Energy and Environment Industry Update - April 23, 2018

Dear USCBC members interested in the Energy and Environment Industry:
In our regular review of policies related to energy and environmental updates, we wanted to share the below updates on energy and environmental related developments.
Also, in case you missed it in USCBC’s China Market Intelligence, USCBC recently published an article on changes to China’s environmental and natural resources regulators following China’s national government restructuring, including a new department for natural resources oversight. The article also includes USCBC’s recent engagement with local and central government environmental regulators. The article is accessible on USCBC’s website here, and it is pasted below this update for your reference.
We hope these updates may be helpful, should you have any questions on these or other topics, please do not hesitate to contact us.
Best regards,
Owen Haacke 欧文
Chief Representative, Shanghai Office
US-China Business Council
1701 Beijing Xilu, Suite 1301
Shanghai, 200040
Tel: 21-6288-3840
[email protected]
NEA: 2018 Guidance on Energy Work
On March 7, the National Energy Administration (NEA) issued the Guiding Opinions on 2018 Energy Work. The guiding opinions were put forth to promote supply-side structural reform, promote the development of new energy, and build a clean, efficient, and safe energy system. According to the guiding opinions, China will cut its coal consumption to around 59 percent of the nation’s primary energy mix while raising natural gas consumption to 7.5 percent of the mix in 2018. China also aims to slash coal consumption to just half of its energy mix by 2020 by raising output and demand for renewable fuels. The guiding opinions said China will produce around 160 billion cubic meters of natural gas, a record and up 8.5 percent from 2017. Domestic coal production in 2018 will also reach an all-time high at 3.7 billion tons, up 7.3 percent from last year.
Relevant Departments Issue Notice of Development Plans for the Smart Photovoltaic Industry (2018-2020)
Six departments led by the Ministry of Industry and Information Technology (MIIT), Ministry of Transportation, Ministry of Agricultural and Rural Affairs and the National Energy Administration issued a plan for development the smart photovoltaic industry from 2018 to 2020. The plan will facilitate technological innovation, facilitate the intelligent manufacturing, and encourage enterprises to use information management systems. The plan also aims to improve the serviceability of terminal products, and the integration, operation and maintenance of the whole system--utilizing Internet, big data, artificial intelligence and 5G technology.


Li Ganjie: China to Implement Another Three-Year Plan to Fight Pollution
On March 17, the Caixin reported that Li Ganjie, the newly-elected Minister of Ecological Environment, said that China will set more stringent targets for improving the nation’s air quality under a new three-year plan. The new targets for concentrations of small, breathable particles known as PM2.5 will be lower than those in the country’s current five-year plan that was due to end in 2020, Li said at a briefing on the sidelines of the country’s National People’s Congress meetings The government will also set up a nationwide inspection system this year, which will require regular checks on polluting companies and factories by local authorities, in addition to central government. The government will also punish local authorities who do not enforce the regulations correctly, he said. In some regions last year, regional governments issued blanket orders for companies to close even if they complied with tough emissions rules.
China to Continue to Promote Coal-to-Gas Transition
On March 19, Caixin reported that the head of the newly-created Ministry of Ecological Environment said China will continue to promote the coal-to-gas switch to face continuing challenges in the prolonged battle against pollution. China announced last week during the National People’s Congress that it would transform the former Ministry of Environmental Protection into the Ecological Environment Ministry to handle taking on the environmental duties of the land, water and agriculture ministries. Li Ganjie, the head of the Ministry of Ecological Environment, reiterated the ministry’s goal to reduce the supply glut in heavy industries and shift commodities transportation from using trucks to using railroads. He also said natural gas supplies will continue to be tight in the future as the country pushes forward on switching consumers from coal to gas.
NDRC: Statistical Investigation System for Energy-efficient Household Appliance Sales
To implement the Chinese government’s policies on green development and energy efficiency, the National Development and Reform Commission (NDRC) on April 9 released a notice aiming to promote better monitoring of highly energy-efficient products. The “statistical investigation system” will examine sales statistics of medium and large-sized household appliance producers across the country. It will survey the number and value of their products, such as refrigerators, air conditioners, flat televisions, washing machines, ventilators, and gas stoves. Household appliance product enterprises must report to NDRC by the deadlines - September 30 for the mid-year report and March 31 for annual report.

Revamped Environmental Regulators Share Priorities with USCBC

April 4th, 2018

The massive restructuring of State Council ministries and departments will bring significant changes to China’s environmental and natural resources regulators including a new department for natural resources oversight, but many of the previous leaders will remain. Amid these changes, the US-China Business Council (USCBC) met with officials to clarify the best tactics for companies to engage central and local governments.
The new Ministry of Ecological Environment (MEE), merges seven ministries and administrations to consolidate conservation and environmental protection functions. In addition to many of the responsibilities of the former Ministry of Environmental Protection (MEP), the new ministry integrates some ecological conservation responsibilities from the National Development and Reform Commission (NDRC), Ministry of Land and Resources, Ministry of Water Resources, State Oceanic Administration, Ministry of Agriculture, and the Office of South-to-North Water Diversion Project. It will also regulate nuclear and radiation safety. Li Ganjie, the former minister of MEP, was appointed minister of MEE. Other leaders of the new ministry will move from MEP. Organizational responsibilities transferred to MEE include:

  • MEP was dismantled and all duties transferred.
  • NDRC's responsibilities related to climate change and emissions.
  • Ministry of Water Resources duties of river basin resources protection and clean up.
  • Ministry of Agriculture will be dismantled and MEE will be responsible for supervising sources of agricultural pollution. (MOA’s other responsibilities will be taken over by the newly created Ministry of Agriculture and Rural Areas.)
  • State Oceanic Administration's duty of protecting oceanic environment.
  • The Office of South-to-North Water Diversion's duty of environmental protection.

Companies are assessing changes to environmental regulatory reporting, but do not expect major disruptions. Officials have noted to USCBC that existing functions will continue to operate as they transition to the new structure.
China will also establish a Ministry of Natural Resources (MNR), merging functions of eight ministries and administrations. MNR integrates the responsibilities of Ministry of Land and Resources, State Oceanic Administration, and National Administration of Surveying, Mapping and Geoinformation. Former Mayor of Beijing and Governor of the Heilongjiang Province Lu Hao was appointed as minister. This change does not affect the National Energy Administration, which will still directly report to NDRC. Responsibilities transferred to MNR include:

  • Ministry of Land and Resources will be dismantled and all its duties transferred.
  • NDRC's administration of land improvement and development policies.
  • Ministry of Housing and Urban-Rural Development's responsibilities for urban and rural planning and management. Ministry of Water Resources' water resources survey and registration duties.
  • Ministry of Agriculture's prairie resources survey and registration duties.
  • State Forestry Administration’s responsibilities for forest, wetlands and other resources survey and registration.
  • State Oceanic Administration will be dismantled and all its duties transferred.
  • National Administration of Surveying, Mapping and Geoinformation will be dismantled and all its duties transferred.

Central government engagement
USCBC met last week with MEE officials in Beijing. Central officials noted the organizational changes and central government priorities:

  • Environmental social credit Central officials discussed how the social credit rating system will apply to individual and company compliance. The credit rating system has already affected some 500 companies when they applied for funding and loans. The system is divided into green, blue, red, and black ratings, and the system is linked with China’s central banks.
  • Continued central government-led investigations The central government will continue to conduct special inspections of provincial and local government agencies that did not meet environmental goals or perform as expected. MEE characterized this action as similar to China’s anti-corruption campaign. According to MEE, 39 cases were investigated and concluded last year. Officials also noted that NGOs and the media play a very active role in investigating and reporting the source of such cases.

Local government engagement
USCBC met with the Shanghai Environmental Protection Bureau (EPB) in March to discuss local environmental enforcement. The 30 USCBC member companies in attendance discussed:

  • Licensing and permitting One goal of the Shanghai EPB is to realize one-license management to simplify administrative licensing procedures. The Shanghai EPB is in the process of reviewing existing processes and plans to implement changes before 2020.
  • VOC emissions The government is cracking down on volatile organic compound (VOC) emissions. Although it is currently excluded in the Environmental Tax Law, local regulators said it will be taxed in the future. However, the government is still trying to figure out a proper way to calculate such an emissions tax, and welcomes company feedback.
  • Hazardous waste removal Companies note challenges securing contracts with hazardous waste disposal companies. A hazardous waste removal permit quota limits waste removal capacity, which can make it challenging for companies to find qualified hazardous waste removal and processing providers, sometimes requiring them to reduce production capacity. Officials in Shanghai are aware of the issue, and regulators are debating the option for additional quota to be purchased in the future.

Supply chain The Shanghai EPB hopes to develop a green supply chain by instituting a third-party enterprise credit system that will provide transparency to help companies review the environmental compliance track-record of potential suppliers. Companies often have difficulty understanding the environmental compliance record of their potential suppliers and partners, which can create environmental compliance risks in their supply chain. Officials said the best document for companies to refer to is the Guidance on Actively Promoting Supply Chain Innovation and Application issued by the State Council in October 2017.