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Part I
Institutional constraints and governance reform
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1 Institutional constraints
Shui-Yan Tang, Carlos Wing-Hung Lo, Kai-Chee Cheung and Jack Man-Keung Lo
Introduction
Since the mid-1980s, many books and articles have been published that examine China’s environmental problems. Some authors reported the alarming rate of environmental degradation in China (Edmonds, 1994; Smil, 1984, 1993; Qu and Li, 1994), while others argued that post-Mao reforms created the conditions for more effective environmental management than in the past (Ross, 1988, 1992). More recently, in an attempt to move beyond broad generalizations about China’s environmental management capabilities, some authors have examined China’s environmental management system at the local level, focusing on problems ranging from policy implementation to local officials’ environmental consciousness (Chan et al., 1995; Jahiel, 1997; Lo and Tang, 1994; Sinkule and Ortolano, 1995). These studies show that government measures in post-Mao China have produced mixed results in environmental protection. For example, most environmental protection efforts have focused on urban areas and generally neglected rural ones. With rising numbers of small and heavily polluting factories, many rural areas have suffered from increasing environmental degradation. In urban areas, some policies have helped slow down rates of pollution; others have proved less effective. What accounts for the mixed results of government efforts in China’s environmental protection? This chapter attempts to answer this question by examining one important, but often neglected, factor – the institutional constraints on China’s environmental management system.
The environmental management system established in post-Mao China allows local governments and their environmental protection bureaus considerable degrees of autonomy. Within the broad framework of environmental protection defined by the national government in the 1979 Provisional Environmental Protection Law and its final version promulgated in 1989, local governments are given substantial freedom to formulate their own policy priorities, select policy tools, design their own arrangements for enforcement and decide the pace of implementation. Such a system has been a mixed blessing for environmental protection. On the one hand, local governments are given an opportunity to tailor their environmental protection efforts to their specific circumstances (Lo and Tang, 1994). On the other hand, they are constrained in their ability and motivation in environmental protection whenever there is a perceived conflict between environmental protection and economic growth. This is especially because local governments are now responsible for generating and retaining most of their own revenues (Oi, 1992, 1995; Hu, 1994). The system creates great pressure for them to compete with one another in adopting pro-growth policies. Whenever officials perceive a conflict between economic interests and environmental protection, they tend to accord the former a higher priority (Chan et al., 1995).
Even when leading officials at the local level realize the importance of environmental protection, various institutional constraints often hinder the work of environmental agencies. First, local governments in China are confronted with difficulties in self-regulation (World Bank, 1992). When a local government owns and sponsors many polluting industries or projects, it is difficult for it to monitor itself. When an environmental bureau is part of the local government, it is often difficult for the bureau to enforce environmental regulations on other government units that sponsor polluting factories and are of equal, and often higher, hierarchical ranking than the enforcing bureau itself.
Second, although in many Western countries citizens and environmental groups are given institutional channels to oversee regulatory processes (Rosenbaum, 1995; Vogel, 1986), in China few such channels exist for public participation in environmental regulation enforcement. This means that environmental bureaus lack a potentially powerful ally in their fight against polluting interests. Without public support and open discussions, the work of an environmental bureau can easily be undermined by informal authority relationships at the local level.
Third, local environmental bureaus can only obtain minimal financial support from the government treasury; most of these bureaus need to generate their own incomes by collecting pollution fees or by engaging in such entrepreneurial activities as providing paid consulting services to the industries they regulate. Although it enhances the bureaus’ financial resources, the practice also creates conflicts of interest in regulatory enforcement.
This chapter illustrates these institutional constraints on environmental management by examining the enforcement of environmental impact assessment (EIA) at the municipal level. As a part of China’s Environmental Protection Law (Ning et al., 1988; Wenger et al., 1990), EIA has provided governments at various levels with a policy instrument that, in principle, can help prevent pollution before it occurs and help correct the country’s previous mistakes in urban planning, such as mixing polluting factories with residential units in urban development. Although these policy objectives have been achieved to a certain degree, the full potential of EIA is yet to be realized because of the institutional constraints inherent in China’s environmental management system. This chapter examines these constraints in the context of environmental impact assessment in two major municipalities, Guangzhou and Shanghai.1 These two cities exhibit considerable variations in the details of their environmental protection organizations, legislation, and enforcement practices. Yet they are confronted with similar institutional constraints, many of which are typical of China’s environmental management system. The chapter begins by outlining the two cities’ formal EIA procedures. Then it examines how various institutional constraints have created problems in the enforcement of these formal procedures.
Formal EIA procedures
Environmental regulations in Guangzhou require sponsors of development and construction projects to submit EIA reports to environmental agencies and other concerned government units. Each EIA report must specify measures to ensure that environmental standards are met in the design, construction, and operation phases. For projects of considerable size, national standards and regulations are used. For those of smaller scale, EIA reports must be prepared in accordance to the standards and procedures detailed in local EIA documents and other local regulations on noise, air, and water pollution control.
EIA reports for large and medium projects (normally with an investment exceeding RMB200 million or US$30 million) are reviewed and approved by either provincial environmental agencies or the National Environmental Protection Agency (Hao, 1993; Wong and Chan, 1994). Smaller projects are reviewed and approved by the Division of Development and Construction Administration (DDCA) of the Municipal Environmental Protection Bureau. The DDCA is supposed to evaluate an EIA report based on its potential impact on the city’s development plan and the effectiveness of its pollution control measures.
For small and local projects in Guangzhou, the EIA involves three major stages. At the project proposal stage, the proposer hires a licensed agent to prepare a preliminary project proposal that includes a brief note on the project’s possible environmental impacts, with particular reference to the selected site. Based on the preliminary project proposal and a site visit, the DDCA determines the acceptability of the site and what specifically needs to be included in the actual EIA report. This site selection stage marks the beginning of the EIA process.
At the core EIA stage, a licensed agent, commissioned by the proposer of the project, prepares an outline of the EIA report to be approved by the DDCA. Once the outline is approved, the proposer finalizes a contract with the licensed agent who can then start preparing the EIA report. Once finished, the EIA report is first examined by commercial and industrial authorities that have jurisdiction over the project, then by the DDCA. The approval of the EIA report by the DDCA brings the project into the last stage of the process: the “three synchronizations” (san tongshi) stage, in which the DDCA is responsible for ensuring that environmental prescriptions specified in the EIA report are followed in the project design, construction and completion phases.
The EIA procedures in Shanghai are similar to those in Guangzhou, requiring approval of EIA forms or reports by the Department of Supervision and Administration of the Shanghai Environmental Protection Bureau. Besides evaluating EIA forms and reports, the department is also responsible for enforcing regulatory requirements at the “three synchronizations” stage. A major difference between the two cities, however, is that Shanghai’s Environmental Protection Bureau has the authority to review and approve all EIA reports regardless of the project’s scale, because Shanghai is a municipality directly under the central government. Shanghai has also developed specific EIA guidelines to deal with its own circumstances. In 1989, for example, Shanghai’s mayor, Zhu Rongji, issued special guidelines governing the approval of development projects in the Upper Huangpu River region. According to the guidelines, any proposed projects with the potential of creating additional water pollution must be rejected (Shanghai Environmental Protection Bureau, 1991, p. 44).
In Shanghai, the Environmental Protection Bureau handles projects with an investment of over RMB30 million. Small and local projects with a smaller investment are normally reviewed and approved by county and district environmental agencies. For projects exceeding RMB200 million or US$30 million, approval is needed from commercial and industrial authorities in the central government before they can be reviewed by the Environmental Protection Bureau. Once approved, a copy of the EIA report must be filed with the National Environmental Protection Agency.
Institutional constraints and enforcement problems
In many developing countries, the EIA has been ineffective in protecting the environment because it focuses only on the planning stage of a development project and lacks provisions to ensure that environmental protection measures are actually carried out at the construction and operational phases (Clark and Herington, 1998; Wramner, 1992; Kakonge, 1994). In comparison, the formal EIA system in China is more advanced. Its “three synchronizations” requirements, if fully enforced, allow an environmental agency to monitor a development project through its design, construction, and completion phases. Nevertheless, the full potential of China’s EIA system is yet to be realized because of major institutional and enforcement problems: a lack of citizen participation, limited enforcement, and conflicts of interest for the regulatory agencies.
A lack of citizen participation
In the United States, United Kingdom, and other developed countries, the EIA system is a major avenue for citizen participation in environmental management (Rosenbaum, 1995). By requiring environmental agencies to hold regular forums for the public to challenge regulatory enforcement practices, the possibility of agency “capture” by polluting interests is reduced. Such participation is a major means for ensuring the credibility and accountability of the environmental regulatory process. Yet formal public participation is not a part of the EIA system in either Guangzhou or Shanghai. In both places the system is dominated entirely by environmental bureaus without any forum and provision for public participation or consultation. All decisions in the process are made solely by bureau officials; no institutional channels exist for the general public and those who are affected by the proposed project to express their opinions and to raise objections. Without such public participation and genuine legislative oversight, it is difficult to ensure accountability in the EIA process. As discussed in the following sections, evidence exists that casts doubt upon the commitment of the environmental bureaus in both cities to enforcing EIA requirements on all relevant development projects.
Limited enforcement
In principle, local environmental bureaus in China have a wide array of statutory authority to ensure compliance of EIA procedures and requirements.2 Yet it is uncertain to what extent these bureaus have been able or willing to apply them to ensure compliance. As pointed out by Sinkule and Ortolano (1995), many local environmental bureaus in Guangdong province have been constrained in their ability to enforce regulations because of their institutional circumstances. Although city-level environmental bureaus in China are legally responsible for implementing policies set by the national government, they are primarily an organ of the city government. Heads of the city environmental bureaus report to the mayor of the city. Financial resources for city environmental bureaus are also provided at the local level.
Such an institutional arrangement often creates difficulties for local environmental bureaus when, for example, they have to impose restrictions or penalties on development projects that are supported or sponsored by senior government officials or other powerful government units. Site selection, for instance, is a crucial step in the EIA process. Nevertheless, sites for many major economic development projects in Guangzhou and Shanghai were determined by leading government officials before the Environmental Protection Bureau could initiate the EIA process. Even if major adverse environmental effects were identified in the subsequent environmental impact statement, it would be politically difficult for the Environmental Protection Bureau to insist on the project’s cancellation or relocation. The best it can do, in most cases, is to require the project to adjust its design and to adopt mitigation measures.
In Guangzhou, for example, a highway project was recently proposed by the municipal authority. The DDCA of the Municipal Environmental Protection Bureau initially objected to the project after the environmental impact statement indicated that the highway would pass through densely populated areas and would generate large amounts of air and noise pollution. However, after insistence from the Municipal Construction Commission and the National Environmental Protection Agency, the DDCA finally conceded and approved the project’s environmental impact statement in exchange for additional noise abatement and air pollution reduction measures for the project. In another example, in Shanghai, the Light Rail Transit was first proposed a few years ago. It was considered by most municipal officials to be crucial for the city’s economic development. The Department of Supervision and Administration of the Municipal Environmental Protection Bureau allowed the construction work to begin well before the completion of the full environmental impact statement in late 1993.
The extent to which an environmental agency can effectively enforce environmental regulations frequently depends on the informal power relations among government officials and units. A major obstacle for effective enforcement of environmental regulations comes from the military and its service units and enterprises. Chan and his colleagues (Chan et al., 1993a), for example, mentioned the difficulty the Guangzhou Environmental Protection Bureau encountered when it tried to undertake a site inspection of the Retired Air Force Personnel Recreation Club. In another case, municipal authorities were able to pull down all illegal constructions in the Baiyun Shan scenic zone except those belonging to the military establishment.
An environmental agency’s capacity for effective enforcement is also constrained by its limited budgetary and personnel resources. In the Guangzhou Environmental Protection Bureau, staff have predominately technical backgrounds, and none of the higher-ranking officials has had any substantial management training. Its administrative arm, the DDCA, which is responsible for enforcing the entire EIA procedure, has a staff of only eight, all of them engineers. This small establishment is responsible for evaluating several hundred EIA forms and reports each year.3 In Shanghai, likewise, the Department of Supervision and Administration of the Municipal Environmental Protection Bureau has a staff of eight, most of them engineers, who handle an annual average of 500–600 development projects, with 90 percent of them submitting EIA forms and 10 percent EIA statements.4 Because of a shortage of staff, the department can only focus on ensuring projects’ adherence to their construction design, and pay scant attention to the rest of the “three synchronizations” stage.
Furthermore, doubts remain about the personal commitment of local environmental officials to the integrity of the EIA. A survey by Chan and colleagues (Chan et al., 1995) suggests that environmental officials in Guangzhou, Zhengzhou, and Nanjing tend to consider economic growth more important than environmental protection.
In Guangzhou, as acknowledged by its own official documents, the enforcement of EIA requirements is lax (Wu, 1994). Many government infrastructure projects were constructed without undergoing an EIA (Guang...
