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Dr. Sun Youhai, Director of the Legislation Office of the National People’s Congress Committee on Environment and Resources, stated that on August 27, 2007, the 29th meeting of the 10th National People’s Congress conducted a preliminary review of the Draft Law of the People’s Republic of China on Circular Economy (hereinafter referred to as the draft), which was submitted for consideration by the Committee on Environment and Resources. The following is an interpretation of certain aspects of the draft: 1. The legislative purpose of the Circular Economy Law. Article 1 of the draft stipulates that this law is enacted to promote the development of a circular economy, improve the efficiency of resource utilization, protect and improve the environment, and achieve sustainable development. It is evident that the legislative purpose of formulating circular economy laws is to enhance resource utilization efficiency, protect and improve the environment, and achieve sustainable development by promoting the development of a circular economy. Since the 1980s, China’s economy has grown rapidly, and significant achievements have been made in various areas of development; however, this has come at a high cost in terms of resources and the environment, and the conflict between economic development and resource/environmental constraints has become increasingly acute. These problems are closely related to the relatively low efficiency of resource utilization in our country. For example, the energy consumption per unit of output in high-energy-consuming industries such as steel, electricity, and cement in our country is currently about 20% higher than the average level of advanced countries around the world ； The overall recovery rate of mineral resources is 30%, which is more than 20% lower than the advanced levels in other countries ； The comprehensive utilization rate of wood is 60%, which is 20% lower than the advanced levels abroad. The proportion of recycled materials used in total production is also much lower compared to the advanced levels in other countries; in the steel industry, for example, the annual amount of scrap steel utilized is less than 20% of the total output of crude steel, whereas in developed countries this figure is 40% ； The reuse rate of industrial water is about 15% to 25% lower than that of advanced countries. The above issues severely hinder China’s future development, and they need to be addressed through approaches such as developing a circular economy, under the guidance of the scientific outlook on development. Experience both internationally and domestically has shown that developing a circular economy is of great significance: firstly, it opens up new resources for economic development ； Second, it can effectively reduce the emission of pollutants ； Third, it helps to improve economic efficiency. In the past, we focused solely on environmental protection, but due to the high costs and substantial expenses involved, this approach faced resistance and opposition from many enterprises and local authorities. Now, by adopting a circular economy model to address resource and environmental issues, and by integrating resource conservation, environmental protection, and economic benefits together, this approach has gained widespread acceptance from all sectors of society. II. On the concept of a circular economy and the scope of application of this law: The circular economy referred to in the draft is an umbrella term for activities such as reduction, reuse, and resource utilization carried out in processes such as production, distribution, and consumption. Reducion refers to minimizing resource consumption and waste generation in processes such as production, distribution, and consumption. Reuse refers to using waste directly as a product, or continuing to use it as a product after it has been repaired, refurbished, or remanufactured, or using all or part of the waste as components in other products. Resource utilization refers to the direct use of waste as raw material or the recycling of waste. Through the above definition, it can be seen that the circular economy has the following characteristics: First, the circular economy is based on the principles of \"reduction, reuse, and resource recycling\". Second, developing a circular economy requires it to be carried out throughout the entire process of production, distribution, and consumption. Third, the entities involved in developing a circular economy include **, enterprises, the public, and industry associations, among others. Fourth, this law regulates the reduction, reuse, and resource recovery activities carried out by various entities. Some comrades believe that a circular economy is a development model, and the term should be changed to reflect this model in the law. According to legal theory, what the law can regulate are only the actions and activities carried out by subjects, not an economic development model. By clarifying the concept of a circular economy, the scope of application of this law is also determined. The draft’s definition of the concept of a circular economy is in line with the international \"3R\" principles, is based on the provisions regarding the circular economy in the \"11th Five-Year Plan\" approved by the State Council, and is consistent with practices in reality; as a result, it has received unanimous approval from experts and practitioners. III. On the framework structure of the draft: How to construct the framework of the circular economy law is one of the issues that has given rise to significant debate during the drafting of the draft. There were various opinions in the discussions regarding the choice of a legislative framework model for a circular economy, but none of them were ideal. After several revisions, the framework of the draft has been designed as follows: Chapter 1 is the General Provisions. It mainly sets forth the major and principled matters related to the overall development of a circular economy, including: the purpose of legislation, the definition of a circular economy, the scope of application of this law, basic policies and principles, the management framework, publicity and education on the circular economy, demonstration projects for its development, and public participation in it. Chapter 2 is the basic management system. It mainly stipulates the basic legal frameworks for developing a circular economy, such as planning systems, total quantity control systems, evaluation and assessment systems for circular economy practices, a producer-oriented extended responsibility system, management systems for key enterprises, and statistical systems. Chapter 3 is about reduction. It mainly stipulates industrial policies, requirements for design, water conservation in industry, oil conservation in industry, requirements for mineral resource extraction, requirements for construction, circular economy in agriculture, conservation in public institutions, conservation in urban life, conservation in service industries, and control of disposable consumer goods. Chapter 4 is about reuse and resource recycling. It mainly stipulates regional circular economy, comprehensive utilization of industrial waste, recycled water in industry, comprehensive utilization of waste heat and pressure, comprehensive utilization of construction waste, waste recycling, qualification management, remanufacturing, and the resource utilization of domestic waste. Considering that reduction, reuse, and recycling occur not only in the production process but also in the distribution and consumption processes, Chapters 3 and 4 are each divided into two sections: the first section regulates reduction, reuse, and recycling in the production process, while the second section regulates them in the distribution and consumption processes. Chapter 5 deals with incentives, Chapter 6 covers legal responsibilities, and Chapter 7 contains supplementary provisions. With such a framework for the draft design, the structure is reasonable and the logic is clear; it can accurately reflect the guiding principles and objectives of legislation, encompass all major systems, and is easy to implement and comply with. IV. Regarding the main management systems, the main management systems established in the draft include: first, a circular economy planning system. Article 12 of the draft stipulates the system for circular economy planning from two aspects: firstly, it requires that people’s governments at the county level and above, when formulating plans for national economic and social development, regional planning, as well as plans for urban and rural construction and scientific and technological development, shall clearly define the goals and requirements for developing a circular economy ； Secondly, it requires the formulation of specialized plans for the development of a circular economy, specifies the procedures for preparing such plans, and clearly states that these plans should include specific indicators such as resource productivity, waste reuse rates, and resource recycling rates. In our country, any endeavor must first have a plan formulated; only with a plan can there be projects and funding. Planning is the prerequisite and foundation. Circular economy planning is the **arrangement and deployment of the development goals, key tasks, and safeguard measures for a circular economy; it serves as an important basis for evaluation and assessment, as well as for implementing incentives, restrictions, or prohibitions.** Therefore, this law sets clear requirements for the formulation of plans, which is of great significance. The second is a total control system to curb resource waste and pollutant emissions. Article 13 of the draft stipulates: \"Local people’s governments at the county level and above shall, in accordance with the total emission control targets for major pollutants and the total control targets for construction land and production water established by higher-level people’s governments for their respective administrative regions, plan and adjust the industrial structure of those regions in order to promote the development of a circular economy.\" ”It is also required that construction projects must comply with the total volume control targets of the respective administrative region. At present, a prominent contradiction in economic work is that economic growth in some areas is based on excessive resource consumption and environmental pollution. Due to limitations in resources and environmental capacity, this pattern of development is unsustainable, and necessary overall control measures must be put in place to address this unsustainable approach. To develop a circular economy and achieve reduction, it is necessary to establish a \"push\" mechanism for total quantity control at the source, that is, to use the capacity of resources and the environment as limits in order to force enterprises to make efforts in energy conservation, emission reduction, and pollution control. To encourage various regions and enterprises to arrange their industrial structures and economic scales in accordance with local resources and environmental carrying capacities, as required by **, and to proactively adopt circular economy measures such as energy conservation, land conservation, water conservation, and emission reduction, the draft introduces a total amount control system to curb resource waste and pollutant emissions, which helps to truly achieve \"increased production without increased pollution\" and \"increased production without increased water consumption\". Third is the circular economy evaluation and assessment system. Article 14 of the draft stipulates that the economic comprehensive macro-control department of the State Council, in conjunction with relevant competent departments such as those for statistics and environmental protection under the State Council, shall establish an evaluation index system for a circular economy. The higher-level people’s authorities, based on the key evaluation indicators for a circular economy specified in the preceding paragraph, regularly assess the progress made by lower-level people’s authorities in developing such an economy, and use these assessment results as an important basis for evaluating the performance of local administrative leaders. When the State Council and local people’s governments at the county level and above report on their work to the people’s congresses at the same level, they shall also report on the development of circular economy. The circular economy evaluation and assessment system serves as the basis for evaluating the development status of circular economy in a region or enterprise, and it also acts as the foundation and standard for comprehensively assessing the coordinated development of a region’s social, economic, and ecological environments. Establishing an evaluation and assessment system for the circular economy helps to address the shortcomings of using GDP as the primary indicator to measure the performance of local leaders in the past. It also helps to solve issues such as the lack of uniform standards for evaluating the development of the circular economy, thereby providing a scientific basis for regions and enterprises to develop a circular economy. The establishment of a evaluation and assessment system for a circular economy requires an accurate statistical accounting system as a prerequisite. The circular economy indicator system serves not only as an important basis for evaluating the performance in developing a circular economy, but also as a key reference for providing enterprises with financial incentives, technical support, and tax benefits. The circular economy law should stipulate the entities responsible for establishing circular economy standards and assessment systems, as well as the basic principles and legal effects thereof, and integrate these provisions into the operation of other legal systems. The evaluation and assessment system for a circular economy should include specific indicators such as resource productivity, recycling rate, and final landfill volume. Fourth is a producer-centered extended liability system. Article 15 of the draft distinguishes different situations and clearly stipulates the responsibilities that producers and other entities shall assume regarding the recycling, utilization, and disposal of products after they are discarded. In the traditional legal framework, product manufacturers are only liable for the quality of the products themselves, but modern manufacturers are also required by law to take responsibility for the recycling, reuse, and disposal of those products after they are no longer in use. In other words, the responsibilities of producers have gradually expanded from the mere production stage and the product usage stage to the recycling, utilization, and disposal stages after the products are discarded, which in turn imposes higher requirements on their design. This extended producer responsibility system has been established in certain **legislation, and practice has shown that it has positive effects. Fifth is the management of enterprises with high energy and water consumption. Article 16 of the draft stipulates that **key enterprises in industries such as steel, non-ferrous metals, coal, electricity, petroleum and petrochemicals, chemicals, building materials, construction, papermaking, and printing and dyeing, which have an annual comprehensive energy consumption or water usage exceeding the specified thresholds, shall be subject to a special management system.** Key enterprises should establish enterprise standards for energy and water consumption that are stricter than **the relevant standards or industry standards, and have these standards reviewed in accordance with regulations. Our country is currently in a stage of accelerated industrial development. Key industrial sectors such as steel, non-ferrous metals, coal, electricity, petroleum and petrochemicals, chemicals, building materials, construction, papermaking, and printing and dyeing have high resource consumption, low efficiency in resource utilization, and high levels of pollutant emissions. Large enterprises play a significant role in this high resource consumption. To ensure the achievement of various planning goals for energy conservation and emission reduction, it is essential to carry out targeted management of high-energy-consuming and high-water-consuming enterprises in key industries at present and in the coming period. By focusing on these key enterprises, one can grasp the essence of resource conservation and recycling. Such a provision is also in line with the spirit of the Standardization Law. Sixth is the regulation and guidance of industrial policy. Article 18 of the draft stipulates that **industrial policies shall meet the requirements of developing a circular economy ； The economic comprehensive macro-control department of the State Council, in conjunction with relevant competent departments such as those responsible for environmental protection under the State Council, regularly issues lists of technologies, processes, equipment, materials, and products that are encouraged, restricted, or phased out ； The production, import, or use of technologies, processes, equipment, materials, and products listed in the phase-out catalog is prohibited ； The relevant departments are responsible for overseeing the implementation of the listing system. Industrial policy is not only an effective means to promote structural adjustments in the industry, but also an important basis for regulating and guiding industrial development. It plays a significant role in phasing out outdated technologies, processes, equipment, and products, as well as in guiding market access. This provision in the draft strengthens **the support of industrial policy for a circular economy. Seventh are the incentive measures. Chapter V is specifically dedicated to incentive policies, which contain relatively detailed provisions, mainly including: the establishment of a special fund for the development of a circular economy (Article 43) ； Financial support shall be provided for major scientific and technological projects in the field of circular economy (Article 44) ； Tax incentives are provided for activities that promote the development of a circular economy (Article 45) ； Provide investment preferences for projects related to the circular economy (Article 46) ； Implement price, fee, and other policy measures conducive to the development of a circular economy (Article 47). To promote the development of a circular economy, administrative coercion alone is not sufficient; it is necessary to establish reasonable incentive mechanisms in accordance with the law in order to motivate entities from various sectors and industries to pursue a circular economic path. The provisions on incentives in the draft help to mobilize the enthusiasm of enterprises and local authorities to actively develop a circular economy. Eighth is the legal liability system. The draft includes a dedicated chapter on legal responsibilities, which stipulates corresponding penalties for the failure of various entities to fulfill their legal obligations, in order to ensure the effective implementation of the Circular Economy Law. This is the root cause of the \"hard constraints\" in the circular economy law. V. The relationship between reduction, reuse, and resource utilization. Some comrades have a vague understanding of the relationship between reduction, reuse, and resource utilization; they believe that since a circular economy law has been enacted, emphasis should be placed on the recycling of waste, that is, reuse and resource utilization, with the goal of increasing the rate of material circulation. In practice, we have seen that the process of recycling waste and reusing resources also consumes resources and causes certain environmental pollution. If costs and consequences are ignored, the result may be that waste is recycled, but this leads to the consumption of more other resources and the creation of secondary pollution; this results in losses in terms of both economic benefits and environmental protection, going against the original purpose of waste recycling and resource utilization. When formulating legislation on a circular economy in our country, it is essential to proceed from reality. Regarding the relationship between reduction, reuse, and resource recycling, we must not only draw on the experiences of developed countries but also take into account China’s basic national conditions. Developed countries such as Japan and Germany, being in the post-industrial era, already have a high level of efficiency in resource utilization, so there is relatively little potential for reduction at the source. These countries focus on developing a circular economy through the reuse of resources (what Japan calls the “vein industry”) ； Our country is currently in a stage of rapid industrialization, during which energy and material consumption are relatively high; there is great potential for reduction at the source, and emphasis should be placed on reduction at this time. In developing a circular economy in our country, reduction is the key and the foundation; it is necessary to minimize waste as much as possible first. Therefore, the draft stipulates that the development of a circular economy should be carried out in accordance with the principle of giving priority to reduction, on the premise of technical feasibility, economic rationality, and environmental friendliness. In order to effectively reduce the costs associated with developing a circular economy and to ensure that the designed products use resources as efficiently as possible, are easy to reuse and recycle, the draft also establishes an ecological design system. It stipulates that entities and individuals involved in the design of processes, equipment, products, and packaging must, in line with the requirements of energy conservation, waste reduction, and pollution control, give priority to using materials and design solutions that are easy to degrade, recycle, disassemble, and that are non-toxic, harmless, or low-toxicity and low-harmfulness. VI. The relationship between the circular economy and environmental protection. The draft contains several provisions that specify the environmental protection requirements that must be met when developing a circular economy. Article 5 stipulates that the development of a circular economy shall be carried out in accordance with the principle of giving priority to reduction, on the premise of technical feasibility, economic rationality, and environmental friendliness. In the process of waste recycling and resource utilization, product quality must be ensured to prevent further pollution. Paragraph 3 of Article 37 stipulates that waste recycling and trading markets shall comply with regulations regarding **environmental protection, safety, fire prevention, etc. Paragraph 2 of Article 42 stipulates that people’s governments at the county level and above shall support enterprises in building facilities for the resource utilization and disposal of sludge, improve the level of comprehensive utilization of sludge, and prevent further pollution. Article 29 stipulates that when establishing or renovating various industrial parks, an environmental impact assessment must be conducted, and ecological protection and pollution control measures must be taken to ensure that the environmental quality in those areas meets the specified standards. The aforementioned provisions are highly targeted. Some people believe that since developing a circular economy is an important way to build a \"resource-saving and environment-friendly\" society, then there is no need to be constrained by environmental protection laws when pursuing such development. In practice, some development zones and industrial parks have become havens for high-energy-consuming and highly polluting industries, turning into places that damage the environment and accumulate dirt and waste. Therefore, great attention must be paid to such actions that damage the environment under the guise of developing a circular economy. To ensure that the development of a circular economy meets environmental protection requirements, the draft clearly defines the relationship between the development of a circular economy and environmental protection, stipulating that such development must be subordinate to the goals of environmental protection and must be subject to the supervision and management by the authorities responsible for environmental protection. The draft emphasizes in particular that environmental impact assessments must be conducted for the establishment and renovation of various industrial parks, and ecological protection and pollution control measures must be taken to ensure that the environmental quality in these areas meets the specified standards. These regulations are of great significance for ensuring that the circular economy develops in the right direction. Wan Gang, Minister of Science and Technology, revealed last week that China **will invest 10 billion yuan over the next three years to support the development of new energy and energy-saving technologies.