CLB co-blogger Steve Dickinson wrote the following article for the China Economic Review. Steve is the monthly legal columnist for the Review, which BizCult rightly raves about today in its post, entitled, “China Economic Review: In Review.” Steve’s conclusion: As written, this law is no big thing:
For all the hype about recycling,the purpose of China’s Circular Economy Promotion Law (CEPL) is not to reduce waste. The primary goal of the legislation, which was approved in late August and comes into effect on January 1, is to deliver energy efficiency.
Misinterpretations in the West are understandable: Circular economy laws in developed countries tend to be concerned with recycling as a form of pollution control and waste management. But China is different. Energy conservation and recycling are viewed from the standpoint of contribution to efficiency, reduction in cost and reduced reliance on imported raw materials.
The entire circular economy initiative is based on inputs and outputs operating in a circle: Fewer energy resources are required because more of the detritus produced by energy consumption is swept up, reconditioned and reused.
Situation: Critical
Energy utilization is a very serious issue in China.
Beijing’s plan is to quadruple the size of the national economy between 2001 and 2020 while doubling energy use. The plan is based on China’s experiences in the 1980-2000 period, during which this ratio of growth to energy utilization was achieved. At the start of the current cycle, economic planners – both in and outside China – assumed that the energy utilization target would be reached with ease.
They believed that the real problem would be to keep the economy growing without overheating or falling into a recession.
In 2006, these same planners were shocked to learn that resource utilization in China had dramatically increased. For the five-year period from 2001 to 2005, economic growth was about 8% as planned, but energy utilization growth jumped 12%. Working to this ratio, if the size of the economy grows by a factor of four through the year 2020, energy usage will grow by a factor of six. For economic and physical reasons, this kind of expansion is just not possible.
If China is not able to bring energy utilization under control, its entire plan for continuous economic expansion at a rate of 8% for the foreseeable future will have to be written off. The CEPL has been adopted as a means of dealing with this problem.
Given the significance of the issue, it is surprising that the law actually offers nothing concrete in pursuit of its stated goal. It is really nothing more than a general statement of policy.
As has been learned in the environmental wars in the US, Europe and Japan, laws that require economic sacrifice now in order to achieve an energy reduction or related environmental goal in the the future only work when backed with clear standards and significant penalties. Both of these are missing from the CEPL.
What the new law does call for is for the State Environmental Protection Administration (SEPA) or some other agency to develop a national circular economy plan. The agency in question should draft formal rules and regulations for implementation of such plans, the law goes on to say.
This approach has been common in legislative drafting in China over the past several years. Controversial laws are adopted by the National People’s Congress, but rules and enforcement mechanisms are absent from the law – responsibility for them is merely passed on to the relevant government agencies.
Further delays
Where the issues are controversial, as in the case of the CEPL, there is usually a long wait before the designated agency issues any rules. And once they do this, the final rules are often no more concrete than the governing law.
The normal reason is that there is no genuine consensus within the government, and between the center and the regions on how to proceed. This is clearly the case with the CEPL. The circular economy program is not well-understood and the present economic sacrifices it would require are strongly resisted by local governments, businesses and consumers.
As a result, even though the law addresses an issue that is critical to the growth of the Chinese economy over the next 20 years, it is unlikely the CEPL will have a genuine impact.
The sadly predictable result is that China will continue to overindulge in the consumption of energy and other natural resources. Beijing faces a struggle to meet its current economic development targets — and it appears likely to be in vain.

Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.