China mulls law to end caps on water pollution fines

BEIJING, Aug 25 (Reuters) China could soon adopt reforms that remove caps on fines for firms that dump waste into water, a change that would put more pressure on polluters to stop polluting.

China currently caps the amount that polluters can be fined, in some case at a level lower than the cost of installing and operating remedial equipment. Once polluters max out the fines, there is also little incentive for them to stop.

Legal revisions to remove the cap and otherwise strengthen the hand of the State Environmental Protection Administration will be submitted to top lawmakers tomorrow, SEPA's vice director of emissions control, Zhao Hualin, said today.

''When we had the massive spill in the Songhua River, we could only fine them 1 million yuan (132,200 dollar), so we fined them 1 million yuan. But after the revisions to the law, there will be basically no cap,'' he told a conference on emissions reduction today.

China's leaders are increasingly paying attention to environmental problems, as pollution darkens the air in cities and endangers water supplies. They were spurred to action by an 80-km (50-mile) benzene slick in the Songhua River in late 2005, which endangered drinking water supplies to millions in China and Russia.

Beijing has twinned emissions reduction goals with a drive to improve energy efficiency, as China's booming economic growth eats into its coal resources and makes it more and more dependent on imported crude oil.

''The revisions could also give SEPA tools other than fines, for instance being able to require a plant to stop production,'' Zhao told Reuters on the sidelines of the conference.

The environmental watchdog's bite has been softened by China's governmental structure, which gives it little authority over well-connected companies or local governments eager to boost their region's economy.

SEPA has recently had some success in shutting non-compliant plants, but is struggling to keep alive an initiative to assess local government officials' performance based on ''Green GDP'' -- a matrix of factors that takes in environmental damage as well as economic growth.

The national agency has recently set up five regional bureaus, each with dozens of staffers, that allows it to extend authority into the provinces.

But its provincial offices are still subordinate to their local provincial government, which severely limits their power to enforce rulings that counteract local interests.

Any change in that relationship would have to await a broader government restructuring, and would have to be approved by the annual full meeting of the nation People's Congress in March.

Meanwhile, SEPA faces an uphill battle.

''Starting in 2000, there was a big push to install emissions control equipment in enterprises nationwide. But over time, we have found many don't bother to turn them on,'' Zhao told the conference.

As many as 80 per cent of enterprises in China's industrial northeast may have non-compliant emissions equipment, Zhao said, based on informal assessments by SEPA teams. Nationwide, that figure is probably at least one-half.

REUTERS RAR PM1818