The environmental degradation caused by China’s unprecedented economic development during the last 30 years is has taken a huge toll on the environment. On numerous days over the last several years, smog levels have exceeded levels that the World Health Organization deems safe, which is the result of China’s reliance on burning coal for 70 percent of its energy needs (Xu 2014, 3). Estimates suggest that 40 percent of rivers are also heavily polluted (Yang 2012, 1). China’s environmental degradation has, according to numerous figures, cost the country an estimated 9 percent of its GDP (Xu 2014, 1).
To address the environmental degradation, the Chinese parliament, in 2014, amended its 1989 Environmental Protection Law (EPL) to strengthen government and enterprise transparency by imposing harsher financial and criminal penalties on polluting companies. This has increasingly become a social issue in recent years, as environmental protests have increased by around 30 percent each year (Liu 2013, 1), indicating growing public skepticism on the government’s willingness and ability to hold companies accountable for environmental violations. To address the environmental degradation, the Chinese parliament, in 2014, amended its 1989 Environmental Protection Law (EPL) to strengthen government and enterprise transparency by imposing harsher financial and criminal penalties on polluting companies. The new EPL exposes companies and their trading partners to significant levels of risk if operations are not managed appropriately.
The effectiveness of the new enforcement mechanisms provided under the new Law will depend greatly on the commitment and capacity of local governments. Each of these elements, which create an uncertain regulatory environment for companies, is discussed in detail paper. This paper by the EcoVadis analyst team examines the new enforcement mechanisms of this bold new law amendment, as well as implementation challenges.