21 August 2019
Toothless law enforcement and fines are not enough disincentive for Chinese polluters that don't play by the book.  Photo: AFP, Getty
Toothless law enforcement and fines are not enough disincentive for Chinese polluters that don't play by the book. Photo: AFP, Getty

Emission cheats need more than rap across knuckles

A majority of China’s power plants are coal-fired, which makes them more profitable than many traditional industries.

That also means they’re clawing back in profit what they give in exchange for it: pollution.

In theory, these power producers are expected to meet certain emission standards. In practice, they are less than forthcoming regarding compliance.

In fact, some cheat. The Chinese government has had enough.

Last week, the Ministry of Environmental Protection named and shamed 19 energy firms that failed to comply with tougher sulphur dioxide emission rules. It published the list on its website. 

State news agency Xinhua reports that fines estimated at 410 million yuan (US$66.03 million) are a likely consequence.

Among those named, mostly power producers, were subsidiaries of the country’s big five power conglomerates – Huaneng, Guodian, Huadian, Datang and China Power Investment Corp. — all of which have been found guilty of falsification and various shenanigans relating to their SO2 emission figures.

Other big names such as China Resources Power (00836.HK), PetroChina and Shenhua Group were also on the list.

They engaged in everything from incomplete use of desulphurization and denitrification systems, falsifying emission monitoring data and tinkering with emission monitoring systems, the ministry said.

Major power firms have been sitting on fat margins since last year when coal prices went on a tailspin.

The top five booked a combined net profit of 74 billion yuan last year, according to Xinhua. In addition, the National Development and Reform Commission increased the baseline desulphurization subsidiary to 0.015 yuan per kilowatt-hour, almost enough to cover the average cost of removing SO2 from exhaust flue gases at major fossil-fuel power plants. Also, many local authorities offer their own incentives.

Advancements in desulphurization technology have trimmed the cost to an acceptable level for most power generators but some are reluctant to invest in cleaner emission systems.

All of these factors contributed to the ministry’s decision to crack down on cheats. However, some question whether this tougher approach has enough teeth.

The 410 million yuan fine slapped by the ministry may be the largest of its kind but when carved up among the 19 violators, it works out to just 21.58 million yuan each — not enough disincentive for not playing by the book.

Analysts are looking to a new environmental protection law that will come into effect next year to bring these offenders into line.

A new way to calculate penalties using progressive rates based on daily emission readings will be adopted and the existing fixed penalties scrapped.

– Contact the writer at [email protected]


EJ Insight writer

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