trending Market Intelligence /marketintelligence/en/news-insights/trending/yzgeodqpjbphy-co-dil2w2 content esgSubNav
In This List

China's bureaucratic revamp seen as boost for environmental crackdown

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


China's bureaucratic revamp seen as boost for environmental crackdown

China's announcement that it will set up three ministries to oversee the mining sector as part of sweeping government reforms is expected to strengthen the country's ongoing crackdown on pollution by resource producers, according to Li Zhiqing, deputy director of Fudan University's research center for environmental economics.

The Chinese government announced March 13 that it will set up a ministry of natural resources, a ministry of ecological environment and a ministry of emergency management under a plan submitted to the National People's Congress by Premier Li Keqiang that would create seven new ministries.

The new natural resources ministry will merge the functions of the Ministry of Land and Resources, the State Oceanic Administration, and the National Administration of Surveying, Mapping and Geo Information. It will also pull together administrative responsibilities previously scattered across five ministries, including regulations over water, grassland, forest and wetland resources, according to a transcript of State Councilor Wang Yong's speech at the Congress session.

Wang noted that the new ministry will oversee the protection of natural resources and establish a new mechanism for their paid use.

"The new ministries will significantly improve the efficiency of regulations over natural resources and environment protection," Li said in an interview with S&P Global Market Intelligence, noting that negotiations across different regulatory bodies had been slowing the government in introducing guidelines or campaigns for resources protection.

The new ministry of ecological environment will replace the existing Ministry of Environmental Protection, whereas the ministry of emergency management will merge the functions of the State Administration of Coal Mine Safety and the China Earthquake Administration, according to a March 13 summary of the state council's reform plans by Xinhua News Agency. The plan also called for a reduction in the number of ministries under China's State Council by eight, to 26.

Li believes that centralizing and regrouping regulatory agencies is expected to help the economy enter a new type of growth during which resource companies' social and environmental costs will be higher. Smaller producers may struggle to cope with such costs, he said.

"Our research showed that the larger producers generally will generally be able to comply with environmental regulations while there is uncertainty for small- and medium-sized producers," he said.

Li added that smaller companies may continue to take advantage of regulatory loopholes given that resources are still supervised by different ministries in China. He expected more stringent regulations to put the squeeze on margins and profitability of heavily polluting companies.

"The reform proposal is not the end. There will be changes and more discussions following it," he said, adding that changes could include standardizing administrative procedures and regulatory guidelines over various resources.

Li noted that the latest round of reforms will also enable authorities to initiate additional collaboration, such as with financial regulators, to improve resources utilization efficiency and environment protection.

Delegates of the national legislature will vote on and finalize the reform plan March 17.