Moving towards greener industrial parks in China: A comparative analysis of Chinese and international green standards

China has achieved rapid economic development in the past four decades at an unprecedented speed, with its Gross Domestic Product (GDP) per capita increasing by more than 25 times. The industrial sector plays a major role in this: in 2017, it took up more than 40% of the GDP but was also responsible for more than two-thirds of overall environmental pollution. With China’s 13^th Five-Year Plan (2016-2020) making the building of an “ecological civilization” a top priority, greening industrial parks (IPs) - where the industrial sector is primarily located in China - and transforming them into “eco-industrial parks” (EIP), will be key. 

As a country with a large industrial sector, a leading role in combating global environmental challenges, and a strong ambition for green development, China is one of the best-positioned economies to take the lead in formulating effective EIP standards to guide not only the green development and transformation of Chinese IPs, but also serve as a useful reference for other countries. 

A new World Bank study looks at how to implement this transformation. Despite considerable progress made in building a comprehensive green regulatory framework for IPs covering different legislative levels, fewer than 5% of industrial parks are green-certified, even though marked improvements in resource efficiency and environmental performances of EIPs were witnessed. 

To identify differences and share policy recommendations to further improve Chinese standards, the report conducts a comparative analysis between the Chinese green standards and the EIP Framework across all four dimensions: park management and economic, social, and environmental performance. The main differences identified between the Chinese and the EIP Framework are the following:

• “General vs. specific” requirements: The Chinese standards formulate more general requirements for park management, while the EIP Framework sets more specific requirements, including detailed description of prerequisites and performance indicators.
• “Implicit vs. explicit” requirements: Many prerequisites included in the EIP Framework are not explicitly listed in the Chinese standards because they are usually compulsory (covered by other pieces of legislation or regulations) for any planned IP in China to be approved by local, provincial, or national authorities. Hence, the fact that Chinese green standards do not have certain provisions does not necessarily mean that the IPs are exempt from these requirements. In general, considering both implicit and explicit requirements regarding park management, the Chinese standards and the EIP Framework are largely in line with each other.

   

Environmental performance

• “Result-based” vs. “process-based” assessment: Differences in environmental performance requirements ensue from different approaches to green standards. The Chinese standards are result-oriented and focus more on the ultimate impact in terms of pollution reduction or resource efficiency. On the other hand, the EIP Framework complements outcome-based targets (such as the proportion of solid waste reused) with “process-based” indicators, focusing on the systems and processes established for pollution control and resource efficiency. The EIP Framework sets dual requirements on both the environmental performance and the process to achieve such results.

   

Social performance

• “Implicit vs. explicit” requirements: Some EIP Framework requirements in the social performance section are not part of the Chinese standards, but they are usually included in additional Chinese legislation.
• “Moral standards vs. legal” requirements: Differences in harassment-related and women-right-related requirements between the Chinese standards and the EIP Framework seem to result from different cultural norms on treating harassment prevention and women’s rights/welfare. In China, when harassment occurs, it is more often dealt with by using moral suasion instead of legal regulations. Other countries tend to rely on social norms and robust regulatory frameworks at the same time.
• Beyond regulatory consideration: The EIP Framework has requirements on occupational health and safety (OH&S) management systems, community dialogue and community outreach. The Chinese standards do not specifically address these requirements.

   

Economic performance

• “Economic standards vs. socioeconomic” standards: Chinese standards and the EIP Framework have different definition of IPs’ economic performances. The evaluation criteria used by the Chinese standards focus on the economic output of IPs, mainly GDP, while the EIP Framework emphasizes the socioeconomic effect of IPs on local economic development and well-being of the local population - as reflected in, for instance, indicators on local employment generation, and opportunities for development of small and medium enterprises (SMEs). The EIP Framework assesses the overall socioeconomic performance of IPs going beyond the park level, not only the newly created GDP.

The analysis shows that the differences between the Chinese and EIP standards are largely a result of different approaches to evaluation of IPs and are not necessarily indicative of inherent weaknesses in the Chinese regulatory framework. The Chinese standards seem to be quite comprehensive and cover key requirements for the evaluation and promotion of EIPs. However, the comparison with the EIP Framework suggests that the Chinese standards could be further improved and move closer towards the EIP Framework. 

China could also strengthen the incentives for IPs to meet EIP standards. The case study of the first application of the EIP Framework in China by the Fuzhou High-Tech Zone (FHTZ), Jiangxi Province, shows that Chinese IPs may face several challenges in moving toward EIP standards, such as: (i) lack of data on the economic and environmental performance of the IP that could be used to assess its compliance with many EIP Framework requirements; (ii) incomplete infrastructure that could facilitate compliance with the environmental performance requirements of the EIP Framework; iii) insufficient incentives for Chinese IPs to strive to go beyond green requirements listed in provincial or national guidelines/regulations and comply with some of the more demanding EIP Framework environmental and economic requirements (such as the use of renewable energy, reduction of GHG emissions, and energy efficiency). 

Better access to finance could also motivate IPs and firms to become greener. As China continues to develop its green financial system, it is important to ensure that green finance is fully leveraged to support the development of EIPs. Public fiscal incentives, while important, will not be enough for the green development and transformation of Chinese IPs, and will increasingly have to be complemented by commercial and private capital. Green credit and green bonds are promising instruments to help achieve this. 

Overall, China has been a trailblazer by adopting several EIP standards in recent years and promoting them at a large scale. While voluntary, these standards have started to be adopted, and can be a way for IPs to effectively reconcile economic, environmental, and social objectives. As various supporting schemes for IPs continue to be rolled out in the coming years, important implementation issues will have to be addressed, including the mainstreaming of EIPs and building local capacity in all domestic regions; strengthening verification and supervision mechanisms to ensure continuous compliance with standards; and data collection for a quantitative assessment of economic, environmental, and social benefits from EIP models. 

From our study, a few policy recommendations standout that could further upgrade green standards and promote green IPs. The recommendations include the need to:

• Introduce more ambitious targets to increase the number of EIPs;
• Consider consolidating, updating, and streamlining EIP standards;
• Seek an optimal set of indicators to balance economic competitiveness and environmental protection;
• Improve data collection and analysis systems to track park performance of IPs against domestic and international EIP standards;
• Strengthen enforcement of existing regulations;
• Consider adopting a specific Law on IP Management;
• Leverage green finance for EIP development. 

For more, download the full study, Enhancing China’s Regulatory Framework for Eco-Industrial Parks: Comparative Analysis of Chinese and International Green Standards, here. 

Authors: Marcin Piatkowski, Senior Economist, Yufan Du, Consultant.