As a "green" start to the new year, the Ministry of
Environmental Protection of the People's Republic of China
("MEP") announced on January 2 the introduction of a
credit rating scheme ("Scheme") that will measure a
company's environmental protection efforts according to a
designated standard. The Scheme is due to launch on March 1.
The rules that govern the Scheme will apply to companies that are
responsible for high levels of pollution and pose great risk to the
environment. Industries caught by the Scheme will include energy,
transportation, thermal power, steel, cement, electrolytic
aluminum, coal, metallurgy, chemical, petrochemical, building
materials, paper, brewing, pharmaceutical, fermentation, textile,
leather, and mining. Companies that exceed prescribed emissions
standards, use or produce toxic and hazardous materials, have
caused significant environmental damage, have been fined more than
50,000 RMB or possess a recordable offense, or have been identified
by environmental protection departments at provincial levels will
also be included. Those who do not fall within the scope of the
Scheme may choose to participate by their own volition.
Each company will be assigned a rating according to a
four-colored scale—green (trustworthy), blue (good), yellow
(warning), and red (adverse)—which will be determined based
on the company's carbon emissions and efforts to curb
pollution. The ratings will then be used by banks and financial
institutions in China to evaluate whether a new loan offering or
subsidy should be granted to the company in question. The MEP has
recommended that companies with the worst ratings should be
prevented from receiving new funding until their environmental
credit rating improves.
It is anticipated that the assessment period for the Scheme will
run from January 1 to December 31, and that the rating will be
published by April of the following year; however, timelines may
differ by province. The provincial environmental protection
departments will be responsible for monitoring the credit rating
scheme and can delegate tasks to other institutions.
As the world's biggest emitter of greenhouse gases, China is increasing efforts
to address its environmental concerns while attempting to appease
mounting civil unrest. The government has set itself an ambitious
target to reduce carbon intensity by 40–45 percent below
2005 levels by 2020, and officials believe the new Scheme will help
the country achieve this goal. Although the Scheme can only
recommend that financial providers and government departments
penalize the worst offenders, most importantly it offers a formal
incentive for businesses to take action to curb their emissions and
adhere to environmental regulations. The success of the Scheme will
rest on how severely the financial community will apply its rules
and the extent to which authorities will incorporate environmental
issues into their economic decisions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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