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China’s Upcoming Circular Economy Law: What Goes Around….. Well, Not Exactly

China environmental laws

CLB co-blogger Steve Dickinson wrote the following article for the China Economic Review [specific link no longer exist]:

For all the hype about recycling, the purpose of China’s Circular Economy Promotion Law (CEPL) is not to reduce waste. The primary goal of the legislation, which was approved in late August and comes into effect on January 1, is to deliver energy efficiency.

Misinterpretations in the West are understandable: Circular economy laws in developed countries tend to be concerned with recycling as a form of pollution control and waste management. But China is different. Energy conservation and recycling are viewed from the standpoint of contribution to efficiency, reduction in cost and reduced reliance on imported raw materials.

The entire circular economy initiative is based on inputs and outputs operating in a circle: Fewer energy resources are required because more of the detritus produced by energy consumption is swept up, reconditioned and reused.

Situation: Critical

Energy utilization is a very serious issue in China.

Beijing’s plan is to quadruple the size of the national economy between 2001 and 2020 while doubling energy use. The plan is based on China’s experiences in the 1980-2000 period, during which this ratio of growth to energy utilization was achieved. At the start of the current cycle, economic planners – both in and outside China – assumed that the energy utilization target would be reached with ease.

They believed the real problem would be to keep the economy growing without overheating or falling into a recession.

In 2006, these same planners were shocked to learn that resource utilization in China had dramatically increased. For the five-year period from 2001 to 2005, economic growth was about 8% as planned, but energy utilization growth jumped 12%. Working to this ratio, if the size of the economy grows by a factor of four through the year 2020, energy usage will grow by a factor of six. For economic and physical reasons, this kind of expansion is just not possible.

If China is not able to bring energy utilization under control, its entire plan for continuous economic expansion at a rate of 8% for the foreseeable future will have to be written off. The CEPL has been adopted as a means of dealing with this problem.

Given the significance of the issue, it is surprising that the law actually offers nothing concrete in pursuit of its stated goal. It is really nothing more than a general statement of policy.

As has been learned in the environmental wars in the US, Europe and Japan, laws that require economic sacrifice now in order to achieve an energy reduction or related environmental goal in the the future only work when backed with clear standards and significant penalties. Both of these are missing from the CEPL.

What the new law does call for is for the State Environmental Protection Administration (SEPA) or some other agency to develop a national circular economy plan. The agency in question should draft formal rules and regulations for implementation of such plans, the law goes on to say.

This approach has been common in legislative drafting in China over the past several years. Controversial laws are adopted by the National People’s Congress, but rules and enforcement mechanisms are absent from the law – responsibility for them is merely passed on to the relevant government agencies.

Further delays

Where the issues are controversial, as in the case of the CEPL, there is usually a long wait before the designated agency issues any rules. And once they do this, the final rules are often no more concrete than the governing law.

The normal reason is that there is no genuine consensus within the government, and between the center and the regions on how to proceed. This is clearly the case with the CEPL. The circular economy program is not well-understood and the present economic sacrifices it would require are strongly resisted by local governments, businesses and consumers.

As a result, even though the law addresses an issue that is critical to the growth of the Chinese economy over the next 20 years, it is unlikely the CEPL will have a genuine impact.

The sadly predictable result is that China will continue to overindulge in the consumption of energy and other natural resources. Beijing faces a struggle to meet its current economic development targets — and it appears likely to be in vain.

One response to “China’s Upcoming Circular Economy Law: What Goes Around….. Well, Not Exactly”

  1. “Circular economy laws in developed countries tend to be concerned with recycling as a form of pollution control and waste management. But China is different. Energy conservation and recycling are viewed from the standpoint of contribution to efficiency, reduction in cost and reduced reliance on imported raw materials.”
    The laws yes, but corporate practice in the US as well as laws at the local level and practices by local governments all tilt in the direction of reduced consumption, efficiency, lessening “Scope 3” GHG emissions and that all means lower costs. Take Denver’s light rail system for example, the general contractor for the project decided to use scrap concrete and rubber for the bedding and rails made from recycled steel. It wasn’t just a “green” move, they got the materials for almost free because other construction projects no longer had to pay landfill fees and actually delivered the material at no cost.
    “As has been learned in the environmental wars in the US, Europe and Japan, laws that require economic sacrifice now in order to achieve an energy reduction or related environmental goal in the the future only work when backed with clear standards and significant penalties. Both of these are missing from the CEPL.”
    The China Environmental Law blog has two good articles on this new law as well as China’s push to diplomatically force developed countries to hand over top shelf pollution reduction/remediation technology as well as no strings attached cash.

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