Profit vs. environment: What’s the impact of the new Chinese environmental protection law?

Environmental Protection Law of China has been officially implemented on Jan. 1. It might have a negative impact on the old manufacturing and process control sectors and open new doors for green engineering investments in existing plants and in automation, controls, instrumentation, and technology retrofits, according to Control Engineering China. It is projected that the investment in China’s atmosphere, water, and soil protection will be close to $1 trillion.
By Aileen Jin, Control Engineering China April 10, 2015

Is environmental protection a luxury or a necessity to the Chinese manufacturing industry, now vigorously pursuing Industry 4.0? Two incidents have drawn intensive attention since the beginning of the new year: Lanzhou Municipal Government sued CNPC Lanzhou Petrochemical Co. and publicly accused it of lacking social responsibility as a central enterprise. Also, the government claimed that the company discharged pollution illegally multiple times in recent years, resulting in serious air pollution. The local media has highlighted the difficult situation faced by government concerning environmental pollution control. Implementing the new Environmental Protection Law of China seems to be a solution to the problem. 

More rigorous punishment

The rigorous Environmental Protection Law of China was officially implemented on Jan. 1, 2015. The new act has granted more power to the environmental protection department. For example, the fine for violating the law is calculated and added on a daily basis without an upper limit. This enables the environmental protection department to seal up and detain pollution discharge equipment and even impose administrative punishment on the persons in charge of enterprises that illegally evade responsibility.

These measures seem to end the long-standing "cat-and-mouse game" between government and pollution-discharging enterprises (especially workshop-style small-sized enterprises). However, when it comes to large enterprises related to the national economy and people’s daily life, governments and enterprises have to face the challenges of surviving despite the severe punishment and determining who should pay the expensive environmental protection cost for enterprises.

Profit vs. environment

Take the iron and steel industry, a major polluting industry, as an example. Excess production capacity plus high reliance on imported iron ore has resulted in high costs and low profits for iron and steel enterprises in recent years. The implementation of the new Environmental Protection Law and more rigorous discharge standards undoubtedly makes things worse for these enterprises. Some iron and steel enterprises indicated that they lost more than $32 for production of each ton of steel after they made huge investments in purchasing environmentally friendly equipment.

This phenomenon also exists in the cement industry. According to a study conducted by the Chinese Research Academy of Environmental Sciences, installing cement denitration equipment will increase the cost of each ton of cement from $3.21 to $6.42 after implementation of the new discharge standards. If calculated according to an annual cement production capacity of 2 billion tons, the operating cost of environmental protection facilities in China’s cement industry will perhaps exceed $6.4 billion. An environmental protection project often features a big investment in the early stages, long payback period, and low return on investment. In addition, with financing difficulties, many enterprises would flinch. To address this matter, Wu Xiaoqing, vice minister of the Ministry of Environmental Protection, insisted on reforming the policy mechanism and establishing an environmental protection financing mechanism. The environmental protection investment in key industries and key areas is currently insufficient. It is projected that the investment in China’s atmosphere, water, and soil protection will be close to $1 trillion. 

Opportunities for green engineering

With the country’s increasing attention to environmental protection, a growth model at the expense of environmental damage will become a thing of the past. The sharp increase in enterprises’ demands for environmental monitoring instrumentation, atmospheric pollution control systems, waste management equipment, and sewage treatment systems will open a new market for the Chinese environmental protection industry.

When strengthening pollution source monitoring, enterprises will also focus on overall factory operation and control level-cure the disease rather than the symptoms. Enterprises will apply advanced automation control technology to gradually eliminate backward hardware and software not only to comply with the national environmental protection standards but also to improve enterprises’ production capacity and efficiency and boost market competitiveness. In some sense, the manufacturing upgrade is killing two birds with one stone.

Aileen Jin, editor-in-chief, Control Engineering China, explains that the new environmental protection law in China may translate into large investments in controls, automation, and instrumentation. Courtesy: Control Engineering ChinaIn the future, it is expected that industrial-grade products used in environmental protection fields, like programmable logic controllers (PLCs), remote data acquisition, variable frequency drives (VFDs), and human-machine interfaces (HMIs), will draw increasing attention. The abundant experience of traditional automation manufacturers in system integration and overall solutions gives them more first-mover advantages in this Blue Ocean market. The cooperation between Schneider Electric and Beijing Origin Water Technology Co. last year focused on the market prospect of the water treatment industry. It could yet be regarded as a wise strategic plan.

– Aileen Jin, editor-in-chief, Control Engineering China. Edited by Joy Chang, digital project manager, Control Engineering, 

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This was translated and edited for Control Engineering from Control Engineering China. 

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