Implementation of the polluter pays principle in China

Published date01 November 2018
Date01 November 2018
Implementation of the polluter pays principle in China
Alexander Zahar
Email: The polluter pays principle aims to correct market failure and its resulting social
injustice by shifting pollution costs from the public at large to polluting enterprises,
at the same time reducing the amount of pollution produced. China has taken
important steps to implement the principle as a key instrument of its environmental
legal regime. However, Chinas implementation falls short in one key respect: it has
not sought to support the development of a necessary parallel system of indepen-
dent third-party verification of the monitoring and reporting practices of polluting
enterprises. Instead, verification of the reported data is still being carried out by the
government itself, through on-site inspections by teams of government agents. In its
eagerness to enforce environmental law in a society where violations by polluters
are the norm more than the exception, Chinas government is contravening the pol-
luter pays principles implied requirement of independencein the verification of
pollution data. This article argues that, in the name of fairness and overall good gov-
ernance, Chinas legislature should begin to facilitate the development of an industry
of environmental verifiers in the countrys nongovernmental sector. Such a reform
may seem ambitious just now, but as the rule of law strengthens in China, the basis
of resistance to independent third-party verification should fall away.
The polluter pays principle began life as a principle of economics, but
it now carries normative force as a legal principle. This means that, in
order to control pollution, a national or subnational government must
as a matter of law implement the principle whenever it is possible and
appropriate to do so. In particular, governments must find ways to
quantify the pollution from industrial facilities societys largest pol-
luting entities and make them pay for its environmental cost. Imple-
mentation of the principle gives rise, I argue, to an additional
normative requirement, namely that the government must strive for
objectivity in its pollution quantification determinations. By far the
best way to meet this goal is for the government to remove itself from
direct involvement in the routine processes of verification of enter-
prise pollution data. This little-noticed normative entailment has impli-
cations for Chinas system of environmental governance. Currently,
the verification function in China sits squarely with the government.
Third-party verification, as practiced in other advanced economies,
offers Chinas government a way out of this predicament, through the
delegation of a substantial component of the verification function to
private auditors, whose services are paid for by the regulated enter-
prises themselves. While this article focuses on China due to its size
and importance, the argument made here may apply to other countries
at a similar stage of development.
Three essential features of independent third-party verification
have been described by McAllister: (i) third-party verification de-
notes a system in which governmental agencies rely on ... third par-
ties to verify data that feeds into the polluter pays calculus;
under this arrangement, a regulated entity is required to contract
with an accredited verifierto have the accuracy, completeness and
transparency of its pollution data report independently verified;
(iii) in third-party verification private third-party verifiers essentially
act in the place of governmental agentsto audit pollution reports,
whereas the government takes on the role of regulating those
©2018 John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
LK McAllister, Regulation by Third-Party Verification(2012) 53 Boston College Law
Review 1, 2.
ibid 2.
ibid 12.
DOI: 10.1111/reel.12242
RECIEL. 2018;27:293305.

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