The 80-billion-dollar market fails to materialize; environmental third-party governance progresses at a snail’s pace

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The 80-billion yuan market plan cannot be realized; the progress of third-party environmental management is slow. Is relying on wind alone the only way to combat smog? Industrial emissions remain one of the main causes of severe air pollution. However, amid an economic downturn, local authorities, in an effort to protect the economy, show signs of relaxing environmental regulations, while industrial enterprises frequently violate these rules. Recently, 12 inspection teams from the Ministry of Environmental Protection, during special inspections on emergency responses to severe air pollution in key cities, found that some enterprises were still engaging in illegal and irregular emissions. New forces are urgently needed to address environmental pollution. As early as January this year, the State Council issued the \"Opinions on Promoting Third-Party Management of Environmental Pollution,\" aiming to promote this model in industries and other sectors in order to address the issue of industrial enterprises discharging pollutants in excess of allowed levels. However, a year has passed, and the third-party governance model remains merely \"beautiful on paper\". On December 12, at the 2015 China Environmental Protection Listed Companies Summit, Ma Hui, executive secretary-general of the Environment Chamber of Commerce, told a reporter from Huaxia Times that over the past year or so, the adoption of the third-party governance model has progressed very slowly, with few projects actually implemented. Emissions exceed limits severely; fog has struck frequently since this winter. Who is to blame for the fog? Investigations carried out by environmental organizations have shown that industrial pollution is likely to be at fault, as excessive emissions remain a serious problem. On November 28, volunteers from the environmental organization \"Good Air Defense Heroes Network\" went to cities such as Tangshan, Qinhuangdao, Tianjin, and Baoding to investigate industrial emissions. They found that despite the severe smog, 314 enterprises subject to strict air emission monitoring across the country still had levels of emissions that exceeded the allowed limits, as shown by their online data. For example, at the Yaohua Glass Industrial Park Co., Ltd. in Qinhuangdao, nitrogen oxide emissions reached over 2,000 mg/cubic meter, which is more than three times the permitted level of 700 mg/cubic meter. Official information from the Ministry of Environmental Protection also shows that during the special inspection conducted on December 9 as part of the emergency response to severe air pollution, it was found that some enterprises were still emitting pollutants in violation of regulations. For example, an unannounced inspection on the morning of December 8 revealed that the packaging factory of Jinjishan Building Materials Co., Ltd. in the Ceramic Park of Shancheng District, Hebi City, had not stopped operations as required by the level-2 emergency response measures; its boilers lacked any environmental protection equipment for dust and sulfur removal, resulting in the release of black smoke. The casting workshop of Shandong Ductile Iron Pipe Co., Ltd. did not have any facilities for collecting or treating waste gases, so the smoke was released directly into the atmosphere... Excessive emissions are a common problem, particularly in industries such as coking and glass manufacturing. ”The Ministry of Environmental Protection stated that common problems include delayed upgrades to meet standards, inadequate daily supervision, unauthorized shutdown of pollution control facilities, and even fraud. Few projects have been implemented; third-party management of environmental pollution is becoming necessary. Luo Jianhua, secretary-general of the Environment Chamber of the All-China Federation of Industry and Commerce, told our newspaper that third-party governance essentially involves introducing market mechanisms, with specialized environmental protection companies handling pollution control, while polluting entities such as industrial enterprises purchase environmental services by paying for them. This makes it more professional and facilitates environmental protection agencies in monitoring the effectiveness of the governance efforts. A greater benefit is that it fosters the development of the environmental protection industry; the two main areas for pollution control are the municipal services sector and the industrial sector. In 2002, the Ministry of Construction promoted market-oriented reforms in public utilities, opening up opportunities in municipal sewage treatment and municipal waste management for the environmental protection industry, which led to the first wave of growth in this sector. The introduction of third-party governance has shown environmental protection companies a glimmer of hope in the industrial pollution treatment market. Zhang Yi, director of the Shanghai Environmental Sanitation Engineering Design Institute, even told reporters optimistically that this move is expected to open up a new market worth over 80 billion yuan. In response to this, over the past year the Environment Chamber of the All-China Federation of Industry and Commerce has assisted various regions including Beijing, Shanghai, Jilin, Heilongjiang, Shanxi, Shaanxi, and Hebei in **drafting the \"Implementation Guidelines for Promoting Third-Party Management of Environmental Pollution\"**, with the aim of putting this model of third-party management into practice. However, a year later, investigations by reporters from the China Times revealed that there are very few projects in which third-party governance has been actually implemented. Among the various environmental protection companies interviewed by our newspaper, only Botian Environmental Group signed a contract for an industrial water recycling project with a coal chemical enterprise in Ningxia, while Veolia collaborated on a water treatment project with the Tangshan branch of Hebei Iron and Steel. Although Jinzhou Environment Group has an industrial water treatment project for a coking enterprise in Linhuan, Anhui, that contract was signed in 2014; most other enterprises do not have such projects carried out by third parties. “Third-party governance saw rapid development in the first two years; this year, **policies were introduced and significant efforts were made to advance it, but it seems that not much progress has been made. ”Wen Yibo, chairman of Sande Group, said. Why is it difficult to implement third-party governance when companies are not willing to cooperate? In Wen Yibo’s view, the main reason is that industrial enterprises are generally in a poor financial situation; \"When we try to establish partnerships, we lose motivation after seeing the conditions of these companies, as we don’t know what the situation will be like next year.\" Luo Jianhua also said that the biggest risk facing third-party governance at present is that industrial enterprises lack the funds to deal with pollution control, and may even go bankrupt; for example, the profit from one ton of steel is only 40 yuan, while the costs associated with environmental protection amount to 120–150 yuan. Amid an economic downturn, some places have been forced to relax environmental regulations for industrial enterprises. Jiang Chao, chairman of Jinzhou Environment Group, said that due to insufficient environmental pressure on enterprises, pollutants are discharged illegally. In response, Xu Shufan, deputy inspector of the Department of Science, Technology and Standards at the Ministry of Ecology and Environment, told a reporter from Huaxia Times that illegal discharges do indeed exist, but as environmental enforcement has been strengthened and local party and government agencies are even held accountable, the situation in this regard is gradually improving. In Xu Shufan’s view, what is more important is to establish a comprehensive set of operational management mechanisms for third-party governance, including various supporting measures such as a fair and open market, a reasonable pricing mechanism, and clear definition of responsibilities. Xue Tao, executive director of the E20 Environmental Industry Research Institute, gave an example: the power sector is a major source of pollution emissions, but some large power companies have their own desulfurization and dust removal firms, commonly referred to as the \"shortlist\"; bidding is carried out only among these companies, which prevents environmental protection firms from entering the market and results in what can be called \"pseudo-third-party governance\". Ma Hui said that at present, the progress of third-party governance to address funding issues needs to be accelerated. For example, in the power industry, subsidies of 1.5 fen per kilowatt-hour for desulfurization, 1 fen per kilowatt-hour for denitrification, and 0.2 fen per kilowatt-hour for dust removal have contributed to the rapid development of these desulfurization and denitrification processes in the power sector. Luo Jianhua said that for goods whose prices are determined by the market, such as steel and cement, it is not possible to set prices just like in the case of water and electricity; therefore, certain \"incentive\" measures can be adopted, whereby steel and cement companies that manage pollution effectively can enjoy certain tax benefits. For environmental protection companies, it is even more important to help industrial enterprises save costs through third-party governance. Zhao Lijun, chairman and president of Botian Environment Group, said that for their coal chemical circulating water project in Ningxia, the volume of water circulated per hour is 320,000 cubic meters. With water prices as high as 12.6 yuan per cubic meter, even a 1% reduction in water usage results in cost savings of tens of millions of yuan per year – and this is the value addition brought about by third-party treatment services.