It is known that China is one of the largest polluters in the world in terms of greenhouse gas emissions and other toxic substances. However, people in the West sometimes overlook how much China has improved in terms of its environmental initiatives in recent years. For instance, China’s air and pollution levels have actually been on a steady decline since the early 2010s, when pollution levels were through the roof. This feat is nothing to scoff at because China is still a developing country. As a result, I’d like to invite you to look at one of the central legislations that allowed China to bring many corporate entities to bear the cost of their environmental exploits:
You Pollute, You Fix
The legislation issued by the Ministry of Environmental Protection in 2017 states (rough translation with some ChatGPT):
Corporations or individuals causing soil contamination are required to bear primary responsibility for remediation and restoration:
- If the responsible company changes, the succeeding entity or individual inherits the obligations (whoever holds its assets/debts).
- If the responsible entity ceases or is unclear, the county-level government assumes the relevant responsibility.
- In cases of lawful land use transfer, the transferee or the party designated through agreement assumes the responsibility.
- Upon termination of land-use rights, the original land-use right holder is responsible for soil contamination caused during the period of their land use.
- Obligations caused by pollution can be applied retroactively, and individuals are accountable for their lifetimes.
Under the legislation, the company is effectively on the hook for any environmental degradation it causes during its operations. Unless the company is successfully dissolved, the obligation will persist through transfers, bankruptcies, or other corporate maneuvers. Since the local government is the last person responsible, it will always try to prevent an accountable company from dissolving itself. Because many matters in China still function under the table, a company (and its directors & majority shareholders) will often be personally liable. The defence of the corporate veil generally only functions partially when a company is dealing with the state (the state can always find you doing something ‘illegal’ that renders the veil inapplicable). Similarly, local authorities will not hesitate to use the threat of criminal punishment to ‘motivate’ some corporations to fix environmental damage and avoid the prospect of those obligations falling onto themselves. Thus, it is not uncommon to see a company director suddenly being arrested for a random investigation and then miraculously released when a giant donation is made to a local environmental initiative.
Of course, even such legislation is only partially effective. As pollution often occurs at a local level, this often forces the local government into a conflict of interest with itself as it both wants to avoid liability but also wants to keep economic growth. As a result, often, what ends up happening is the company will bribe the local official currently in office and operate for X amount of years. The corrupt official will be able to boast about his financial achievements and get a promotion at the end of his term while leaving the environmental mess to his successor to handle.
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