China Air Pollution 10 July 2018Expert call replay details
We hosted a call with Dr Sam Geall on 5th July to discuss recent developments with
China's Environmental Regulation. The replay is available until 19th July: UK Tel:
+44 207 136 9233 (Global Numbers); Passcode: 63683035. This follows an update
to the UBS Evidence Lab studies on China Air Quality on 22-Jun (Link).
China: latest environmental policy developments
In 2018, the Chinese government has strengthened the construction of ecological
civilisation (ie the need for society to respect, protect, and adapt to nature etc)
and has successfully issued a number of documents to strengthen ecological
environmental protection. They have set up a new environmental taxation system,
established two new environmental super-Ministries, and launched the largest ever
environmental protection inspection. At the end of June they published a report
called Opinions on Strengthening Ecological Environmental Protection and
Resolutely Fighting Pollution Prevention & Control and at the start of July they
published the Three-Year Action Plan to win the Blue Sky Defence War.
In our opinion, it is clear that there is still strong momentum behind China's
environmental policy which is being driven by President Xi. We see this as a
structural positive for commodities and the mining sector. We discuss the guideline
issued on 24-June and 3-Year Action Plan issued in 3-July in more detail below.
Figure 1: Overview of key environmental developments in China in 2018
Date News
1-Jan Environmental Protection Tax came into effect (to replace the pollution discharge charge); under the new law, companies and public institutions that discharge
listed pollutants directly into the environment are subject to taxes for producing noise, air, and water pollution, as well as solid waste. The tax gives
companies an incentive to cut emissions and upgrade production technology. (news)
14-Mar Creation of Super-Ministries: at the National People’s Congress in Mar-18, President Xi concentrated the responsibilities of different government departments
into two Ministries: the Ministry of Ecology & Environment (MEE) & the Ministry of Natural Resources (MNR). The restructuring expands the remit of the
Ministries & reduces bureaucratic fragmentation. The MEE has a larger budget (2018: RMB12bn vs MEP RMB7bn) & more staff (to ~500 from ~300) (news)
19-Apr Scrap ban: the MEE announced China will ban imports on 32 types of scrap materials, incl 16 materials considered Category 7 from 31-Dec-18 and another
16 types (incl some stainless steel scrap), from 31-Dec-19. This follows the imposition of tighter quality standards on scrap imports from 1 March 2018 (news).
15-May Vehicle emissions: The Beijing Environmental Protection Bureau released a study saying that car emissions have become the top cause of PM2.5 (contributing
45%), ahead of coal burning (news). China intends to implement its strictest vehicle emissions regulation yet to further reduce air pollution (news)
18-May National Conference on Ecological and Environmental Protection: President Xi said China will channel more energy into promoting ecological civilization &
resolving environmental problems; leaders of local party governments will be held responsible for environmental protection in their own administrative
regions. A new evaluation system will be established to assess the performance of officials; those damaging the environment will be held accountable (news)
11-Jun New round of inspections: the MEE launched the largest ever environmental inspection, involving 200 teams & 18,000 local government supervisors (3x the
number in winter closures). The inspection will last until April 2019 and covers more cities & regions including the Beijing-Tianjin-Hebei region and the
surrounding areas, the Yangtze River Delta, and the Fenhe and Weihe river plains. The inspections will revolve around prominent public complaints, such as
emergency responses to cases of heavy pollution, crop straw burning and coal-fired boilers (news; news).
24-Jun Opinions on Strengthening Ecological Environmental Protection and Resolutely Fighting Pollution: the government announced a guideline for enhancing
environmental protection and winning the battle against air, water and soil pollution, specifying pollution control targets. By 2020, cities at the prefecture
level and above that fail to meet air quality standards should see their density of PM2.5 fall 18% from 2015 levels, the number of good-air days in cities
should reach 80% annually, emissions of SO2 & NOx should drop 15% from 2015 levels, & chemical oxygen demand & emission of ammonia nitrogen
should fall 10%. Local governments are required to take political responsibility and draft & assign a list of responsibilities to departments (newsnews).
3-Jul Three Year Plan to Win the Blue Sky Defence War: the State Council released a new 3yr Action Plan (to 2020) aimed at reducing emissions of major air
pollutants and greenhouse gases (same targets as in 24-Jun guideline). Efforts will be focused on Beijing-Tianjin-Hebei region, the Yangtze River Delta, and
the Fenhe and Weihe river plains (news).
Source: MEE, industry data, UBS
President Xi continues to drive
forward China's environmental
agenda in 2018
China Air Pollution 10 July 2018Opinions on Ecological Environmental Protection
On 24th June 2018, the Central Committee of the Communist Party of China (CPC)
and the State Council publicly announced a guideline called Opinions on
Strengthening Ecological Environmental Protection and Resolutely Fighting
Pollution Prevention & Control (translation). This sets out plans to win the
battle against air, water & soil pollution, and specifies pollution control targets for
2020 and beyond. The guideline acknowledges that important strides in fighting
pollution have been made, but recognises there are challenges ahead as some
local areas and government departments are not shouldering their responsibilities,
there is still a conspicuous tension between economic & social development and
environmental protection, and the country is still frequented by heavy air pollution.
There are 10 elements to the Ecological Environmental Protection guidelines; the
guidelines discuss why the construction of ecological civilisation is fundamental to
the sustainable development of China and how protection of the ecological
environment will be strengthened. It also specifies targets for improving air &
water quality, curbing land pollution, forest coverage ratio and energy
conservation. In addition to the mandatory targets, authorities made it clear that
local Party committees & governments must shoulder the political responsibility
of seeking ecological civilization progress and environmental protection. Local
governments are required to draft and assign a list of responsibilities to
departments. Other measures include enhancing the evaluation of the pollution
control efforts of central & local Party and government organs, tightening the
accountability system, urging companies to take responsibility in improving the
environment, and encouraging the public to adopt a green way of life.
Figure 2: Ten sections of Ecological Environmental Protection Guideline
Source:CPC Central Committee & the State Council, UBS
Section #6 of the guideline sets out targets for air quality improvements by 2020.
These are designed to be aligned with the 13th Five-Year Plan to reduce confusion:
(1) By 2020, cities at the prefecture level and above that fail to meet air quality
standards should see their density of PM2.5 fall at least 18% from 2015 levels,
while the number of good-air days in cities should reach 80% annually. We
note this matches the target of the 13