Since the initial passage of the framework Environmental Protection Law in 1979, China has passed many laws, regulations, and standards addressing environmental protection. The Law on Prevention and Control of Air Pollution, the primary law dealing with air pollution, provides comprehensive measures on air pollution prevention and control.
Construction of new industrial facilities that may affect the atmospheric environment must be preceded by environmental impact assessments, and standards for the emission of atmospheric pollutants and the total emission control requirements for key atmospheric pollutants must be met. Polluting entities must also obtain a pollutant discharge permit for industrial emissions or the emission of specified hazardous and toxic atmospheric pollutants. Effective January 1, 2018, a newly designed environmental protection tax replaced the pollution discharge fee. The tax applies to specified air pollutants, not including carbon dioxide.
Pollutants discharged by motor vehicles and vessels as well as non-road mobile machinery must not exceed the stipulated emission standards. China has been implementing vehicle emissions standards that mainly follow the EU standards. The China 5 standard for light-duty vehicles is similar to the Euro 5 standard with some deviations.
National standards for fuel consumption limits have been established for various types of vehicles. The current Phase IV standards for passenger cars, which took effect on January 1, 2016, set a fleet average target of 5.0 L/100km for new vehicles sold in 2020.
China has created a New Energy Vehicle (NEV) credit system under which passenger car manufacturers will be required to earn NEV credits starting in 2019. The excess NEV credits, if any, may be used to offset an automaker’s negative corporate average fuel consumption (CAFC) points that occurred by exceeding the CAFC target set by the state.
Air pollution and carbon emissions in China have mainly been attributable to coal burning and industrial production during the early stage of economic development. In urban areas, especially megacities such as Beijing and Shanghai, emissions from vehicles have become an increasing problem. In recent years, it has been observed that the emissions of long-regulated sulfur dioxide (SO2) and total suspended particulates (TSP, including particulate matter [PM10]), have passed their peak and are diminishing. The situation of fine particulate matter (PM2.5) and ground-level ozone (O3) concentration, however, is worsening. Regional air pollution problems are becoming significant. Sometimes vast regions, such as all of eastern and central China, are under very high concentrations of PM2.5 and O3.
The environmental protection agency in the central government, the Ministry of Environmental Protection (MEP), was previously responsible for the prevention and control of air pollution. Greenhouse gas emissions control, climate change, and energy management, were the responsibility of the National Development and Reform Commission (NDRC). In April 2018 a new Ministry of Ecology and Environment (MEE) was established. The new MEE absorbed the environmental protection functions of the former MEP and several other central government departments, as well as the pollution-related functions of the NDRC.
II. National Policies
The government has recognized that air pollution is severe and that the pressure to control pollution is expected to increase due to growing energy consumption resulting from the industrialization and urbanization of the country. Air pollution has been addressed in a series of national policies, including the national five-year plans for economic and social development, which set clean-air targets for the country with corresponding time limits.
A. Air Pollution Prevention and Control Action Plan
The administration led by Xi Jinping and Li Keqiang illustrated its strong will to improve air quality in its first year, during which the State Council issued the Air Pollution Prevention and Control Action Plan in September 2013. The Action Plan provides guidance for national efforts to control air pollution in the present and near future.
In the Action Plan, the State Council emphasizes that the protection of the atmospheric environment “assures the people’s welfare, the sustainable development of [the] economy, [and] enhances a well-off society and the great rejuvenation of the China Dream.” The Plan recognizes that “air pollution is serious in China,” describing the problem as follows:
[The r]egional air quality problem characterized by the inhalable particulate matter (PM10) and fine particles (PM2.5) has become increasingly prominent, which harms people’s health and affects social harmony and stability. As the deepening of the industrialization and urbanization, energy resource consumption keeps growing, and the [urgency of implementing efforts of] air pollution prevention and control continues to increase.
The Action Plan sets quantitative targets for improving the air quality of the whole country and of key regions within specified time limits, and provides ten key actions covering major aspects of air quality management, which include the following:
- By 2017, the urban concentration of PM10 must decrease by 10% compared with 2012, and as a result the annual number of days with fairly good air quality should gradually increase.
- Concentrations of PM2.5 in the heavily polluted Beijing-Tianjin-Hebei, Yangtze River Delta, and Pearl River Delta regions must fall by around 25%, 20%, and 15%, respectively.
- PM2.5 annual concentrations in Beijing must be controlled below 60 milligrams per cubic meter (mg/m3).
B. The 13th Five Year Plan
China’s 13th Five-Year (2016–2020) Plan for Economic and Social Development contains strong commitments to improve air quality and control emissions. The Plan describes the country’s clean-air action plan as follows:
We will formulate a plan for ensuring air quality standards in cities are met, strictly enforce obligatory targets, see that cities at and above the prefectural level achieve a 25% reduction in the number of days of heavy air pollution, and channel greater effort into reducing fine particulate matter emissions in key regions. We will establish a monitoring system to ensure that environmental protection standards for vehicles, watercraft, and fuel oil are achieved. We will work to increase the proportion of natural gas users in cities. We will strengthen monitoring of windblown dust from unpaved roads and construction sites and prohibit open straw burning.
The Five-Year Plan commits to reduce emissions, ensure compliance with emissions standards, and promote the use of clean energy:
We will ensure that all industrial polluters meet emissions standards. We will improve emissions standards, strengthen supervisory monitoring of industrial pollution sources, publish a blacklist of enterprises that fail to meet emissions standards, and require such enterprises to make corrections within a stipulated time frame. All heavily polluting enterprises located within urban districts will either be relocated, upgraded, or, in accordance with the law, shut down. We will conduct the second national survey of pollution sources. We will reform the total emissions control system for major pollutants so that more pollutants are covered. . . . We will promote the use of alternative clean energy in urban “villages” and [outskirts], and replace small and medium coal-fired facilities. . . . Chief industries will be transformed to achieve clean production.
III. Laws, Regulations, and Standards
During the past four decades, China has adopted many laws, regulations, and standards adressing environmental protection. Implementation of the environmental protection laws used to be weak, but has becoming increasingly stronger over the past few decades when the severe air pollution has caused huge health damages and social losses.
A. Environmental Protection Law
The Environmental Protection Law is the framework law that provides general provisions regulating all aspects of environmental protection and pollution control. The Environmental Protection Law was first adopted in 1979 on a trial basis, and formally promulgated on December 26, 1989. The Law was most recently revised in 2014, with the revisions taking effect on January 1, 2015.
B. Law on Prevention and Control of Air Pollution (Air Law)
After the first passage of the Environmental Protection Law, China passed approximately thirty special laws regulating various areas of environmental protection, approximately ninety administrative regulations, and many more standards. Among them, the Law on Prevention and Control of Air Pollution (Air Law) is the primary law dealing with air pollution, providing comprehensive measures of air pollution prevention and control.
The Air Law was first adopted in 1987 and has been revised several times since then, including a major revision in 2015 that took effect on January 1, 2016. The revised Air Law sets a specific goal of improving air quality and emphasizes the control of air pollution caused by coal burning, industrial production, motor vehicles and vessels, dust, and agricultural activities. It calls for comprehensive measures to be taken to restrict atmospheric pollutants and greenhouse gases, including particulate matter, sulfur dioxide, nitrogen oxides, volatile organic compounds, and ammonia.
IV. Air Quality Standards
A. Legal Provisions
According to the Environmental Protection Law and the Air Law, the environmental protection agency under the State Council is tasked with formulating national environmental quality standards, including air quality standards. Provincial governments may establish local standards on items not covered in the national standards and set stricter limits on items covered by the national standards. Regions that have not met the national standards must formulate an attainment plan showing how they will meet the standards by a certain time.
For regions that exceed national total emissions targets of key air pollutants or could not achieve the improvement targets of ambient air quality set by the state, the local government leaders will be “interviewed” by the central or provincial environmental protection authorities and new projects in that region will be prohibited from undergoing required environmental impact assessments.
B. Ambient Air Quality Standards, GB 3095-2012
The Ambient Air Quality Standards that are currently effective, GB 3095-2012, were released by the then Ministry of Environmental Protection on February 29, 2012. The Standards set mandatory limits for the primary pollutants—SO2, nitrogen dioxide (NO2), carbon monoxide (CO), O3, PM10, and PM2.5—and took effect nationwide on January 1, 2016.
The Standards set two classes of limit values: Class I standards apply to regions that need special protection such as natural reserves and natural scenic areas, while Class II standards apply to all other areas including residential, mixed-use, industrial, and rural areas. For example, the limit for the daily average of O3 is 100 micrograms per cubic meter (µg/m3) under Class I, compared to 160 µg/m3 under Class II. The hourly average limit of O3 is 160 µg/m3 under Class I and 200 µg/m3 under Class II.
V. Control of Coal Use
The Air Law calls for changing the energy stucture to reduce the percentage of coal used for energy consumption and promotes the clean and efficient use of coal. Article 32 of the Air Law provides that the central and local governments will take measures to improve the energy infrastructure and popularize the production and utilization of clean energy; optimize the utilization of coal to be cleaner and more efficient; reduce the proportion of coal in primary energy consumption; and reduce the discharge of atmospheric pollutants during the production, utilization, and transformation of coal.
The Law requires coal plants to have on-site washing equipment to remove sulfur and ash content, to meet environmental standards. Importing, selling, or using substandard coal is prohibited, and the state encourages the use of high-quality coal. The Law requires oil refinery companies to produce fuel oil in accordance with the fuel quality standards. Importing, selling, and burning petroleum coke that fails to comply with quality standards are prohibited.
VI. Clean-Air Requirements for Industrial Facilities
A. Environmental Impact Assessments
Construction of new industrial facilities that may affect the atmospheric environment must be preceded by an environmental impact assessments according to article 18 of the Air Law. The standards for emissions of atmospheric pollutants and the total emission control requirements for key atmospheric pollutants must be complied with if a proposed construction project will discharge atmospheric pollutants.
B. Pollutant Discharge Permit
Polluting entities must obtain a pollutant discharge permit for industrial emissions or the emission of specified hazardous and toxic atmospheric pollutants. A pollutant discharge permit is also required for entities manufacturing and operating coal-burning heat sources. Detailed rules about the issuance of pollutant discharge permits are provided by the Interim Measures on Administration of Pollution Discharge Permit, which were issued by the MEP on December 23, 2016.
C. Pollutant Discharge Fees and Environmental Protection Tax
China previously collected a pollutant discharge fee on pollutants discharged into the environment, as provided by the Environmental Protection Law. Effective January 1, 2018, the Environmental Protection Tax Law replaced the pollutant discharge fee with a newly designed environmental protection tax. Under the Environmental Protection Tax Law, entities directly discharging pollutants into the environment, including air pollutants, water pollutants, solid waste, and noise, are subject to the tax. The Law lists specific air pollutants that are subject to the tax; CO2 is not included.
VII. Vehicle Emissions Standards
A. Legal Provisions
The Air Law calls for low-carbon and eco-friendly transportation. It provides that the state must adopt fiscal, taxation, government procurement, and other measures to promote the use of energy-efficient and new-energy vehicles, vessels, and non-road mobile machinery, and that the development of high-fuel-consumption and high-emission motor vehicles, vessels, and non-road mobile machinery will be restricted to reduce fossil fuel consumption.
According to the Air Law, pollutants discharged by motor vehicles, vessels, and non-road mobile machinery must not exceed the stipulated emission standards. The Law prohibits manufacturing, importing, or selling motor vehicles, vessels, and non-road mobile machinery that exceeds the emission standards.
B. Vehicle Emissions Standards
The current emissions standard for light-duty vehicles, the Limits and Measurement Methods for Emissions From Light-duty Vehicles (China 5), GB 18352.5–2013, was issued by the MEP and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in May 2013. Ligh-duty vehicles sold and registered in China were required to comply with this standard effective January 1, 2018. China has been issuing vehicle emissions standards mainly following the EU standards. The China 5 standard for light-duty vehicles is similar to the Euro 5 standard, with some deviations.
China also issued the following emissions standards for heavy-duty vehicles, three-wheeled and low-speed vehicles, motorcycles, and non-road mobile machinery:
- Limits and Measurement Methods for Exhaust Pollutants from Compression Ignition and Gas-Fueled Positive Ignition Engines of Vehicles (III, IV, V), GB 17691–2005, effective January 1, 2007.
- Limits and Measurement Method for Exhaust Pollutants from Gasoline Engines of Heavy-duty Vehicles (III, IV), GB 14762–2008, effective July 1, 2009.
- Limits and Measurement Methods for Exhaust Pollutants from Diesel Engines of Three-wheel & Low-speed Goods Vehicles (I, II), GB 19756–2005, effective January 1, 2006.
- Limits and Measurement Methods for Emissions from Motorcycles (IV), GB 14622–2007, effective July 1, 2008.
- Limits and Measurement Methods for Exhaust Pollutants from Diesel Engines of Non-road Mobile Machinery (III, IV), GB 20891–2014, effective October 1, 2014.
- Limits and Measurement Methods for Exhaust Pollutants from Small Spark Ignition Engines of Non-road Mobile Machinery (I, II), GB 26133–2010, effective March 1, 2011.
VIII. Fuel Efficiency
A. Fuel Consumption Limits
According to China’s Energy Conservation Law, which was first enacted in 1997 and most recently revised in 2016, the state encourages the development and use of clean fuels and alternative fuels in transportation. The relevant departments under the State Council formulate standards for fuel consumption limits for vehicles and vessels, and vehicles and vessels that cannot meet the fuel consumption standards are prohibited from being operated.
China’s Energy-Saving and New Energy Vehicle Industry Development Plan (2012–2020) sets the expected fleet average targets of 6.9 liters (L) per 100 kilometers (km) by 2015 and 5.0 L/100km by 2020. National fuel consumption limits have been established for various types of vechicles. The current Phase IV standards for passenger cars, the Fuel Consumption Limits for Passenger Cars, GB 19578–2014, was released in December 2014. Effective January 1, 2016, the Phase IV standards set a fleet average target of 5.0 L/100km for new vehicles sold in 2020, equivalent to a 27.5% reduction from the previous target of 6.9 L/100km in 2015.
B. CAFC and New Energy Vehicle Credits
The Phase IV standards include a corporate average fuel consumption (CAFC) standard for manufacturers, and each manufacturer’s passenger car fleet must meet the CAFC target of the given year.
On September 27, 2017, China’s Ministry of Industry and Information Technology (MIIT) and several other central government departments jointly issued the Measures on Parallel Administration of Passenger Car Enterprise Average Fuel Consumption and New Energy Vehicle (NEV) Credits, which took effect on April 1, 2018. The Measures apply to passenger cars only. The NEVs under the Measures include pure electric passenger cars, plug-in hybrids, and fuel-cell passenger cars. The Measures establish a “parallel administration” system of auto companies’ CAFC and NEV sales aimed at promoting new-energy cars and providing additional compliance flexibility to the existing fuel-consumption regulation. China’s NEV mandate is similar to California’s Zero Emission Vehicle (ZEV) mandate.
According to the Measures, auto companies producing or importing over 30,000 non-NEV passenger cars per year will be required to earn NEV credits equal to a set percentage of their non-NEV sales in China starting in 2019. The required annual NEV credit percentage is 10% in 2019 and will increase to 12% in 2020. Credits each NEV may generate vary: each plug-in hybrid may generate two credits, the credits each purely electric car may generate depends on the electric battery range, and the credits each fuel-cell car may generate depends on the rated power of the fuel cell system.
A company generates surplus NEV credits if its actual NEV credits are greater than the NEV target. Similarly, it generates surplus CAFC credits if its actual CAFC is lower than its CAFC target. The surplus NEV credits can be used to offset the CAFC credit deficit if its actual CAFC is higher than its target. The Measures create a market where the credits can be traded:
➢ Surplus NEV credits can be sold to other companies.
➢ Surplus CAFC credits can be banked and carried forward to help with CAFC compliance in future years or transferred to affiliated companies to help offset a CAFC credit deficit.
➢ To offset an NEV credit deficit, an automaker needs to purchase NEV credits from other companies.
➢ To offset a CAFC credit deficit, more options are provided, including using banked CAFC credits, transferring CAFC credits from affiliated companies, using selfgenerated NEV credits, and purchasing NEV credits from other companies.
Update Aug. 18, 2018
On June 27, 2018, the State Council released a new three-year action plan for tackling air pollution, the Three-Year Action Plan for Winning the Blue Sky War. The action plan sets up targets for improving the air quality of the country by 2020.
Prepared by Laney Zhang
Foreign Law Specialist
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 Ma Tianjie & Liu Qin, China Reshapes Ministries to Better Protect Environment, China Dialogue (Mar. 14, 2018), https://www.chinadialogue.net/article/show/single/en/10502-China-reshapes-ministries-to-better-protect-environment, archived at https://perma.cc/P5XB-3JLV.
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 The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2016–2020), http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf, archived at https://perma.cc/7L3R-P8J2.
 Id. ch. 44, § 1.
 Id. ch. 44, § 2.
 Jin et al., supra note 1.
 PRC Environmental Protection Law (adopted by the Standing Committee of the National People’s Congress (NPC) on Dec. 26, 1989, revised Apr. 24, 2014, effective Jan. 1, 2015), http://zfs.mep.gov.cn/fl/201404/t2014 0425_271040.shtml (in Chinese), archived at https://perma.cc/E92B-E2HZ; English translation at https://www.chinadialogue.net/Environmental-Protection-Law-2014-eversion.pdf, archived at https://perma.cc/Q2A9-V6ZK.
 Environmental Protection Law First Major Revision in 25 Years, China.com.cn (Apr. 25, 2014), http://guoqing. china.com.cn/2014-04/25/content_32201755.htm (in Chinese), archived at https://perma.cc/PS2J-BUKL.
 PRC Law on Prevention and Control of Air Pollution (adopted by the NPC Standing Committee on Sept. 5, 1987, last revised Aug. 29, 2015, effective Jan. 1, 2016), http://www.npc.gov.cn/npc/xinwen/2015-08/31/content_ 1945589.htm (in Chinese), archived at https://perma.cc/YVZ6-2E9T.
 Id. art. 2.
 Environmental Protection Law art. 15; Air Law art. 8.
 Environmental Protection Law art. 15.
 Id. art. 28.
 Air Law art. 22.
 Ambient Air Quality Standards, GB 3095-2012 (issued by the MEP and AQSIQ on Feb. 29, 2012, effective Jan. 1, 2016), http://126.96.36.199:8080/gzaqi/Document/gjzlbz.pdf, archived at https://perma.cc/8PHM-FPJ5.
 Air Law arts. 32–42.
 Id. art. 32.
 Id. art. 33.
 Id. art. 35.
 Id. art. 37.
 Id. art. 18.
 Id. 19.
 Interim Measures on Administration of Pollution Discharge Permit (issued by the MEP on Dec. 23, 2016), http://www.mep.gov.cn/gkml/hbb/bwj/201701/t20170105_394012.htm?COLLCC=871453746& (in Chinese), archived at https://perma.cc/MCE2-J2KJ.
 Environmental Protection Law art. 43.
 PRC Environmental Protection Tax Law (adopted by the NPC Standing Committee on Dec. 25, 2016, effective Jan. 1, 2018), http://www.npc.gov.cn/npc/xinwen/2016-12/25/content_2004993.htm (in Chinese), archived at https://perma.cc/9RJQ-ETMD.
 Id. arts. 2&3.
 Id. Annex II.
 Air Law art. 50.
 Air Law art. 51.
 The Limits and Measurement Methods for Emissions from Light-duty Vehicles (China 5), GB 18352.5－2013 (issued by MEP and AQSIQ on Sept. 17, 2013), http://kjs.mep.gov.cn/hjbhbz/bzwb/dqhjbh/dqydywrwpfbz/ 201309/W020131105534056881723.pdf (in Chinese), archived at https://perma.cc/DJ2U-P2WK.
 China: Light-Duty: Emissions, Transportpolicy.net, https://www.transportpolicy.net/standard/china-light-duty-emissions/ (last visited Apr. 20, 2018), archived at https://perma.cc/7W4A-M3QJ.
 Limits and Measurement Methods for Exhaust Pollutants from Compression Ignition and Gas Fueled Positive Ignition Engines of Vehicles (III, IV, V), GB 17691－2005 (issued by MEP and AQSIQ on May 30, 2005), http://kjs.mep.gov.cn/hjbhbz/bzwb/dqhjbh/dqydywrwpfbz/200701/W020110127400649893698.pdf (in Chinese), archived at https://perma.cc/8UKY-VMQ8.
 Limits and Measurement Method for Exhaust Pollutants from Gasoline Engines of Heavy-duty Vehicles (III, IV), GB 14762-2008 (issued by MEP and AQSIQ on Apr. 2, 2008), http://kjs.mep.gov.cn/hjbhbz/bzwb/dq hjbh/dqydywrwpfbz/200804/W020111121354629553675.pdf (in Chinese), archived at https://perma.cc/DU8L-GM4C.
 Limits and Measurement Methods for Exhaust Pollutants from Diesel Engines of Three-wheel & Low-speed Goods Vehicles (I, II), GB 19756—2005 (issued by MEP and AQSIQ on May 30, 2005), http://kjs.mep.gov.cn/ hjbhbz/bzwb/dqhjbh/dqydywrwpfbz/200601/W020110127403616308220.pdf (in Chinese), archived at https://perma.cc/XBJ5-LNMY.
 Limits and Measurement Methods for Emissions from Motorcycles (IV), GB 14622–2007 (issued by MEP and AQSIQ on Apr. 3, 2007), http://kjs.mep.gov.cn/hjbhbz/bzwb/dqhjbh/dqydywrwpfbz/200704/W0201201 04512013466312.pdf (in Chinese), archived at https://perma.cc/7VDS-HZ6Q.
 Limits and Measurement Methods for Exhaust Pollutants from Diesel Engines of Non-road Mobile Machinery (III, IV), GB 20891–2014 (issued by MEP and AQSIQ on May 16, 2014), http://kjs.mep.gov.cn/hjbhbz/ bzwb/dqhjbh/dqydywrwpfbz/201405/W020140603336102800621.pdf (in Chinese), archived at https://perma.cc/F9JW-YRXW.
 Limits and Measurement Methods for Exhaust Pollutants from Small Spark Ignition Engines of Non-road Mobile Machinery (I, II), GB 26133–2010 (issued by MEP and AQSIQ on Dec. 30, 2010), http://kjs.mep.gov.cn/hj bhbz/bzwb/dqhjbh/dqydywrwpfbz/201101/W020130206491873646734.pdf (in Chinese), archived at https://perma.cc/8V9W-7VPG.
 PRC Energy Conservation Law (adopted by the NPC Standing Committee on Nov. 1, 1997, revised Oct. 28, 2007, effective Apr. 1, 2008) art. 45, http://www.gov.cn/flfg/2007-10/28/content_788493.htm (in Chinese), archived at https://perma.cc/9YEH-FVAJ.
 Id. art. 46.
 State Council, Energy-Saving and New Energy Vehicle Industry Development Plan (2012–2020) (June 28, 2012), http://www.gov.cn/zwgk/2012-07/09/content_2179032.htm (in Chinese), archived at https://perma.cc/GH9K-9R95.
 Fuel Consumption Limits for Passenger Cars, GB 19578–2014 (issued by the AQSIQ and Standardization Administration of China on Dec. 22, 2014, effective Jan. 1, 2016), http://www.miit.gov.cn/n1146295/ n1652858/n1653018/c3780606/part/3780612.pdf (in Chinese), archived at https://perma.cc/N6AH-7ARS.
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 Measures on Parallel Administration of Passenger Car Enterprise Average Fuel Consumption and New-Energy Vehicle Credits (issued by the MIIT, Ministry of Finance, Ministry of Commerce, General Administration of Customs, and AQSIQ on Sept. 27, 2017, effective Apr. 1, 2018), http://www.miit.gov.cn/n1146290/n4388791/ c5826378/content.html (in Chinese), https://perma.cc/L2CP-5XTS.
 Id. art. 2.
 Id. art. 4.
 China’s New Energy Vehicle Mandate Policy (Final Rule), International Council on Clean Transportation (Jan. 2018), https://www.theicct.org/sites/default/files/publications/ICCT_China-NEV-mandate_policy-update_20180111.pdf, archived at https://perma.cc/86KZ-UA5H.
 Measures, supra note 54, art. 17.
 Id. Annex II.
 Id. art. 14.
 Id. art. 8.
 Id. art. 26.
 China’s New Energy Vehicle Mandate Policy (Final Rule), supra note 57.
Last Updated: 08/16/2019