan ($26 million) in restoration costs for illegally dumping almost 25,000 tons of chemical waste into two rivers in 2012.

This is the biggest ever award in a public interest environmental lawsuit in China, with the media describing the amount involved as "astronomical," although the fines are small when compared with Japan, the E.U., and the U.S.

But by previous standards, the 160 million yuan fines are far tougher than what has come before.

Wang Canfa, professor at the China University of Politics and Law, told chinadialogue that in the past judgments have awarded compensation in the tens of thousands of yuan to the victims of pollution. “The latest fine covered the costs of restoration and so was much higher, the highest ever award in an environmental case.

Wang contrasted this with a case in Guangxi where only 150,000 yuan in total compensation was awarded when numerous residents of a village suffered severe pain in joints and bones after eating cadmium-contaminated rice. If the same happened in Japan, each victim would be due compensation equivalent to a million yuan, he added.

“It’s a signal, a signal that the use of public interest litigation to impose higher costs on polluting firms is now normal. This might change the current situation where costs of obeying and enforcing the law are high, but the costs of breaking it low, with polluters incurring higher costs,” says Wang.

Will New Environmental Laws Work?

On January 1, the day new, tougher environmental laws came into effect, Chinese NGO Friends of Nature received notice from the Nanping Intermediate People’s Court that it would hear the organization’s case against illegal miners. At the same time, Friends of Nature set up China’s first fund to support public interest environmental litigation.

The NGO’s case will be the first under a system for public interest litigation established in the new law. Previously such cases were hard to bring, as it was unclear who was actually entitled to do so.

Wang Canfa points out that the example in Jiangsu is just one case, originating before the new law came into effect, and as such does not show that it will be more powerful. But he still has high hopes for the incoming legislation, which he describes as having the required.

“Toothless legislation lacks the power to compel. A polluting firm can be ordered to halt operations—but if it doesn’t, the court is powerless. It might look like the court is biting down hard—but in reality there would be little impact.”

Wang went on to explain that “the Ministry of Environmental Protection now has the power to seal premises and seize property—it could seize polluting equipment, or the trucks used to transport pollutants.” The environmental authorities can now also transfer those responsible for pollution to the public security bureau for administrative detention.

The success of the new law will depend on how the law is enforced, how many cases reach the courts, and how they are handled, Wang adds. But Wen Yibo, head of the China Environment Chamber of Commerce, says companies will now have to take the new laws seriously.

At a summit on IPOs for Chinese environmental firms held at the end of 2014, Wen told chinadialogue that: “Our projects need to take this into account at every stage, from negotiations to policy-making. If we don’t, it could mean disaster for the company.

"The melamine scandal was a food safety issue, but in the future it’s very possible that a company could be wiped out due to an environmental scandal,” said Wen, who is also chairman of Beijing Sound Group, an environmental protection firm.

Many firms, however, are still taking risks and are confident they won’t be singled out, it seems. One question being asked is whether environmental laws will be enforced with the greater rigor that anti-corruption laws were in 2014.

It's Cheaper to Break the Law

There’s plenty of evidence that companies are taking risks and flouting environmental laws. In mid-December the Institute for Public and Environmental Affairs (IPE) published an analysis of waste gas emissions, hoping to push firms into making better environmental choices.

IPE director Ma Jun says companies have been crunching the numbers and concluded that taking action isn't worth the expense.

“Some companies have consulted with us, but they realize it’s cheaper to break the law than obey it. Bringing public interest litigation is difficult, and therefore there’s no risk of paying high levels of compensation. They just go ahead and invest as they want,” Ma says.

The extent to which the new law will be effective is largely dependent on responses by local government, which will be responsible for both developing and enforcing of environmental law.

“The current standards are tough enough, if enforced,” Wen said. “If standards are too tough and you only enforce them in a small minority of cases, or not at all, then they’re useless.”