Leo Lewis wrote in The Times, “Regulation is poor and the incentives for companies to improve their game is slight. Construction dust from thousands of building sites is allowed to spew into the air. The roads are choked with illegal vehicles belching fumes. Factory owners and the people charged with policing them are corrupt. Too-powerful state-owned companies have lobbied hard to use the cheapest, dirtiest fuels in their trucks. Beijing's bowl-like geography may make it prone to high pollution, but there is dawning recognition that, as with so many of China's problems, the system is at fault. [Source: Leo Lewis, The (London) Times, April 22, 2013]

China seems to be following a policy of “pollute first, improve later.” When development and economic growth was low, there was relatively little pollution except for that from the large Mao-era smokestack industries. Since the Deng Xiaoping reform growth and getting rich have been emphasized no matter what the cost The New York Times compared China’s problem to a teenage smoker. Chinese climate expert told the Times, “Typically industrial countries deal with green problems when the are rich. We have deal with while we are still poor.”

Fixing China’s environment is largely seen as a political problem. Local officials tend to advance their careers by generating economic growth and maintaining order. They have little patience with environmentalist whose goals often run counter to theirs. When polluting factories are clsed they are often reopened later to bring down unemployment rates.

China’s Environmental Bureaucratic Lack of Authority

Sui-Lee Wee and Hui Li of Reuters wrote: “The environment ministry, however, faces formidable odds in the face of China's complex bureaucracy and weak enforcement of laws. At least 10 government entities such as the powerful National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) shape policies that affect the environment. The bureaucratic tug-of-war has been going on for years. Frustrated by the repeated delays in [Source: Sui-Lee Wee and Hui Li, Reuters, February 3, 2013 <~>]

“Unlike the U.S. Environmental Protection Agency, the environment ministry has no power to set fuel emission standards, and sometimes it is not even consulted on decisions taken by other government departments that would affect the environment. For example, when the MIIT and the NDRC held a meeting to deliberate on a policy subsidising energy-saving cars, they never contacted the environment ministry, said Ding Yan, deputy director of the Vehicle Emissions Control Center. As it turns out, some of these cars are actually relatively heavy polluters. <~>

“In 2008, China promoted the State Environmental Protection Administration to a full ministry in a bid to give it more weight in the country's fight against pollution. Yet the ministry still lacks the authority to force big state-owned enterprises and local governments to toe the line. The ministry did not respond to a request for comment. "Even a powerful environment minister is of no use," Ding said. "You need the highest leaders like Xi Jinping and Li Keqiang to really value the work of the environment ministry." <~>

“Excessive pollution levels have already prompted the Beijing government to roll out a series of temporary emergency measures such as shutting down 103 heavily polluting factories and taking 30 percent of government vehicles off roads, but the capital's air has remained hazardous. It remains unclear whether Xi will restrain the influence of the oil firms, but with public anger rising, and with a normally compliant media joining in the calls for action, political pressure is growing. <~>

Power of State-Owned Companies on Environmental Issues

Edward Wong wrote in the New York Times, ““The state-owned enterprises are given critical roles in policy-making on environmental standards. The committees that determine fuel standards, for example, are housed in the buildings of an oil company. Whether the enterprises can be forced to follow, rather than impede, environmental restrictions will be a critical test of the commitment of the government to curbing the influence of vested interests in the economy. [Source: Edward Wong, New York Times, March 21, 2013 \\\\]

“The Ministry of Environmental Protection is the main government advocate for both higher fuel standards and better automobile technology. It has the power to force automakers to use new technology by issuing stricter tailpipe emissions standards, but it cannot unilaterally impose new fuel standards or enforce compliance from the oil companies. Instead, it can merely lobby other relevant ministries or agencies to take action. When fuel standards do not keep pace with vehicle technology, the environmental ministry has to delay issuing new tailpipe emissions standards, and so cars do not get upgraded. \\\\

“Fuel standards are issued by the Standardization Administration of China, which convenes a committee and a subcommittee to research standards. They each have 30 to 40 members, almost all of whom are from oil companies, said Yue Xin, a scientist who sits on one of the groups on behalf of the Ministry of Environmental Protection. The members from the oil companies “will represent more of the company’s interests,” Mr. Yue said. Sinopec and PetroChina, two of the biggest oil companies, have insisted that consumers or the government pay to upgrade their refineries to produce cleaner fuel, and they have delayed approving higher standards unless there is consensus on who pays. \\\\

“Sinopec for years has never argued against the need to improve China’s standards,” said David Vance Wagner, a senior researcher at the International Council on Clean Transportation who used to work under the Chinese Ministry of Environmental Protection. “They’ve just argued about the finance of it.” In late January, Fu Chengyu, chairman of Sinopec, acknowledged that the oil companies bore some responsibility for air pollution, but he also argued that the government’s fuel standards were not high enough, according to Xinhua, the state news agency. What Mr. Fu failed to explain was that oil company representatives on the committees researching fuel standards have been the main impediment to pushing through better standards.

Political Infighting over Pollution Solutions in China

Edward Wong wrote in the New York Times, “Infighting within the government bureaucracy is one of the biggest obstacles to enacting stronger environmental policies. Even as some officials push for tighter restrictions on pollutants, state-owned enterprises — especially China’s oil and power companies — have been putting profits ahead of health in working to outflank new rules, according to government data and interviews with people involved in policy negotiations. For instance, even though trucks and buses crisscrossing China are far worse for the environment than any other vehicles, the oil companies have delayed for years an improvement in the diesel fuel those vehicles burn. As a result, the sulfur levels of diesel in China are at least 23 times that of the United States. As for power companies, the three biggest ones in the country are all repeat violators of government restrictions on emissions from coal-burning plants; offending power plants are found across the country, from Inner Mongolia to the southwest metropolis of Chongqing. [Source: Edward Wong, New York Times, March 21, 2013 \\\\]

“After deadly air pollution hit record levels in northern China, officials put forward strict new fuel standards that the oil companies had blocked for years. But there are doubts about whether the oil companies will comply, especially since oil officials resisted a similar government order for higher-grade fuel four years ago. State-owned power companies have been similarly resistant. The companies regularly ignore government orders to upgrade coal-burning electricity plants, according to ministry data. And as with the oil companies, the power companies exert an outsize influence over environmental policy debates. \\\\

In 2011, during a round of discussions over stricter emissions standards, the China Electricity Council, which represents the companies, pushed back hard against the proposals, saying that the costs of upgrading the plants would be too high.“During the procedure of setting the standard, the companies or the industry councils have a lot of influence,” said Zhou Rong, a campaign manager on energy issues for Greenpeace East Asia. “My personal opinion is even if we have the most stringent standards for every sector, the companies will violate those.” \\\\

Deutsche Bank released an analysts’ note called for drastic policy changes and “a strong government will to overcome the opposition from interest groups.”For the most part, Chinese automakers have supported upgrading cars with cleaner technology, which makes them more marketable worldwide, environmental advocates say. But better technology cannot operate properly without high-quality fuel, and this is where the bottleneck occurs. \\\\

Political Infighting over Fuel and Technology Issues in China

Edward Wong wrote in the New York Times, “The system of forging fuel standards has led to fierce bureaucratic infighting. Mr. Yue and others say that because of constant haggling by the oil companies, the government for years delayed issuing upgraded China IV diesel standards that are on par with European standards. On Feb. 6, after the uproar over record-breaking air pollution, the State Council, China’s cabinet, smashed the gridlock by putting out guidelines that called for a nationwide adoption of the new China IV diesel standards by the end of 2014. [Source: Edward Wong, New York Times, March 21, 2013 \\\\]

“It also set deadlines on the issuing and phasing in of even cleaner China V standards. The next day, the Standardization Administration of China issued the upgraded China IV diesel standards that the oil companies had been trying to delay for years. But the costs of upgrading could still lead the oil companies to ignore the new standards, which is what they did when the State Council in 2009 ordered a phase-in of the China III diesel standard. In the early February 2013 the State Council said the government needed to create a fiscal policy to support the refinery upgrades, but the Ministry of Finance has yet to make the policy. \\\\

“Another big concern lies in the debate over the cleaner China V gasoline standard, which the State Council said must be issued by December and phased in by the end of 2017. In the committee debates, Sinopec argues that it is expensive to meet the requirements for sulfur levels. Oil company representatives did not reply to requests for comment. In public, oil company executives are trying to shift the blame. Mr. Fu told reporters this month that “in fact the biggest killer is coal.” \\\\

Beijing officials have said that vehicle emissions account for 22 percent of the main deadly particulate matter in the air, known as PM 2.5, and another 40 percent is from coal-fired factories in Beijing and nearby provinces. In February, the Ministry of Environmental Protection issued stricter factory emissions standards for six coal-burning industries. First on the list is the power industry, which accounts for about half the coal consumption in China. \\\\

“But compliance by the state-owned enterprises could be a problem. The environmental ministry publishes annual lists of factories that have violated emissions regulations. A review shows that the factories are all run by the biggest power companies. The annual lists represent only a fraction of the plants in violation, since installation by the factories of monitoring equipment is spotty, and the equipment readings can be manipulated, said Kevin Jianjun Tu, an energy scholar at the Carnegie Endowment for International Peace. Another problem is the low penalties: fines are generally capped around $16,000, not much of a deterrent, said Ms. Zhou, the Greenpeace representative. She said the violating factories “should be required to stop production temporarily — that would then force companies to take this seriously.” \\\\

China's Oil Giants Resist Changes to Reduce Pollution

Sui-Lee Wee and Hui Li of Reuters wrote: “The search for culprits behind the rancid haze enveloping China's capital has turned a spotlight on the country's two largest oil companies and their resistance to tougher fuel standards. Bureaucratic fighting between the environment ministry on the one hand and China National Petroleum Corp (CNPC) and Sinopec Group on the other has thwarted stricter emission standards for diesel trucks and buses -- a main cause of air pollution blanketing dozens of China's cities. [Source: Sui-Lee Wee and Hui Li, Reuters, February 3, 2013 <~>]

“To be sure, many sources contribute to air pollution levels but analysts say the oil companies' foot-dragging and disregard of environmental regulations underscore a critical challenge facing a toothless environment ministry in its mission to curb air pollution. With widespread and rising public anger changing the political calculus, it also poses a broader question of whether the incoming administration led by Communist Party chief Xi Jinping will stand up to powerful vested interests in a country where state-owned enterprises have long trumped certain ministries in the quest for economic growth at all costs. <~>

"I think the Communist Party's new government should weaken CNPC and Sinopec," said Wang Yukai, a professor from the National School of Administration. "These interest groups have too much power." Delays in implementing stricter emission standards are rooted in money -- chiefly, who should pay for the price of refining cleaner fuels? By some estimates, auto emissions contribute as much as a quarter of the most dangerous particles in Beijing's air. To supply cleaner diesel, the oil firms must invest tens of billions of yuan (billions of dollars) to remove the sulphur content, said Xiaoyi Mu, a senior lecturer in energy economics at the University of Dundee in Scotland. <~>

PetroChina, the listed arm of CNPC, said in a statement sent to Reuters that all automotive diesel produced by PetroChina in 2012 met exisiting Chinese emissions standards. It added PetroChina would "push forward upgrading of fuel quality, and supply clean, good quality and diversified products". Sinopec chairman Fu Chengyu, quoted in state news agency Xinhua, acknowledged that China's refineries are one of the main parties that should bear responsibility for air pollution. Even so, he added that was not because fuel failed to meet standards but rather because fuel standards were not sufficient. <~>

Battle Between Chinese Oil Companies and the Environmental Ministry

Sui-Lee Wee and Hui Li of Reuters wrote: “The bureaucratic tug-of-war has been going on for years. Frustrated by the repeated delays in enforcing existing environmental standards, China's deputy environment minister, Zhang Lijun, called a meeting in late 2011 with officials from the country's two biggest oil companies. In unequivocal statements, he sought to lay down the law: The ministry was not going to further delay the cleaner China IV emission standard for trucks and buses, despite reluctance by CNPC and Sinopec to supply the fuel that would cost more to produce. "If the sulphur content in your oil is too high and does not meet the standards, and if cars break down, it'll be your responsibility. The environment ministry will have nothing to do with it," Zhang said, according to Tang Dagang, director of the Vehicle Emission Control Center, who was present at the meeting. [Source: Sui-Lee Wee and Hui Li, Reuters, February 3, 2013 <~>]

The officials from the oil companies responded by promising to supply the cleaner fuel after the Lunar New Year in 2012, a traditional holiday that fell in January that year. But a few months later, a spot check by the environment ministry showed the companies were still supplying ordinary diesel, said Tang, whose policy research group is affiliated with the ministry. <~>

With media focusing on a sudden worsening of the air quality in Beijing at the start of 2013 -- 21 days in January recorded "heavily polluted" levels or worse -- urban residents are increasingly impatient with the political wrangling. "The air pollution is terrible," said Beijing resident Zhang Shuqing on a recent very polluted day. "They need to sort it out, the department responsible needs to sort out the environment."

High Costs of Reducing Air Pollution

Sui-Lee Wee and Hui Li of Reuters wrote: “The problem for oil firms such as PetroChina, the listed arm of CNPC, and Sinopec is that central planners set prices at the pump, even when global energy costs remain high. Tang said both CNPC and Sinopec have told the environment ministry that they would have supplied the fuels "if they had gotten a reasonable price". Jiang Kejun, research professor at the NDRC's Energy Research Institute, says it is unreasonable to demand that CNPC and Sinopec bear the cost of refining cleaner fuels. [Source: Sui-Lee Wee and Hui Li, Reuters, February 3, 2013 <~>]

"I'm an environmentalist and I also hate the actions of CNPC and Sinopec," Jiang said. "But we have to tell the public: energy prices will rise significantly. To enjoy both low energy prices and also fresh air, there's no way you can have both." With no supply of cleaner diesel fuel, Beijing had to delay the implementation of the China IV emission standard for diesel trucks and buses twice -- first in 2011 and then later in 2012, when it was extended to this July. <~>

The new standard aims to cut emissions of particulate matter and nitrogen oxides -- two key components of urban smog -- from trucks and buses by 80 percent and 30 percent, respectively, said Vance Wagner, a senior researcher at the International Council on Clean Transportation. "Diesel vehicles, especially trucks and buses, are a disproportionately large source of emissions," Wagner said in emailed comments. He cited environment ministry data that showed large trucks comprise only about 5 percent of China's vehicle fleet, but emit over 60 percent of particulate matter emissions. <~>

In response, China's finance ministry has stepped in to negotiate preferential tax policies with the oil firms to help offset the higher costs of producing cleaner diesel fuel, say people close to the environment ministry. Chinese media reported that new cleaner diesel fuel standards, similar to Euro IV standards that restrict sulfur content, could be issued soon in addition to the existing emissions standards. Even the new requirements, however, could give oil companies a two-year window for full compliance. Without intervention at a higher level, the delays are likely to go on.

Yue Xin, head of the vehicle fuels and emissions lab at the Chinese Research Academy of Environmental Sciences, has spent more than three years sparring with CNPC and Sinopec on a committee that sets fuel standards. Yue is one of two members representing the environment ministry on the panel while about 70 percent of the representatives are from the oil firms. Now, Yue, whose group is affiliated with the environment ministry, is lobbying for the oil firms to put "detergents" in its gasoline, which will burn fuel cleanly.

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© 2008 Jeffrey Hays

Last updated December 2013

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