China: Round And Round: China Is Aiming For A Circular Society With The New Recycling Economy Promotion Law

Last Updated: 21 January 2009
Article by Melinda Xie and Chang Liu

Extravagant packaging, wasted water, lights turned on all night - all could be under threat by the Recycling Economy Promotion Law, which comes into effect on January 1 2009.

China is feeling tremendous pressures from its high energy and resource consumption. Compared with developed countries, China's resources utilisation rate is relatively low. Energy consumption per unit of GDP in industries such as steel, electricity and cement is 20 percent higher than that of developed countries; China's mineral resources recovery rate and comprehensive utilisation rate of timber are 20 percentage points below advanced standards; and the water re-use rate by industries in China is 15 percent - 25 points lower than the global standard. Worse still, China is the largest sulphur dioxide and chemical oxygen demand (COD) emitter in the world, and is also replacing the US as the world's largest carbon dioxide emitter.

The Recycling Economy Promotion Law may be a meaningful attempt to solve these problems. For those who have been closely following the drafting process, its promulgation represents a significant step forward to an energy-saving and environmental-friendly society, though some criticisms have been raised, such as that the law is too general and still lacks implementing rules.

The law follows the "three Rs" (reduce, reuse, recycle) principle. This means reducing resource consumption and waste generation in the process of production, circulation and consumption; reusing waste and repaired, renovated or reproduced waste as products or components; and directly using (recycling) wastes as raw materials or in waste regeneration.

While drafting the law, China learned a great deal from the experiences of many industrialised countries, especially Germany and Japan. However, the concept of "recycling" in the law is broader than the mere recycling of wastes, as it puts more emphasis on the importance of the reduction of resource consumption and pollutant discharge.

Nothing Wasted

Under the law, industrial enterprises are required to apply advanced or appropriate water-saving technology and equipment, set up and implement a water-saving plan and control water consumption in the production process.

As in the "three simultaneities" system familiar to all industrial enterprises, any new, reconstructed or expanded project should install water-saving facilities, which should be designed, built and put into operation at the same time as the main part of the project.

Likewise, the law encourages the use of reclaimed water for urban road cleaning, greening and landscaping wherever possible, and states that waste heat and pressure should be used by enterprises with reclaiming technologies.

The law also supports and encourages the use of high-efficiency and energy-saving products. Enterprises in the industries of electricity, petrol processing, chemical, steel and nonferrous and construction materials will be urged to use clean coal, coke and gas rather than fuel oil. Energy-, water- and other resource-saving products should be used in restaurants, entertainment enterprises and hotels to avoid the waste of resources and environmental pollution.

An energy-efficiency label will be another effective way to implement energy conservation. China has issued four batches of catalogues of products with energy efficiency labels in the last four years. The most recent batch covers six types of products, including computer monitors and photocopiers, and from March 2009 any products on the list that do not meet the specified standards of energy efficiency will not be allowed to be manufactured, sold, or imported into the Chinese market.

In addition to these rules and mechanisms, the government will issue a further catalogue of restricted one-off consumables and impose unfavourable tariffs and policies on exporting them.

Excessive packaging is also being targeted. Product packaging standards will be enforced and enterprises should pay special attention to their product packaging design to avoid violation of applicable compulsory standards.

Extended Liabilities?

Manufacturers may view their liabilities as not going beyond the assembly and use of their products. However, modern manufacturers' responsibilities have developed far beyond that, and now extend to the re-collection and disposal of abandoned products. The central government will publish a catalogue of mandatory re-collection of products and packaging. If products or packaging your company makes or uses are listed in the catalogue, you will have to collect the waste products or packaging for reutilisation (if possible) or for bio-safety disposal.

Manufacturers nevertheless can always entrust a third party, such as a distributor, to collect waste products or packaging.

Recycling and resource recovery requirements cover a wide range of areas, such as utilisation of fly ash, gauges, tailing, lean materials, scrap materials, waste gas, comprehensive utilisation of straw, livestock waste and biomass energy.

The government also encourages the establishment of waste recovery systems. Local authorities must arrange for the reasonable deployment of garbage collection stands and garbage trading markets as well as formulate an overall plan for the construction of facilities for collection and recovery of household garbage.

Firms that are big enough and on the list of key enterprises with high energy or water consumption will be under the close scrutiny of the government of the relevant level.

In the Energy Conservation Law, which went into effect in April 2008, China has already outlined a special monitoring and management system for high-energy-consuming enterprises. The Recycling Economy Promotion Law applies a similar mechanism to firms with high water usage.

Affected sectors include steel, non-ferrous metal production, coal, power generation, oil refining, chemicals, construction material production, construction, paper, printing and dyeing. The detailed monitoring and management rules will be issued jointly by the Recycling Economy Development General Management Office and relevant departments of the State Council. It is yet to be seen when and how detailed rules will be put in place, but companies may have to keep a close eye on the latest developments to allow timely responses.

Opportunities, Challenges

It may not seem like good timing to enforce the new law now, when the global economy has been hit by financial crisis and companies are sensitive to any additional cost. However, challenges and opportunities always coexist. The law includes a series of incentives, such as the set up of special funds, the granting of favourable tax treatment to industries and activities that promote conservation of energy, water and materials, financial institutions granting loans with priority for recycling projects, and the implementing of government procurement policy to encourage the recycling economy.

Local governments have responded proactively to the new legislation, particularly because major indicators of the recycling economy will be included in assessments of local officials' performance. Therefore, some local governments have already taken the lead to enact local incentive measures. Shenzhen has provided many favourable policies, such as annual financial subsidies, special funds, loans with priority and preferable treatment in government procurement, while Chongqing has released details of the types of projects and enterprises that will qualify for government financial subsidies to the promote recycling economy.

Winners will be those who embrace the challenges and react in the first instance.

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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