Editor’s note: As a step toward furthering institutional reforms in China, a new ministry – the Ministry of Ecology and Environment (MEE), has been established. What specific policies and actions can we expect from the new MEE? Hu Min, founder and senior adviser at the Innovative Green Development Program (IGDP), an independent think tank specializing in promoting China’s green development policies at home and abroad, and a non-resident senior fellow at Tsinghua Brookings Center of Brookings Institute, and Diego Montero, strategic adviser at IGDP, share their views in this three-part series. This the third part.

The Ministry of Ecology and Environment (MEE) has been structured around reducing damage to the natural environment from air and water pollution, solid waste, and nuclear materials. Policy in each area follows a similar regulatory framework, and each has its own priority program. 

For example, regional air quality coordination has played a central role in addressing air pollution and the “river chief” policy is now at the core of water protection efforts.   

Now that the climate portfolio has moved from the National Development Reform Commission (NDRC) to the MEE, of all climate policy programs initiated by the NDRC, e.g., carbon markets and low carbon city pilots, which one will become the flagship?

Because it has been held by President Xi Jinping and because most experts believe it to be the most effective policy tool to mitigate GHG emissions, there is a bigger chance that China’s carbon market program will emerge as the flagship climate program.

Of course, as with any carbon market, its effectiveness will be determined by its design features. For the carbon market to work, it will need to be integrated into MEE’s environmental regulatory system. This will strengthen its legal foundation and improve the quality of MRV.

But this will have to be done carefully. Other ideas on the table, such as linking emissions allowances with environmental permits, or linking carbon trading with water or air pollution emissions trading, might slow down policy progress. That CO2 is a global pollutant while water and air pollution are domestic or regional problems will make this integration a challenge.

Cities could be where climate change and pollution control come together

All around the world, grassroots and sub-national actors and groups have become the heart of the climate movement. In China, municipal governments are leading the charge in climate action. 

According to Policy Mapping, an online tool that tracks China’s climate policies maintained by innovative Green Development Program, more than 36 cities have committed to peaking their CO2 emission earlier than the national goal of 2030. 

Wuhan, a city of 10 million in central China, has committed to peaking its CO2 emissions by 2022 and released the country's first ever city action plan laying out steps to achieve this goal.

Mandatory provincial and municipal implementation plans in low carbon pilots are the core policy to delegate environmental quality and carbon mitigation goals to China’s local governments.

These low carbon pilots have been carrying out local carbon mitigation experiments, generating a wealth of new information about which works and which doesn’t.

Non-pilot regions, however, have not had to develop carbon mitigation plans (carbon intensity reduction goals are included in their macro social and development plans, but detailed carbon mitigation plans per se are not required).

Because China’s low carbon pilots plans and actions are a good fit within MEE’s regulatory system, they may now serve to inform national policies that affect every city and province. 

The Air Pollution Prevention and Control Law requires over 100 key cities across the country to develop compliance plans. There’s a good chance that the MEE will instruct cities to develop integrated multi-pollutant abatement plans that include GHGs emissions. 

Incorporating carbon mitigation performance indicators into China’s Quantitative Examination System on Comprehensive Renovation of the Urban Environment would be a step forward towards this direction.  

Merging Climate, Development and Finance Policy

The concern that removing climate policy from the NDRC’s mandate might weaken activity in this area is  valid since the NDRC remains a powerful overall policy planning body within the Chinese government and carbon mitigation requires that we rethink economic fundamentals.

Pollution control traditionally focuses on end-of-pipe abatement measures whereas climate change mitigation is only truly practical when it addresses the front-end utilization of energy resources, including increasing energy efficiency throughout the economy and decarbonizing the power supply.

But the MEE seems ready to take this on. Minister Li Ganjie has emphasized “optimizing four structures” in explaining the newly released Three-Year Blue Sky Defense Plan. They include China's economic, energy, transportation and land-use structures. 

Allowing the MEE to play a central role in decarbonizing and greening China’s economic growth will be critical if China wants to have a truly ambitious climate policy.

This makes environmental economic policies, including green finance, green insurance, green pricing, and of course carbon pricing, more important than ever.

Putting a price on climate change risk and incorporating this into investment decisions and infrastructure development will prove to be a key approach to merge climate and economic policies. 

We can expect China to continue making progress in local environmental protection and global climate change mitigation. Challenges certainly remain, but the creation of the MEE reflects a genuine dedication at the highest levels of China’s leadership to build an “ecological civilization” that offers a clean environment at home and much-needed climate leadership in the world at large.  

(Cover: Beijing Mentougou natural scenery, August 18, 2018/ VCG Photo)