Enhancing China’s Regulatory Framework for Eco-Industrial Parks Comparative Analysis of Chinese and International Green Standards Enhancing China’s Regulatory Framework for Eco-Industrial Parks Comparative Analysis of Chinese and International Green Standards April 2019 The World Bank Table of Contents Acknowledgments............................................................................................................................... vii Acronyms............................................................................................................................................. viii Executive Summary............................................................................................................................ 1 1. Introduction..................................................................................................................................... 7 1.1 Project background and context................................................................................................ 7 1.2 Scope of the report..................................................................................................................... 11 2. Green Industrial Parks in China: History, Development, and Regulatory Framework.......... 13 2.1 From industrial parks to eco-industrial parks........................................................................... 13 2.2 Regulatory framework of IP management and EIP promotion in China.................................. 14 2.3 The “Green Triangle” of Chinese EIP standards....................................................................... 17 2.4 Evaluation of the Chinese EIP standards................................................................................... 20 3. Comparative Analysis of the Chinese and International EIP Frameworks............................... 25 3.1 Park management: “General vs. specific” and “implicit vs. explicit” requirements................ 26 3.2 Environmental performance: “Result-based” vs. “process-based” assessment........................ 27 3.3 Social performance: “Implicit vs. explicit” and “moral standards vs. legal requirements”...... 28 3.4 Economic performance: “Economic standards vs. socioeconomic standards”......................... 28 4. Application of the EIP Framework in the Fuzhou High-Tech Zone........................................... 31 4.1 Overview of FHTZ..................................................................................................................... 31 4.2 Compliance barriers................................................................................................................... 33 5. Fiscal and financial instruments to promote and develop EIPs.................................................. 41 5.1 Evaluation of the incentive frameworks of the Chinese EIP standards.................................... 41 5.2 Green finance for the green transformation and development of IPs in China........................ 44 6. Conclusions and Policy Recommendations................................................................................... 49 Appendixes........................................................................................................................................... 53 Appendix A. Regulatory framework of IP management and EIP promotion in China................... 53 Appendix B. Standard for National Demonstration EIPs (MEE)................................................... 61 Appendix C. Basic requirements and performance indicators of applying for circular economy transformation demonstration IPs (NDRC and MOF)............................... 65 Appendix D. Requirements/Qualifications of Green IPs (MIIT).................................................... 68 Appendix E. Comparison of “China Green Triangle” against the EIP Framework........................ 71 Appendix F. Self-assessment by Fuzhou High-tech Zone against the EIP Framework.................. 82 Appendix G. Financial instrument/policies promoting the development of EIPs in China............ 95 Appendix H. Comparison between the Chinese EIP standards......................................................101 Appendix I. An overview of the WBG/UNIDO/GIZ International Framework for EIPs...............102 Appendix J. Examples of potential incentives for complying with EIP standards.........................104 References............................................................................................................................................ 107 Figures Figure 2.1 General managerial and operational structure of Chinese EIPs.................................... 14 Figure 2.2 Number of “green-certified” IPs in China regulated by MEE, MIIT, and NRDC........ 22 Figure 2.3 Summary of the indicator comparison.......................................................................... 23 Figure 3.1 Comparison between the Chinese green standards and the EIP Framework................ 25 Figure I.1 Core EIP categories and topics...................................................................................... 102 Figure J.1 Potential incentives for complying with EIP standards................................................. 104 Tables Table ES1. Improvement in environmental performance of eco-/green and circular economy demonstration pilot parks in China, 2011−15................................................................ 2 Table ES2. Number and proportion of certified EIPs in China....................................................... 2 Table 2.1 Number and proportion of “green-certified” IPs in China.............................................. 21 Table 2.2 Environmental performance improvement of EIPs and circular economy demonstration pilot parks in China, 2011-15................................................................. 22 Table 3.1 Summary of the comparative analysis between the EIP Framework and Chinese standards......................................................................................................................... 29 Table 4.1 Summary of FHTZ’s 2018 self-assessment against the EIP Framework....................... 32 Table C.1 Performance indicators................................................................................................... 66 Table D.1 Green IP Indicator System.............................................................................................. 68 Table E.1 A detailed comparison of the three Chinese IP green standards..................................... 71 Table E.2 A detailed comparison between the Chinese standards and the EIP Framework........... 79 Boxes Box 1.1 Leading international EIP examples.................................................................................. 9 Box 2.1 China’s regulatory frameworks on monitoring and evaluation of EIP standards.............. 19 Box 4.1 Summary of FHTZ’s self-assessment against the MIIT Framework................................ 32 Box 4.2 Performance monitoring and data collection systems for EIPs......................................... 33 Box 4.3 Environmental management systems and ISO 14000 standards for IEs........................... 36 Box 4.4 Fostering industrial symbiosis through regional networks................................................ 38 Box 6.1 Example of a tiered EIP certification system..................................................................... 50 Box J.1 Influence of foreign investment on environmental awareness...........................................105 vii Acknowledgments This report was prepared by a team led by Marcin Piatkowski (Senior Economist, World Bank) and comprising Antoine Coste (Economist, World Bank), Lei Shi, Yufan Du, and Zezhou Cai (Consultants). The report benefit- ted from valuable comments from Barjor Mehta, Wanli Fang, Douglas Zeng, Sinem Demir, and Etienne Kechi- chian. It was written under the overall guidance of Jennifer Isern and Irina Astrakhan. viii Acronyms CBRC China Banking Regulatory Commission CDB China Development Bank CIRC China Insurance Regulatory Commission CNIS China National Institute of Standardization CSRC China Securities Regulatory Commission EIA environmental impact assessment EIP eco-industrial park EMS environment management system EnMS energy management system FHTZ Fuzhou High-Tech Zone GHG greenhouse gas GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit IAV industrial added value IP industrial park ISO International Organization for Standardization MOC Ministry of Commerce M&E monitoring and evaluation MEE Ministry of Ecology and Environment MEP Ministry of Environment Protection MIIT Ministry of Industry and Information Technology MOF Ministry of Finance MOST Ministry of Science and Technology NDRC National Development and Reform Commission NPC National People’s Congress OH&S Occupational Health and Safety PBoC People’s Bank of China PPP public-private partnership RMB renminbi (Chinese currency unit) SMEs small and medium enterprises TEDA Tianjin Economic-Technological Development Area UNIDO United Nations Industrial Development Organization 1 Executive Summary China has impressed the world with its rapid economic growth over the past four decades, during which time it has increased its real income per capita by more than 25 times. 1 However, the attendant environmental costs have also been significant, jeopardizing economic and social gains from growth. To move toward sustainable development and reduce the environmental impact of further economic growth, the Chinese government has started to prioritize green development and the building of an “ecological civilization.” 2 China’s 13th Five-Year Plan (2016−2020) has upgraded the building of the “ecological civilization” to the level of “national strate- gy”—a policy target of top priority. During the 19th National Congress of the Communist Party of China in October 2017, President Xi Jinping emphasized that “energy conservation and environmental protection are fundamental national strategies” and “lucid waters and lush mountains are invaluable assets.” President Xi called for enhanced efforts to “continue the ‘Beautiful China’ initiative to create good working and living environments for our people and play our part in ensuring global ecological security.” 4 Prime Minister Li Keqiang also noted that “the level of ecological civilization should be progressively upgraded to promote green development and achieve a co-development of economic prosperity and environmental protection.”5 The sustainable transition of the Chinese industrial sector is a key factor that will determine the success of the “ecological civilization.” The industrial sector is one of the largest contributors to the country’s economy (40.5 percent of national GDP in 2017), 6 but also to the overall environmental pollution (approximately 70 percent of total environmental pollution in 2015).7 According to the Ministry of Ecology and Environment (MEE), industrial parks (IPs) 8 are the key source of industrial production and “all new industrial projects are required to be operated within industrial parks” (Zhang 2018). The growing concentration of industrial activities within IPs suggests that an increasing proportion of industrial pollution will be produced in IPs. Thus, promoting green development of IPs will be vital for the achievement of China’s and the world’s sustainable development goals. Effective management of IPs toward green development requires a well-functioning regulatory framework to provide standards, requirements, guidelines, and robust monitoring and evaluation (M&E) frameworks. Although China does not have a specific IP management law, a comprehensive regulatory framework is in place, covering different legislative levels including (from top to bottom in terms of their importance) laws, regulations, national policies, and standards and indicators. This regulatory framework covers multiple aspects of IP management, including requirements concerning the economic and environmental performances of IPs. 1 China’s GDP per capita increased from US$308 (in constant 2010 US dollars) in 1978 to US$7,329 in 2017, according to the World Bank’s World Development Indicators (WDI) database. In 2018, it likely reached around US$7800, or almost 26 times more than in 1978. 2 Sheng Tai Wen Ming (生态文明) in Chinese. 3 The State Council of the People’s Republic of China (2016a). 4 President Xi Jinping (2017). 5 The State Council of the People’s Republic of China (2016a). 6 National Bureau of Statistics of the People’s Republic of China (2018). 7 China Environment News (2015). 8 An industrial park (IP), also commonly called an industrial estate or zone, can be defined as “a tract of land developed and subdivided into plots according to a comprehensive plan with or without built-up factories, sometimes with common facilities for the use of a group of industries” (UNIDO 1997). IPs are generally characterized by a geographically delimited area, usually physically secured, above-average infrastructure for the country, and a single management entity or adminis- tration. They may offer certain other benefits based on physical location within the zone, such as streamlined business regulations and procedures. In the case of Special Economic Zones (SEZs), they may also form a separate customs area, distinct from the national customs area (duty-free benefits). In China, this may correspond to different types of develop- ments, including SEZs, economic and technological development zones (ETDZs), free trade zones (FTZs), export-process- ing zones (EPZs), and high-tech industrial development zones (HIDZs). (Zeng 2011). 2 However, higher-level regulations (law > regulation > policy > standards and indicators) tend to be less specific in managing and promoting the green development and transformation of IPs: they do not target IPs when it comes to managing industrial activities, most of which focus on either a broader scale (industrial sector) or a more micro scale (industrial firms and enterprises). In comparison, several sets of standards are specifically targeting the green transformation and development of IPs. Three ministries—the Ministry of Ecology and Environment (MEE), the National Development and Reform Commission (NDRC), and the Ministry of Industry and Information Technology (MIIT)—have formu- lated three sets of standards and requirements for the assessment of eco-industrial parks (EIPs) (referred to in this report as the “China Green Triangle”). However, despite marked improvements in resource efficiency and environmental performances of EIPs (Table ES.1), the proportion of IPs certified under the three standards is still low, averaging less than 5 percent of the total number of Chinese IPs (Table ES.2). This seems to reflect an “elite model” for the certification of EIPs, suggesting that some potentially qualified IPs might be excluded from obtaining EIP certification because of quota limits. Table ES1. Improvement in environmental performance of eco-/green and circular economy demonstration pilot parks in China, 2011−15 Environmental performance indicators Improvement Land use per unit of industrial added value ↓ by 30.1% Energy consumption per unit of industrial added value ↓ by 32.7% Fresh water use per unit of industrial added value ↓ by 33.6% Industrial water reuse rate ↑ to 90% Comprehensive utilization rate of industrial solid waste ↑ to 94.1% Source: World Bank, based on Shi et al. (2016). Note: eco/green and circular economy demonstration pilot parks are demonstration industrial parks approved by the relevant Chinese government ministries (MEE, MIIT and NDRC in this context) to promote resource efficiency, clean energy use, pollution control, and the circular use of resources within industrial parks. Table ES2. Number and proportion of certified EIPs in China MEE-certified NDRC-certified MIIT-certified No. of certified IPs 93 138 46 (100 by 2020) Total no. of IPs 2,543 2,543 2,543 % of IPs certified 3.7% 5.4% 1.8% (3.9% by 2020) Sources: World Bank calculations based on NDRC (2013, 2015a, 2016a, 2018); NDRC and MOF (2014, 2017a, 2018); MIIT (2017, 2018); MEE (2018); projections for 2020 from MIIT (2016d). Note: IPs = industrial parks; MEE = Ministry of Ecology and Environment; MIIT = Ministry of Industry and Information Technology; and NDRC = National Development and Reform Commission. 3 Comparisons between each set of the Chinese green standards show that the MEE and MIIT standards are highly consistent in terms of both categorization (economic development performance, resource use efficiency, environmental protection, energy utilization, and managerial capacity) and indicator design—21 out of 31 MIIT indicators and 19 out of 32 MEE indicators are identical or similar, suggesting a potential opportunity to merge the two standards. The NDRC standard is somewhat different in scope as it emphasizes the circular economy performance of IPs.9 Unlike the MIIT and MEE standards, which cover managerial, environmental, and economic performance of IPs, the NDRC indicators focus more on resource efficiency and pollutant emissions. They also measure the environmental performance of IPs differently. The different emphasis of the NDRC standard translates into a relatively lower consistency with the MEE and MIIT standards. Overall, multiple sets of EIP standards formulated by different government ministries might leave IPs ambiguous about which standards to comply with, potentially slowing the green development of IPs. 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 among the best positioned economies to take the lead in formulating effective EIP standards that would not only guide the green development and transformation of Chinese IPs, but also serve as a useful reference for the formulation of EIP standards by other countries. China’s standards were notably considered for the preparation of the global EIP standards recently adopted by the World Bank Group, United Nations Industrial Development Organization (UNIDO), and the German development agency, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), referred to as the “EIP Framework” in this report. 10 While this EIP Framework is a flexible tool with indicative requirements and targets meant to be adapted to local circumstances, it may serve as a useful reference for China to assess the quality of its EIP standards and consider opportunities to improve them. This 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— to identify differences and share policy recommendations for further improvements of the Chinese standards. The main differences identified between the Chinese and the EIP Framework are the following: Park management “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. 9 Circular economy refers to an economic model that encourages the circular use (reuse/recycle) of resources in economic activities to improve the resource efficiency of production and support the overall economic development. 10 WBG, UNIDO, and GIZ (2017). See Appendix I for a presentation of the EIP Framework. 4 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 Frame- work 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 regula- tory 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 toward the EIP Framework. 5 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. The key challenges include: Lack of data: FHTZ has a department of statistics that collects data at the park level. The data measure key economic and environmental performance indicators such as industrial output, industrial added value, tax revenue, and energy consumption, in line with municipal and/or provincial requirements. However, data going beyond municipal or provincial requirements are usually not collected. As a result, FHTZ does not have data to assess its compliance with many EIP Framework requirements. Incomplete infrastructure: Compliance with the environmental performance requirements of the EIP Frame- work usually requires additional investments in park infrastructure. In the case of FHTZ, to meet the EIP standards, it would have to invest in, for instance, internationally certified environmental/energy management systems, capacity to recover waste heat, and a greenhouse gas (GHG) monitoring system. The Chinese standards do not specifically address requirements on the availability of “green infrastructure” (except for wastewater treatment facilities, green buildings, and public buses in the MIIT and MEE standards) or focus on different type of green infrastructure. This indicates an area where the Chinese standards could be upgraded and move closer toward the EIP Framework. Insufficient incentives: FHTZ and other Chinese IPs strive to meet the green requirements listed in provincial or national guidelines/regulations. However, local economic, regulatory, and technical conditions do not seem to provide sufficient incentives to go beyond the local standards and comply with some of the more demanding EIP Framework environmental and economic requirements (such as use of renewable energy, reduction of GHG emissions, and energy efficiency). In some cases, park management and tenant firms may not see benefits in adopting international standards, such as environment management systems (EMS) and energy management systems (EnMS) certified by the International Organization for Standardization (ISO), although the experience in China and abroad suggests these can bring benefits, including in terms of attracting foreign investment. This suggests a role for awareness raising and technical support to identify institutional reforms and investments that can yield environmental, economic and social benefits for the IP, its tenants, and surrounding communities. All three Chinese green standard-makers (MEE, MIIT and NDRC) have a systematic incentive framework in place to promote compliance with the Chinese green standards, and the green transformation and development of Chinese IPs overall. The incentives include direct subsidies, preferential tax policies, and easier access to financing from financial institutions. Some nonfinancial incentives are also planned, such as including indica- tors on EIP certification in the assessment of IP’s business environment and competitiveness by local authori- ties and recognition through awards—although it is not clear how effective they have been so far. Most incen- tives are provided for both IPs and tenant firms. Nevertheless, the incentive frameworks of the Chinese green standards could benefit from establishing a more explicit link between the provision of incentives for firms and whether a firm resides in an EIP. Currently, 6 incentives for parks and firms are often separate. Except for one of the MIIT policies for promoting the estab- lishment of green IPs that specifically promotes projects proposed by green factories, green IPs, and green industrial chains, as well as resident firms within them, there is no link between getting access to financial support and residing in green-certified IPs. The Chinese authorities could consider offering additional incen- tives for EIP tenant firms to strengthen incentives for IPs to comply with green standards. In addition, IPs with, for instance, a larger percentage of green tenant firms, could also be prioritized in public support schemes, providing strong incentives for both IPs and tenant firms to seek green certifications. 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 develop- ment of EIPs. Among other general issues for the implementation of green finance, this will require (i) coordi- nation with the different EIP standards in place, as well as with industrial and other relevant policies, to ensure that the link between IPs’ environmental performance and access to green finance is strengthened; (ii) increased focus on data collection and the evaluation of the impacts of green finance initiatives; and (iii) capac- ity building for green finance at the local level (IIGF and UNEP 2017). Public fiscal incentives, while import- ant, will not be sufficient 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. Likewise, the Ministry of Finance (MOF) and NDRC have developed a policy framework for green public-private partnerships (PPPs) (NDRC and MOF 2014), which have grown rapidly and could increase financing for green infrastructure in EIPs. 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 by a growing, although a still small number of Chinese IPs 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 of local capacity in all regions of the country; strengthening of verification and supervision mechanisms to ensure continuous compliance with the standards; data collection and the quantitative assessment of economic, environmental, and social benefits from EIP models; and development of appropriate business models to expand EIPs. The report concludes by sharing policy recommendations that the Chinese authorities could consider to further upgrade the 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 (for example, by using a tiering certification system to foster competition and continuous improvement), 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 and expand access to information ‐ Strengthen enforcement of existing regulations ‐ Consider adopting a specific Law on IP Management. ‐ Leverage green finance for EIP development. 7 Introduction 1.1 Project background and context China has achieved remarkable success in economic growth and development in the past four decades, during which time it has increased its GDP per capita by more than 25 times. However, this strong performance has been accompanied with adverse environmental impacts, jeopardizing economic and social gains from growth. To move toward sustainable development and reduce the environmental impact of further economic growth, the Chinese government has started to prioritize green development and the building of an “ecological civiliza- tion.” 11 China’s 13th Five-Year Plan (2016−2020) has upgraded the building of this “ecological civilization” to the level of “national strategy”—a policy target of top priority. 12 During the 19th National Congress of the Communist Party of China in October 2017, President Xi Jinping emphasized that “energy conservation and environmental protection are fundamental national strategies” and “lucid waters and lush mountains are invalu- able assets.” President Xi also called for enhanced efforts to “continue the ‘Beautiful China’ initiative to create good working and living environments for our people and play our part in ensuring global ecological securi- ty.”13 Prime Minister Li Keqiang also noted that “the level of ecological civilization should be progressively upgraded to promote green development and achieve a co-development of economic prosperity and environ- mental protection.” 14 The greening of the Chinese industrial sector is a key factor that will determine the success of the “ecological civilization.” The industrial sector is one of the largest contributors to the country’s economy (40.5 percent of national GDP in 2017), 15 but also to overall pollution (approximately 70 percent of total environmental pollu- tion in 2015). 16 While some progress has been made to improve the sector’s resource efficiency and to reduce industrial pollution, there is still a large untapped potential for improvement. Industrial parks (IPs) have played a particularly important role in industrial development in China. 17 According to the Ministry of Ecology and Environment (MEE), “IPs have become the ‘key vehicle’ for industrial develop- ment in China […] all new industrial projects are required to be operated within IPs” (Zhang 2018). In 2016, the economic output of all Chinese IPs amounted to 60 percent of the country’s GDP, and national IPs alone contributed 17 trillion RMB (23 percent of GDP) in the same year (Zhang 2018). The ongoing concentration of industrial activities within IPs suggests that an increasing proportion of industrial pollution is generated by IPs. Thus, guiding and managing IPs in line with green development principles will be vital for the achieve- ment of China’s and the world’s sustainable development goals. There has been increasing pressure from the top over the last decade for improved environmental performance of industries. Despite significant efforts in this direction by many IPs, economic objectives often continue to be given priority over environmental and social ones. IPs have continued to face increasing environmental issues and resource access constraints. In some IPs, environmental systems infrastructure has lagged other invest- ment, leading to negative environmental impacts. It is estimated that IPs in over 80 percent of Chinese 11 Sheng Tai Wen Ming (生态文明) in Chinese. 12 The State Council of the People’s Republic of China (2016a). 13 President Xi Jinping (2017). 14 The State Council of the People’s Republic of China (2016a). 15 National Bureau of Statistics of People’s Republic of China (2018). 16 China Environment News (2015). 17 See the definition of IPs provided in the executive summary (footnote 8). 8 provinces have environmental problems, which include illegal production, excessive pollutant emissions, and ineffective environmental monitoring— making industrial zones “pollution-concentrated zones.” 18 In some cases, lax environmental protection has led to serious environmental pollution. 19 This has become a major barrier for China to proceed with environmental rehabilitation (Zhang 2018). China is not the only country in which the concentration of industrial activity in dedicated zones has led to rising environmental challenges. An increasing interest among academics and policy makers for eco-industrial parks (EIPs) has been observed globally over the last two decades, in high-, medium- and low-income coun- tries alike. 20 An EIP can broadly be defined as “a dedicated area for industrial use at a suitable site that ensures sustainability through the integration of social, economic, and environmental quality aspects into its siting, planning, management and operations” (WBG, UNIDO, and GIZ 2017). EIPs can seek to reduce their environ- mental impacts by (i) investing in common pollution and waste management facilities; (ii) promoting invest- ments in resource efficiency and cleaner production (RECP) by each tenant company; (iii) fostering exchanges of waste material, water, and energy between tenants (“industrial symbiosis”), as well as with surrounding urban areas; (iv) promoting circularity (such as remanufacturing, reuse, and/or recycling); (v) adopting green building and other environmental standards (such as ISO 1400121 ); (vi) increasing access to renewable energy sources; and (vii) ensuring strategic recruitment of tenants and increasing green cover in the estate. While many IPs around the world have claimed the “eco” label, there are still few actual EIPs in operation, especially in developing and emerging economies (UNIDO 2016). Good examples of IPs that have reaped economic, environmental and social gains from shifting to EIP models can nonetheless be found in several countries, such as China, Denmark, and the Republic of Korea (Box 1.1). China has been one of the pioneers in implementing the EIP concept, and one of the main subjects of the literature on the topic. 22 It is one of the few countries, along with Italy and Vietnam, that has sought to introduce standards to define EIP requirements and monitor their performance. 23 There is emerging evidence that Chinese EIPs have recorded a strong improvement in economic and environmental performance: according to one study by Tian et al. (2014), 17 Chinese EIPs analyzed in the study have increased value added by 56 percent over the studied period, while solid waste production increased by only 6 percent. 24 18 China Enterprise News (2017). 19 For example, in April 2018, three IPs (Yanweigang, Duigougang, and Chenjiagang) in Jiangsu Province were found to illegally emit wastewater to the nearby Guan River, causing serious environmental damage to both water and land. Ineffec- tive environmental management by the three IPs was the main reason for the pollution. On-site investigation showed that: (i) the water and air pollution level of many resident firms was over 50 times higher than the national standards; (ii) residents’ health was negatively affected: residents report a constant pungent smell from factories and a higher frequency of illness; (iii) the fishing industry was badly hit: before the pollution, approximately 500kg of fish, shrimp, and shellfish could be gathered within an hour; while after the pollution, 6 hours of fishing could gather less than 10kg of small fish; (iv) surrounding agricultural land polluted by industrial wastewater is no longer able to be cultivated or fertilized (CCTV 2018). 20 For overviews of EIP development, see notably UNIDO (2016, 2017); WBG, UNIDO, and GIZ (2017); Chertow and Park (2016); and Shenoy (2016). 21 ISO 14001 is an international standard developed by the International Organization for Standardization for certification of environmental management systems (EMS). The standard aims to help companies and organizations enhance their environmental performance and improve ecological sustainability. More information on: https://www.iso.org/stan- dard/60857.html 22 See, for instance, Geng and Côté (2003); Geng et al. (2009); Shi et al. (2010); Zhang et al. (2010) ; Bai et al. (2014); Shi and Yu (2014); Liu and Bi (2015); Wang, Lei, and Bi (2015), Wang, Deutz, and Gibbs (2015), Yu, Han, and Cui (2015); Yu, Lu, and Wang (2018); Yang et al. (2018). 23 See Taddeao (2016) for Italy and Massard, Leuenberger, and Dong (2018) for Vietnam. 24 Specifically, Tian et al. (2014) find that “(1) industrial added value of the 17 eco-industrial parks as a whole increased by 56%; (2) for comprehensive energy consumption, fresh water consumption, industrial wastewater generation, and solid waste production, the 17 eco-industrial parks had an overall increase of 20%, 18%, 12%, and 6%, respectively. The quantity of energy and fresh water consumption, wastewater and solid waste generation in some eco-industrial parks started to decrease with economic growth. Meanwhile, the average intensity of the four metrics decreased by 22%, 25%, 28%, and 32%, respectively; (3) for chemical oxygen demand and sulfur dioxide, the eco-industrial parks accomplished a two-fold decrease in both total quantity of emissions and intensity. Chemical oxygen demand emissions and its intensity decreased by 25% and 52%, respectively. Sulfur dioxide emissions and its intensity decreased by 51% and 69%, respectively.” 9 Box 1.1 Leading international EIP examples Tianjin (China): Tianjin Economic-Technological Development Area (TEDA), located 130 kilome- ters southeast of Beijing, is a leading industrial area in China and hosts thousands of foreign and domestic companies, mainly in the electronics, automobile & machinery, biotechnology & pharma- ceutical, and food & beverage industries. It was the first national economic-technological development area to create an independent environ- mental regulatory body in 1990 and a tenant environment protection association in 1996. Since then, it has continuously upgraded its environmental management capacity ( through, for example, environ- mental impact assessments of new investment projects, and environmental monitoring of existing key water and air pollution sources, pollution discharge levies). TEDA obtained ISO 14001 certification in 2000, in parallel with several tenant companies, and was nominated as a national demonstration zone for ISO 14001 the same year. In the early 2000s, TEDA formulated an EIP development plan, and was subsequently recognized as a national demonstration EIP and pilot circular economy zone. In addition to regulatory requirements and resource scarcity, one of TEDA management’s main motiva- tions to transition to an EIP model was fierce competition for foreign investment from other leading IPs in China. Over the years, TEDA and its tenant companies have developed a complex system of public infrastructure and symbiotic exchanges between companies to recover materials and improve the management of energy, wastewater, and solid waste. Economic and environmental benefits have been considerable. Ulsan (Korea): The city of Ulsan, located in the southeastern part of Korea, is the country’s industrial capital. The metropolitan area includes two national industrial complexes (Ulsan-Mipo and Onsan), as well as several regional ones, which include over 1,000 firms in diverse heavy industries, including vehicle manufacturing, shipbuilding, oil refineries, machinery, nonferrous metals, fertilizer, and chemical industries. Rapid industrial development between the 1960s and 1980s resulted in serious air and water pollution issues, with dire economic, environmental, and social impacts. This led the Korean government to impose stricter environmental quality standards in Ulsan industrial complexes from the late 1980s, pushing resident firms to invest in pollution management and prevention, and to promote resource efficiency and cleaner production from the 1990s onward. Ulsan was one of the main pilot sites of the national EIP program launched in 2003, which focused on the development of industrial symbiosis. This built on synergies previously established by industrial firms in Ulsan, including shared utilities and exchanges of by-products. The Ulsan Regional EIP Center, led by an advisory board with repre- sentatives from the local government, industry, and academia, was established to collect data, identify potential industrial symbiosis projects, coordinate with the national level for the provision of technical 10 and financial support to individual projects, and monitor economic, social, and environmental impacts. Under the program, 77 projects were funded for research and development and 34 for operations. Investments amounted to US$14.8 in project research and development from the government and US$245.8 million from industries. Overall, the projects supported have led to US$65 million in new business income from the sale of waste and by-products and US$78 million in energy and material costs savings each year. Between 2005 and 2016, they also saved 279,761 tons of oil equivalent in energy use through a reduction of 665,712 tons of CO2 emissions and 4,052 tons of air pollutants, such as SOx and NOx); a decrease of 79,357 tons of water; and the reuse of 40,044 tons of by-products and waste (GGGI 2017). Kalundborg (Denmark): Kalundborg is among the world’s best-known example of EIP and has been the object of numerous studies over the last three decades. Rather than a government-planned estate, it is a business-led industrial symbiosis and utility-sharing network, which has been progressively established since the 1960s. The system is currently made up of 25 different exchanges of water, energy/heat, and materials, with flows emanating from six differ- ent industrial firms and three public organizations with 5,000 employees. Since 2011, this partnership has been formalized as a private association, Kalundborg Symbiosis (http://www.symbiosis.dk/en/), which manages matters involving all partners and explores opportunities for further collaboration. A life-cycle assessment based on data for 2015 and comparing production with and without the current industrial symbiosis network showed that it generated annual financial savings of over €24 million for all the partners involved, and reduced GHG emissions by 635,000 tonnes of CO2 equiva- lent. Source: Park and Won (2007); GGGI (2017); Shi, Chertow, and Song (2010); https://www.ellenmacarthurfoun- dation.org/case-studies/effective-industrial-symbiosis, Kechichian and Mi Hoon Jeong. 2016. 11 1.2 Scope of the report To help China achieve a greener development, this report aims at assessing the adequacy of the existing Chinese regulatory framework in promoting the green transition of IPs, including the different EIP standards in force, and at identifying obstacles and opportunities for this transition. Specifically, this report: ‐ Briefly discusses the history and development of IPs in China ‐ Evaluates the effectiveness of the Chinese regulatory framework of IP management and EIP promotion at all legislative levels (laws, national regulations, national policies, standards & indicators) ‐ Identifies the similarities and differences among the Chinese EIP standards and evaluates their effectiveness in guiding and promoting the green transformation of IPs, as well as room for further improvement ‐ Conducts a comparative analysis between the Chinese standards and the EIP Framework ‐ Identifies challenges for Chinese IPs to comply with the EIP Framework through a case study of Fuzhou High-tech Zone (FHTZ), Jiangxi Province ‐ Assesses the current incentive structure for Chinese IPs to undertake a green transition ‐ Evaluates the development of green finance for EIP development and promotion and identifies opportunities for establishing a more effective green finance system ‐ Provides policy recommendations for the Chinese standards to guide the green development and transforma- tion of Chinese IPs, but also serve as a model for the formulation of future international EIP standards. 12 13 Green Industrial Parks in China: History, Development, and Regulatory Framework 2.1 From industrial parks to eco-industrial parks In the past 40 years of Chinese economic development, IPs have been playing a key role as “policy pioneers.” China started developing various forms of IPs in the 1980s as part of the country’s economic reform program. Since then, IPs have been a major force in the development and concentration of Chinese industries, notably enabled by strong political commitment at the highest level, proactive support from different levels of govern- ments, institutional autonomy for zones, experimentation with new policies and institutions, and adoption of clear targets and competition between zones (Zeng 2011). By the end of 2017, China had a total of 2,543 IPs, including 552 national IPs and 1,991 provincial ones. Over time, the increasing concentration of industries and a booming number of IPs have created increasing pressure on land and resources, with chaotic infrastructure construction and growing pollution. In parallel with renewed efforts over the last two decades to enforce environmental regulations and to ensure industry compli- ance, this led the Chinese government to take a series of actions to encourage a more rational development of IPs in the 2000s. During this period, EIPs received increasing attention and gradually became a mainstream model for IP development. MEE (then the State Environment Protection Administration—SEPA) initiated the EIP Demonstration Program in the early 2000s to minimize pollution and waste generation in existing IPs and was later joined by the Ministry of Science and Technology (MOST) and the Ministry of Commerce (MOC). Some sector-specific IPs—such as chemical parks in the Yangtze Delta Area and sugar-making parks in the Zhujiang Delta Area—adopted measures early on to balance economic growth and environmental sustainability. After 2004, several leading parks joined the EIP pilot project, including the Tianjin and Fuzhou Economic-Technological Development Areas (TEDA/FEDA) and Suzhou IP. The pace of certification under the EIP Demonstration Program increased after 2010 (Thieriot and Sawyer 2015). Other initiatives to green IPs were adopted in parallel. This includes the Circular Economy Pilot Zones program initiated in 2001 by the Ministry of Environment Protection (MEP) (now MEE) and taken over in 2005 by the National Development and Reform Commission (NDRC), which since 2012 has jointly led it with the Ministry of Finance (MOF) as the Circular Transformation Industrial Parks program. In addition, the Low-Carbon IP Pilot Program was launched in 2013 by the Ministry of Industry and Information Technology (MIIT) jointly with the NDRC.25 The general managerial and operational structure of Chinese EIPs at the current stage is presented in Figure 2.1. 25 See Thieriot and Sawyer (2015) for an earlier presentation of the three programs, their governance structure, and certifica- tion procedures. The rest of the report uses the term “EIP” to refer in general to the different programs in place. 14 Figure 2.1 General managerial and operational structure of Chinese EIPs Central government (national demonstration pilots) MOST MOC MEE MIIT NDRC MOF Others Circular economy upgrade Eco-industrial parks Green industrial parks demonstration parks Provincial governments (provincial demonstration pilots) Industrial park management committee Industrial park promotion External supportive institutions Public institutions Firm-related projects Infrastructure Company Infrastructure-related projects External verification Financial institutions institutions Capacity building projects Source: World Bank. Note: MEE = Ministry of Ecology and Environment; MIIT = Ministry of Industry and Information Technology; MOC = Ministry of Commerce; MOF = Ministry of Finance; MOST = Ministry of Science and Technology; NDRC = National Development and Reform Commission. 2.2 Regulatory framework of IP management and EIP promotion in China Effective management of IPs toward green development and transformation requires a well-functioning regula- tory framework. The current regulatory framework for IP management in China has the following key charac- teristics:26 ‐ Contrary to some countries, such as Turkey, China does not have a specific law on IP management. However, a comprehensive regulatory framework is in place, which covers different legislative levels, including (from top to bottom) laws, regulations, national policies, and standards & indicators. ‐ The regulatory framework covers multiple aspects of IP management, including requirements on IPs’ economic and environmental performance, which are generally consistent with the principle of sustainable development. ‐ Complementary policy instruments are used in the regulatory framework, including command and control, economic/financial incentives, moral suasion, and supporting policy. ‐ IPs at different levels (such as national, provincial, municipal, county) face regulations of different stringency. 26 See Appendix A for details on relevant provisions of each law, regulation, policy and standard analyzed. 15 National laws Five comprehensive national-level laws are directly relevant for the environmental impact and greening of industrial activities. However, most provisions focus on managing and regulating industrial activities in gener- al, targeting industrial projects and firms, rather than IPs specifically. ‐ Environmental Protection Law: 27 6 out of 70 articles in this law are related to IP management. Industrial firms and enterprises are obliged to perform due diligence in reducing environmental pollution, prioritizing the use of clean and renewable energy, applying less-polluting technologies in production, and installing pollution control facilities. However, the 6 articles do not directly target IPs, but instead focus on industrial activities in general. ‐ Environmental Impact Assessment Law:28 3 out of 37 articles in this law are related to IP management, focus- ing on specific environmental impact assessment (EIA) requirements procedures for industrial projects. The law targets all industrial projects rather than IPs specifically. ‐ Cleaner Production Promotion Law: 29 4 out of 42 articles in this law are related to IP management, including the compulsory requirement for all industrial projects to conduct an environmental impact assessment (EIA) before construction or production, prioritizing the use of resource-efficient and low-waste technologies, recycling and reusing wastes when economically and technically feasible, and monitoring resource use and waste generation during production. Like the Environmental Protection Law and the Environmental Impact Assessment Law, IPs are not specifically targeted. ‐ Circular Economy Promotion Law: 30 2 out of 58 articles in this law are related to IP management. They share similar ideas with the “3R principle” (Reduce, Reuse, Recycle), requiring efficient and circular utilization of resources, including waste, energy, land and water. Article IV-29 specifically regulates and encourages IPs to organize firms within the parks to fulfill the principle of circular economy. ‐ Environmental Protection Tax Law: 31 2 out of 28 articles in this law are related to IP management. The Law sets the “threshold emission level” for different pollutants, above which emitting firms must pay the environ- mental protection tax. In addition, five specific laws include articles that are related to IP management. They focus on the firm level rather than the park level. Compared with the comprehensive laws discussed previously, these laws deal with specific aspects, such as waste management, renewable energy, and energy saving. The specific laws include: ‐ Water Pollution Prevention and Control Law: 32 4 relevant articles out of 103. ‐ Air Pollution Prevention and Control Law:33 3 relevant articles out of 129. ‐ Law on the Prevention and Control of Environmental Pollution by Solid Waste: 34 3 relevant articles out of 91. ‐ Renewable Energy Law:35 1 relevant articles out of 33. ‐ Energy Conservation Law:36 2 relevant articles out of 87. 27 中华人民共和国环境保护法 (NPC 2015). 28 中华人民共和国环境影响评价法 (NPC 2016c). 29 中华人民共和国清洁生产促进法 (NPC 2012). 30 中华人民共和国循环经济促进法 (NPC 2009a). 31 中华人民共和国环境保护税法 (NPC 2018). 32 中华人民共和国水污染防治法 (NPC 2017). 33 中华人民共和国大气污染防治法 (NPC 2016a). 34 中华人民共和国固体废物污染环境防治法 (NPC 2016d). 35 中华人民共和国可再生能源法 (NPC 2009b). 36 中华人民共和国节约能源法 (NPC 2016b) 16 National regulations Three major national regulations include articles relevant to IP management. These regulations set targets on a broader scale (industrial sector level) and formulate regulations on a more micro level (firm level), but do not specifically address the IP level. ‐ Ten Measures of Air Pollution Prevention and Control: 37 3 relevant articles out of 10. ‐ Action Plan for Water Pollution Prevention and Control: 38 3 relevant articles out of 35. Article I-1 specifical- ly focuses on industrial zones (enhancing water pollution management, wastewater treatment facilities, and real-time monitoring system for wastewater emissions at the park-level). ‐ Action Plan for Soil Pollution Prevention and Control:39 1 relevant article out of 35. National policies At the policy level, more sections and paragraphs specifically deal with IP management. ‐ General Guidelines on the Institutional Reform of Ecological Civilization: 40 This document outlines the requirements, principles, and objectives of building an “ecological civilization” and promoting green devel- opment. Among the key requirements are supporting green, circular, and low-carbon development and balancing economic development and environmental protection. Establishing an effective green finance system is also emphasized. ‐ Notice by the State Council on the “Made in China 2025” Project: 41 This policy proposes to pursue “green manufacturing,” with the establishment of 100 “green demonstration IPs” by 2020 as a key objective. ‐ The 13th Five-Year Plan on the Economic and Social Development of the People’s Republic of China:42 Article 43-5 includes the promotion of circular economy modification within IPs and industrial symbiosis between firms within parks. ‐ Action Plan for Leading Circular Economy Development:43 Three articles offer roadmaps and quantitative targets for “circular economy upgrade for industrial parks.” ‐ Guiding Notice on Strengthening the Development of National Eco-Industrial Parks: 44 This is a general guideline that targets the development of EIPs in China and points out the general requirements, key objec- tives, and supporting policies (such as financial incentives and capacity building) for establishing national EIPs. ‐ Guidelines on the Management of National Eco-Industrial Parks:45 This provides detailed requirements and procedures of the application, construction/establishment, approval, performance verification, and manage- ment of national EIPs. ‐ Plan for Industrial Green Development (2016−2020):46 This Plan outlines the blueprint for the green devel- opment of China’s industrial sector during the 13th Five- Year period. The establishment of a green manufac- turing system is among the ten key objectives, including the construction of green IPs. The Plan proposes to establish 100 representative and high-level demonstration green IPs by 2020. 37 大气污染防治十条措施 (The State Council of the People's Republic of China 2013). 38 水污染防治行动计划 (The State Council of the People's Republic of China 2015a). 39 土壤污染防治行动计划 (The State Council of the People's Republic of China 2016b). 40 生态文明体制改革总体方案 (The State Council of the People's Republic of China 2015c). 41 国务院关于印发〈中国制造2025〉的通知 (The State Council of the People's Republic of China 2015b). 42 中华人民共和国国民经济和社会发展第十三个五年规划纲要 (NDRC 2016b). 43 循环发展引领行动 (NDRC 2017). 44 关于加强国家生态工业示范园区建设的指导意见 (MEE, MOC, and MOST 2011). 45 国家生态工业示范园区管理办法 (MEE, MOC, and MOST 2015). 46 工业绿色发展规划（2016−2020）(MIIT 2016c). 17 Standards and Indicators Four different Chinese ministries have formulated relevant evaluation frameworks, focusing on upgrading of ordinary IPs into (i) green industrial parks, (ii) EIPs, and (iii) IPs in line with the circular economy principle. Standards and indicators are specifically designed to manage and guide the green development of Chinese IPs. Three of them (referred to here as the “Green Triangle”) are analyzed in more detail in the next section. ‐ Standard for National Demonstration Eco-Industrial Parks 47 ‐ Notice on the Establishment of a Green Manufacturing System48 ‐ Notice on Recommending Key Candidate Industrial Parks for Circular Economy Transformation in 2017 49 ‐ Specification for Circular Economy Performance Evaluation of IPs 50 2.3 The “Green Triangle” of Chinese EIP standards In 2006, China was the first country to adopt national standards to assess the performance of EIPs (Geng et al. 2009). Since then, three separate EIP standards have been formulated: namely, National Demonstration Eco-In- dustrial Parks; Industrial Parks for Circular Economy Transformation; and Green Industrial Parks. The devel- opment of several parallel initiatives has political roots. Different agencies took the lead on each of them—MEE, NDRC, and MIIT, respectively. Accordingly, the different standards have a slightly different focus according to their own agenda. The development of the three standards can be better understood from a historical perspective. The first standard was developed by MEE (then called the State Environmental Protection Administration) in 2000, to promote the idea of industrial ecology in China. Thus, the focus is on environmental protection and resource saving. The second standard was developed by NDRC in 2012, to implement China’s Circular Economy Promotion Law passed in 2008 and the Twelfth Five-Year Plan formulated in 2011. Thus, the focus is on circu- lar economy transformation. The third standard was developed by MIIT in 2016, when MIIT wanted to develop a holistic green manufacturing system under the framework of China Manufacture 2025 unveiled in 2015. Thus, in addition to green industrial parks, MIIT is also promoting green factories, green design products, and green supply chain management demonstration firms. MEE Standard: Standard for National Demonstration Eco-Industrial Parks 51 The latest version of the MEE standard was adopted in January 2016 and builds the MEE’s EIP demonstration program. The MEE standard contains 32 indicators, categorized into 5 groups: economic development (4); industrial symbiosis (3); resource saving (9); environmental protection (13); and information disclosure (3). For an IP to be considered a national demonstration EIP, the park is required to meet the requirements of 17 compulsory indicators and a minimum of 6 optional indicators. Requirements on environmental protection and resource saving are the key focus of the MEE standard, including 13 and 9 indicators, respectively. For environmental protection indicators especially, 12 out of 13 are compulsory, covering requirements of 47 国家生态工业示范园区标准（HJ 274-2015）(MEE 2016). 48 关于开展绿色制造体系建设的通知 (MIIT 2016b). 49 关于请组织推荐2017年国家园区循环化改造重点支持备选园区的通知 (NDRC and MOF 2017b). 50 工业园区循环经济评价规范（GB/T 33567-2017） (CNIS 2017). 51 国家生态工业示范园区标准（HJ274-2015）(MEE 2016). See details on requirements and indicators in Appendix B. 18 pollution emission levels, soundness of environmental management and risk control systems, wastewater and solid waste generation per unit of industrial output, reuse and safe disposal of various kinds of wastes, and the green coverage rate. 52 Detailed description and calculating methods of each indicator are provided as well. NDRC Standard: Notice on Recommending Key Candidate Industrial Parks for Circular Economy Trans- formation in 2017 53 The Notice provides a guideline for the application, evaluation, and selection of demonstration IPs for circular economy transformation. It specifies 11 basic requirements/qualifications for an IP to be able to apply for becoming a “circular economy” demonstration park, and provides template indicators that measure the perfor- mance of IPs. In addition, the Notice on the End-of-term Evaluation and Capital Settlement of the National Demonstration Industrial Parks of Circular Economy Upgrade and Urban Mining Demonstration Pilots (2017)54 extends the template indicators and offers a more comprehensive set of indicators that evaluate the “circular economy performance” of IPs. The combination of basic requirements/qualifications and indicators from these two documents is referred to in this report as the “NDRC standard.” The NDRC standard includes 31 indicators in total, categorized into 8 groups: resource productivity (5); resource consumption (5); comprehensive utilization of resources (5); pollutant emissions (8); other indicators (3); “characteristic indicators” ;55 projects subsidized by central government finance (3); and self-implemented projects (2). The NDRC standard emphasizes the circular economy performance of IPs, leading to a focus on resource productivity, efficiency, and pollutant emissions. Given this specific focus, economic, social, and managerial performances receive less emphasis than the MEE standard. The NDRC standard also does not set target values for indicators. Instead, it provides an information sheet for IPs’ self-assessment against their previous performance and estimated future progress. Rather than providing a general and comprehensive evaluation framework for IPs’ performance, the NDRC standard focuses on assessing and promoting circulari- ty. MIIT Standard: Requirement for the Evaluation of Green Industrial Parks, under the Notice on the Estab- lishment of a Green Manufacturing System 56 There are 31 indicators and 8 basic requirements within the MIIT standard. The indicators are divided into 6 categories: energy utilization (3); resource utilization (8); infrastructure (5); industry (4); ecology and environ- ment (8); and management (3). Similar to the MEE standard (with its categories of “resource saving” and “environmental protection”), “resource utilization” and “ecology and environment” indicators are the most numerous, consisting of over half (16/31) of all the indicators of the MIIT Standard. A balance is nonetheless achieved among different categories: managerial, environmental, and economic performance are all assessed through a number of indicators, although social performance indicators are not specifically included. For an IP to qualify as a MIIT-certified green IP, the park needs to meet 17 compulsory requirements and at least 6 optional requirements. In addition, all the 8 basic requirements must be met. A formula calculating 52 Green coverage refers to the area covered by green plants, such as trees, grass, flowers, etc. It is one of the indicators used to monitor industrial parks’ environmental performance. 53 关于请组织推荐2017年国家园区循环化改造重点支持备选园区的通知. See details on requirements and indicators in Appendix C. 54 关于开展2017年国家园区循环化改造示范试点、“城市矿产”示范基地终期验收和资金清算的通知 (NDRC and MOF 2017c). 55 These indicators are left blank for each IPs to fill in if an IP believes that it is becoming more “green” or “circular” in areas going beyond specific requirement of the standard. 56 绿色园区评价标准, 关于开展绿色制造体系建设的通知. See details on requirements and indicators in Appendix D. 19 the “green index” of IPs is given based on their performance on the 31 indicators (see Appendix D). This score is an important reference for the assessment and selection of candidate MIIT-certified national green IPs. Monitoring and evaluation (M&E) is a critical element of enforcing EIP standards. China has so far developed a relatively comprehensive framework (Box 2.1). Box 2.1 China’s regulatory frameworks on monitoring and evaluation of EIP standards Both MEE and NDRC have relatively comprehensive M&E frameworks to supervise the performance and promote the continual improvement of IPs. Since MIIT just developed its standards in 2016, it has not formulated a regulatory framework on M&E yet. MEE formulated its first M&E regulatory framework in 2005 and revised it in 2015. The process consists of two parts—self-assessment by industrial parks every year and review by MEE every three years. Specifically, every year, each national demonstration eco-industrial park conducts a self-as- sessment on its performance on eco-industrial development, writes a self-assessment report, and sends the report to MEE for examination and record-keeping. Every three years, MEE makes a spot check of a number of parks. If any park does not pass the check, it will be required to rectify within a prescribed time limit. If it fails again after rectification, it will be removed from MEE’s list. In addition, MEE pushes hard on information-sharing to enhance public participation and supervision. NDRC, along with Ministry of Finance, issued its framework to enforce the implementation of the circular economy transformation plan of IPs in 2015. The process also consists of two parts—mid-term evaluation and end-of-term acceptance test. The mid-term evaluation applies to IPs whose transformation plan was approved more than three years but fewer than five years ago. The parks first undertake a self-assessment and send the reports to provincial agencies. Provincial agencies then conduct on-site evaluations and send the results to NDRC and the Ministry of Finance. Finally, NDRC and the Ministry of Finance entrust a third party to verify the self-assessment reports. If any park does not pass the evaluation, it will be removed from NDRC’s list and return the funding from the central government’s budget. The end-of-term acceptance test applies to IPs whose circular economy transformation plan was approved more than five years ago. Again, the parks first undertake a self-assessment and apply to NDRC and Ministry of Finance for end-of-term acceptance test through provincial agencies. NDRC and Ministry of Finance will then entrust a third party to make an on-site evaluation. If any park does not pass the test, it could be given up to one year to make adjustments. But if it fails again, it will be removed from NDRC’s list and return 50 percent of the funding from the central government’s budget. Sources: MEE, MOC, and MOST (2015); NRDC and MOF (2015) 20 2.4 Evaluation of the Chinese EIP standards Comparison of different Chinese EIP standards An examination of the three EIP standards indicates three major differences among them: Different emphasis on IP performance assessment: The MEE standard evaluates the performance of IPs from the angle of ecological and environmental protection, with an emphasis on pollution control and environmental quality. The NDRC standard focuses on the circular use of resources and its efficiency, following the method of life-cycle assessment of resource utilization. The MIIT standard covers the most dimensions and attempts to evaluate the development and performance of IPs from an integrative and multi-dimensional “resource-envi- ronment-economy-society” angle. This reflects the different administrative functions of the three government ministries that issued each standard. In general, the indicators in all the three sets of standards serve their respective regulatory functions well. However, room for further improvement exists: for instance, social performance requirements are not addressed in all three standards. Different evaluation methods: The MEE and MIIT standards both set target values or threshold values for each indicator. However, in the NDRC standard, IPs self-assess their performance on each indicator and provide an estimated value for a certain year in the future. Differences also exist between the MEE and MIIT standards. The latter calculates a score (green index) using a formula based on IPs’ performance on the indicators. This score, rather than the performance on certain indicators, determines whether or not an IP qualifies as a green IP. In other words, failure to reach the target value of certain standards does not necessarily mean a failure to become a MIIT-certified green IP. The MEE standard, on the other hand, requires IPs to reach the target values of all necessary indicators before being considered MEE-certified EIPs. Different evaluation procedures: IPs that want to apply for the MEE certification of EIP need to first draft an “EIP development plan” according to the Guideline on Drafting EIP Development Plan (MEE 2007) and submit it to provincial authorities of environmental protection, commerce, and science & technology. If agreed by the three provincial authorities, the application will be passed on for approval to the EIP construction leader- ship group led by MEE, MOFCOM, and MOST. 57 Meanwhile, the MIIT and NDRC standards adopt an assess- ment framework of “provincial recommendation–national evaluation”: provinces evaluate and recommend IPs to relevant national ministries and the latter make the final evaluation and selection. The NDRC standard requires interested IPs to first draft an Implementation Plan for Circular Economy Transformation following the instructions of Guideline for IPs on Drafting Implementation Plan for Circular Economy Transformation. 58 Provincial departments of circular economy development management and finance organize experts to assess the implementation plans, select IPs with the best foundation, the greatest potential for circular economy trans- formation, and the best implementation plan, and recommend these IPs to NDRC and the Ministry of Finance. NDRC and MOF then organize experts to evaluate the implementation plans of the recommended IPs 57 See MEE, MOC, and MOST (2015). 58 NDRC and MOF (2017b). 21 and decide which parks to certify (NRDC and MOF 2017b). The MIIT standard requires interested IPs to self-assess their performance against the standard and invite third-party “evaluation institutions” (selected and authorized by MIIT) to conduct on-site park performance assessments. Eligible IPs can apply to the relevant department at the provincial level. Provincial departments then assess and check the applications (focusing on IPs’ performance against the MIIT standard indicators and on the assessment report by the third party), and recommend the most qualified IPs to MIIT. MIIT then organizes experts to further evaluate the recommended IPs through discussions, public announcements, and spot-checks before confirming the IPs to be certified (MIIT 2016b). In general, the assessment and selection process of green-certified IPs for all three standards allows only a limited number of IPs to compete for relevant green certification. For instance, the NDRC standard each year allows only two candidate IPs from each province in the Beijing-Tianjin-Hebei region and the Yangtze River Economic Belt, and one candidate IP in each of the other provinces to be recommended from provincial level to national level as candidates for NDRC-certified circular economy demonstration IPs (NDRC and MOF 2017b). MEE and MIIT standards are similarly restrictive, even though many IPs could be qualified to comply with the green standards. The environmental impact of green-certified IPs in China By the end of June 2018, there were 93 MEE-certified, 138 NDRC-certified, and 46 MIIT-certified IPs in China. With a total of 2,543 national- and provincial-level IPs nationwide, the proportion of green-certified parks is still relatively small (Table 2.1). Table 2.1 Number and proportion of “green-certified” IPs in China Circular economy EIPs (MEE) demonstration parks Green IPs (MIIT) (NDRC) 46 Number of certified IPs 93 138 (100 in 2020) 1.8% Percent of IPs certified 3.7% 5.4% (3.9% in 2020) Sources: World Bank calculations based on NDRC (2018); MIIT (2017, 2018); and MEE (2018); and projections for 2020 from MIIT (2017). Note: The number of NDRC-certified “circular economy demonstration” IPs is calculated based on the annual announce- ments (2012−2018) by the NDRC on the list of certified parks [NDRC and MOF (2014, 2017a, 2018); NDRC (2013, 2015a, 2016a)]. EIPs = eco-industrial parks; IPs = industrial parks; MEE = Ministry of Ecology and Environment; MIIT = Ministry of Industry and Information Technology. 22 Figure 2.2 Number of “green-certified” IPs in China regulated by MEE, MIIT, and NRDC 70 MEE 8 26 1 MIIT 14 11 NDRC 112 Sources: World Bank calculations based on NDRC (2018); MIIT (2017, 2018); and MEE (2018); projections for 2020 from MIIT (2017). Note: The number of NDRC-certified “circular economy demonstration” IPs is calculated based on the annual announce- ments (2012−18) by the NDRC on the list of certified parks [NDRC and MOF (2014, 2017a, 2018); NDRC (2013, 2015a, 2016a)]. One IP (Tianjin Economic-Technological Development Area) holds all three of the certifications, while 8 hold two certifications from MEE and MITT, 11 from MIIT and NDRC, and 14 from MEE and NDRC. The remaining 208 IPs hold one certification from either of the three agencies. The evidence suggests that Chinese EIP standards have generally been effective in fostering the greening of IPs. Table 2.2 shows a substantial improvement in the environmental performance of green-certified IPs in China between 2011 and 2015. For instance, the average energy consumption per unit of industrial added value among the certified parks has declined by almost one-third, providing evidence of a successful decoupling of growth in industrial output and its environmental impact (Shi et al. 2016). Table 2.2 Environmental performance improvement of EIPs and circular economy demonstration pilot parks in China, 2011-15 Environmental performance indicator Improvement Land use per unit of industrial added value ↓ by 30.1% Energy consumption per unit of industrial added value ↓ by 32.7% Fresh water use per unit of industrial added value ↓ by 33.6% Industrial water reuse rate ↑ to 90% Comprehensive utilization rate of industrial solid waste ↑ to 94.1% Source: World Bank based on Shi et al. (2016). 23 Comparison of indicators in each Chinese green standard An indicator-by-indicator comparison between the MEE and MIIT standards show that they all have much in common. 59 The two standards share considerable similarities in categorization and design of indicators (Figure 2.3). Both standards categorize indicators into identical groups, including economic development, resource efficiency, environmental protection, energy utilization, and managerial capacity—although under different titles (such as “economic development” in the MEE standard versus “industry green index” in the MIIT standard). Moreover, as many as 21 out of 31 MIIT indicators and 19 out of 32 MEE indicators are identical to or have similar requirements with the other. The main distinction lies in the indicators relevant to infrastructural requirements and specific environmental protection requirements. The infrastructure section in the MIIT standard sets requirements on green buildings and public transport, while the MEE standard does not. In terms of environmental protection, the MEE indicators specifically target emission ceiling/limit of key pollutants emitted by polluters within IPs, as well as environmental management capacity requirements, such as the soundness of IPs’ environmental risk control system, while the MIIT indicators focus more broadly on waste management and green coverage under this category. Nevertheless, the MEE and MIIT standards have more similarities than differences and could potentially be consolidated into a comprehensive EIP standard. Figure 2.3 Summary of the indicator comparison Source: World Bank. Note: For example, “MIIT & MEE: MIIT – 21/31; MEE – 19/32” means when comparing MIIT and MEE indicators, 21 out of all 31 MIIT indicators are identical to, or have similar requirements with, MEE indicators; and 19 out of all 32 MEE indicators are identical to or have similar requirements with MIIT indicators. 59 The number of similar indicators between each pair of standards can differ if an indicator in one standard shares similari- ties with more than one indicators in the other standard. For example, 21 MIIT indicators have similar requirements with the MEE indicators; while 19 MEE indicators have similar requirements with the MIIT indicators. See Appendix H for a detailed cross-mapping of the three frameworks’ indicators. 24 The NDRC standard has much less in common with the other standards, as it emphasizes the circular economy performance of IPs. Instead of covering multiple aspects, including managerial, environmental, and economic performance of IPs, similarly to the MIIT and MEE standards, the NDRC standard targets specific aspects of IP management and operation. It therefore shares fewer similar indicators (10 and 7 indicators) with the MEE and MIIT standards but serves its specific function well. Summary China has a large industrial sector, an increasingly leading role in combating global environmental challenges such as climate change, and a pioneering experience in adopting regulations and policies for green develop- ment, notably for IPs. This places it among the best positioned countries to take the lead in formulating effec- tive EIP standards that would not only guide the green development and transformation of Chinese IPs, but also serve as a useful reference for the formulation of international EIP standards. However, the existing Chinese regulatory framework for IPs and EIPs appears relatively complex. For IPs willing to become EIPs, multiple sets of standards by different governmental ministries can create uncertainty about which certification to strive for. While the different standards pursue closely related objectives, the responsible agencies have not yet coordinated and aligned their standards and indicators, which could slow the greening of IPs in China. This suggests a scope for establishing a consolidated set of EIP standards in China, covering all key requirements from various aspects. In this regard, the EIP Framework jointly adopted by the World Bank Group, UNIDO, and GIZ in 2017 may serve as a useful blueprint for the Chinese authorities to assess their domestic EIP standards and identify oppor- tunities for improvement.60 In the next chapter, a comparative analysis between the Chinese EIP standards and the EIP Framework is conducted to identify the differences between them. Based on this, some recommenda- tions for the Chinese green standards to move toward becoming an internationally exemplary EIP standard are provided. 60 See Appendix I for a presentation of the EIP Framework. 25 Comparative Analysis of the Chinese and International EIP Frameworks While the EIP Framework is a flexible tool with indicative requirements and targets meant to be adapted to local circumstances, it may serve as a useful reference for China to assess the quality of its EIP standards and consider opportunities to improve them. A comparison between the indicators of the MIIT, NDRC, and MEE standards and the EIP Framework shows that there is significant alignment between the EIP and the MIIT and MEE standards (Figure 3.1). The NDRC standard, due to its specific function of evaluating the circular economy performance of IPs, is less consistent with the EIP Framework. The discussion that follows provide a detailed comparison across four dimensions of the EIP Framework—park management and economic, social and economic performance—and across all the indicators. See Appendix E for further details. Figure 3.1 Comparison between the Chinese green standards and the EIP Framework 132 Number of √ 49 44 18 EIP MIIT NDRC MEE Source: World Bank. Note: The number of checkmarks (√) is used to indicate the consistency/similarity for each indicator/requirement: one, two, and three √s are allocated for low, medium, and high level of consistency, respectively. Full alignment with the EIP Frame- work means 132 √s. 26 3.1 Park management: “General vs. specific” and “implicit vs. explicit” requirements The MIIT and MEE standards are moderately in line with the EIP Framework regarding park management requirements, while the NDRC standard is less aligned with the EIP Framework. - General vs. specific: The Chinese standards on park management requirements are rather general, while the EIP Framework sets more specific prerequisites and performance indicators. For example, the EIP Frame- work requires IPs to have specific systems to monitor park performance (tracking IPs’ environmental, social, and economic performance, as well as critical risk factors and related responses) and comply with local/na- tional regulations and international standards. The Chinese standards have similar requirements, 61 but do not describe in detail what specifically is needed to meet the requirements. - Implicit vs. explicit: The fact that some requirements are included in the EIP Framework but are not included in the Chinese standards does not necessarily mean that Chinese IPs are exempt from these requirements. Some requirements are not explicitly listed in the Chinese standards because they are usually prerequisites for any planned IP to obtain permission for establishment and operation from local, provincial, and national authorities. For instance, while the EIP Framework provides a list of required park property, common infrastructure and services (such as waste and wastewater treatment plants, waste collection areas and services, and maintenance and repair workshops), the Chinese standards do not list these requirements (except for concentrated wastewater treatment facilities in the MIIT and MEE standards, and environmental protection facilities in the NDRC standard). Nonetheless, all Chinese IPs are required to provide all necessary basic infrastructure and common services for resident firms. Depending on specific circumstances in each IP, this may still fall short of the infrastructure needed to address park-level environmental issues emphasized in the EIP Framework. Another example is the EIP Framework requirement of having a dedicated park manage- ment entity to handle park planning, operations and management, and monitoring. Most Chinese IPs are state-owned and an “IP management committee” (under the administration of the municipal government) is empowered to provide the required services. The preceding examples show that considering both implicit and explicit requirements regarding park manage- ment in the Chinese context, the Chinese standards and the EIP Framework are quite in line with each other. That said, it would be useful for the Chinese authorities to (i) include implicit requirements in the standards to enhance transparency and (ii) describe each requirement in sufficient detail to avoid ambiguity. 61 Indicator MG-30 and 31 of the MIIT standard and EP-20, ID-30, and ID-31 of the MEE standard require IPs to ensure that the IP’s environmental management ability, green IP information platform, and standard system are sufficiently sound. 27 3.2 Environmental performance: “Result-based” vs. “process-based” assessment The environmental performance section has the most similarities between the Chinese standards and the EIP Framework. Under the goal of building an “ecological civilization,” environmental protection has become a key (if not the key) factor in policy making in the Chinese industrial sector. Requirements targeting environ- mental performance of IPs comprise the largest portion of all three sets of Chinese standards, focusing on subjects similar to the EIP Framework, including resource efficiency, waste management, and pollution control. Differences still exist with the EIP Framework, which notably requires internationally certified environmen- tal/energy management systems (EMS/EnMS), ecosystem services, monitoring systems for energy consump- tion, sustainable use of water, maximum percentage of waste that is landfilled, and so on. There is nonetheless a considerable degree of consistency between the Chinese standards (especially the MIIT and MEE standards) and the EIP Framework, notably on water reuse efficiency, renewable and clean energy, energy efficiency, waste/by-product reuse and recycling, and pollution prevention and management strategies. Nevertheless, different approaches are taken by the Chinese standards and the EIP Framework in setting environmental performance requirements. The Chinese standards are largely result-oriented, focusing more on the result of pollution control or resource reuse/recycle (such as the minimum percentage of resource reused, minimum percentage of energy consumption from renewable and clean sources, maximum level of pollutant emissions and waste generation). In turn, 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. In addition to overseeing the results of final emission level of pollutants or the total amount of waste generation, the EIP Framework also includes requirements on how to achieve such results. All the prerequisites and almost half of the performance indicators in the EIP Framework directly require IPs and resident firms to set up EMS, monitoring and metering systems, energy recovery and efficiency strategies, resource reuse and environmental assessment plans, carbon intensity and energy intensity targets, and environmental risk management frameworks. These process-focused requirements offer a roadmap that can help IPs and firms achieve environmental protection targets and provide for continu- ous improvement. China could consider including more process-based indicators in its EIP standards to signal to IPs and firms the systems and processes needed to achieve current and future environmental targets. Future reviews of national EIP standards could also lead to further improvements, such as a stronger focus on the efficient use of materi- als: like the EIP Framework, the Chinese standards include indicators on energy and water efficiency, but mostly consider the efficient use of materials through the angle of industrial waste and its reuse/recycling. In line with circular economy principles, park- and firm-level indicators could be considered to assess results in fostering the third “R” (reduce) and a more sustainable material use (such as “eco-design,” the amount of scarce or polluting raw materials used per unit of output, switching to more sustainable inputs, and adoption of best available technologies). Likewise, China’s EIP standards focus on production processes within IPs and do not consider broader life-cycle impacts, including at the resource extraction, usage, and disposal stages. The Chinese authorities could consider including life-cycle indicators for key products, reflecting efforts and results by IPs and tenant firms to reduce upstream/downstream impacts. 28 3.3 Social performance: “Implicit vs. explicit” and “moral standards vs. legal require- ments” There are significant differences between the Chinese standards and the EIP Framework regarding social performance requirements. 62 Specifically: ‐ Implicit vs. explicit requirements: A functioning management system that ensures the provision of funda- mental social infrastructure and services (such as lighting systems, security systems, and night transporta- tion) is a necessary requirement for an IP to be established. Accordingly, some of the requirements in the EIP Framework are not explicitly listed in the Chinese standards but apply to Chinese IPs. ‐ Cultural norms vs. legal requirements: The absence in Chinese standards of EIP Framework indicators on sexual harassment and skills/vocational training of women could partly be attributed to cultural differences. The more conservative nature of the Chinese culture has, to some extent, made topics such as harassment prevention and women’s rights less explicitly or openly discussed by the Chinese public, which tends to see these more as moral standards and less as legal requirements. If harassment occurs, it is more often dealt with using social customs rather than legal regulations. In addition, the EIP Framework has requirements on occupational health and safety (OH&S) management systems, and community dialogue and community outreach, while the Chinese standards do not specifically address such topics. To further improve the Chinese standards, adjustments could be made to explicitly list all the requirements regarding IPs’ social performance. For harassment-related requirements, explicit rules could be introduced to strengthen harassment prevention and women’s rights, including in the evaluation of IPs. In addition, China could consider including broader labor and social dimensions, such as OH&S management systems, social infrastructure, jobs generated in green industries or through circular economy initiatives, and community outreach activities. 3.4 Economic performance: “Economic standards vs. socioeconomic standards” The MIIT and MEE standards contain some requirements for assessing the economic performance of IPs. However, apart from one indicator in the MIIT standard, the remaining requirements in the Chinese standards share little consistency with the EIP Framework. 62 The NDRC standard shares no requirement with the EIP Framework on this dimension. The MIIT standard and the EIP Framework have only 1 (out of 2) prerequisite and 1 (out of 8) performance indicators in common with the EIP Frame- work; the MEE standard has no similar requirement with the EIP Framework prerequisites and overlaps with only 2 (out of 8) EIP Framework performance indicators. 29 A prominent reason is that the Chinese standards and the EIP Framework have a different perspective on the measurement of economic performance of IPs. The evaluation criteria used by the Chinese standards focus on the economic output of IPs, with a concentration on industrial output and industrial added value (such as indus- trial added value generated from reuse and recycling of resources, industrial output from high-tech firms, and industrial added value growth rate). In turn, instead of measuring the economic performance of the IPs them- selves, the EIP Framework emphasizes the socioeconomic effect of IPs on local economic and social develop- ment (such as requirements to generate local employment, provide local businesses with opportunities to grow, and promote local SMEs). In other words, the EIP Framework assesses the overall socioeconomic performance of IPs beyond the park level. Going forward, the Chinese standards could productively broaden their coverage to include indicators on local economic and social development. Summary The Chinese EIP standards are quite comprehensive and cover key requirements for the evaluation and promo- tion of EIPs. However, the comparative analysis of the Chinese green standards and the EIP Framework reveals several differences (Table 3.1). The differences are largely a result of a different perspective on the functions of IPs and a stronger reliance of the Chinese standards on other standards and legislation. The comparison with the EIP Framework suggests the areas where the Chinese standards could be further improved. These include the need to increase transparency, make certain standards more explicit and introduce specific legislation on women’s rights. Table 3.1 provides specific recommendations. If adopted, the Chinese standards would be strengthened and could become a blueprint for other countries. Table 3.1 Summary of the comparative analysis between the EIP Framework and Chinese standards Identified differences Recommendations General vs. specific requirements: The Chinese standards on park management Describe each requirement in sufficient requirements are rather general, while the detail to avoid any ambiguity. EIP Framework sets more specific prereq- uisites and performance indicators. Implicit vs. explicit requirements: The fact that some requirements are included in the Park EIP Framework but are not included in the management Chinese standards does not necessarily mean that Chinese IPs are exempt from these requirements. They are not explicitly listed because they are usually prerequi- Include both implicit and explicit sites (covered by other legislation or requirements in the Chinese standards requirements) for any planned IP to obtain to enhance transparency. permission for establishment and operation from local, provincial, and national author- ities. 30 Identified differences Recommendations Result-based vs. process-based approaches to environmental management: The Chinese standards are largely result-based and focus more on the result of pollution control or resource reuse/recycle. In Include more process-based indicators Environmental in Chinese standards to signal to IPs addition to outcome-based targets, the EIP performance Framework covers process-based indica- and firms the systems and process tors focusing on the systems and processes needed to achieve current and future established for pollution control and environmental targets. resource efficiency. This offers a roadmap that can help IPs and firms achieve environmental protection targets and provide for continuous improvement. Implicit vs. explicit requirements: Some requirements are in place but are not explicitly listed in the Chinese standards because they are usually prerequisites Assess possibilities to make require- (covered under other pieces of legislation ments more specific to avoid any or requirements) for any planned IP to ambiguity. obtain permission for establishment and operation from local, provincial, and Social national authorities. performance Cultural norms vs. legal requirements: The general public in China tends to see harass- ment prevention and the protection of Introduce explicit rules to strengthen women’s welfare more as moral standards harassment prevention and women’s and less as legal requirements. Within an rights in the management and evalua- IP, if harassment occurs, it is more often tion of IPs. dealt with by using social customs rather than legal regulations. The EIP Framework requirements on OH&S management systems, community Include broader labor and social dialogue, and community outreach are not dimensions, such as OH&S manage- specifically addressed by the Chinese ment systems and community outreach standards. activities in the Chinese standards. Economic standards vs. socioeconomic standards: The Chinese standards and the EIP Framework have different emphasis and definitions of IPs’ economic perfor- The Chinese standards could produc- mance. The evaluation criteria used by the Economic tively broaden their coverage to Chinese standards focus specifically on the performance include indicators on the local economic output of IPs, such as industrial economic and social development. output and industrial added value; the EIP Framework emphasizes IPs’ socioeconom- ic impacts on local economic and social development. Note: EIP = eco-industrial park; IP = industrial park; OS&H = occupational health and safety. 31 Application of the EIP Framework in the Fuzhou High-Tech Zone This chapter analyzes the result of the first application of the EIP Framework in China, using the Fuzhou High-Tech Industrial Zone (FHTZ) as a case study. The main objectives of this analysis are to (i) identify the key challenges faced by the Chinese IPs to move toward complying with the EIP framework and (ii) use the results of the case study as a reference for further upgrading of Chinese standards to better promote green development and transformation of IPs. 4.1 Overview of FHTZ FHTZ is located in eastern China, in Fuzhou, Jiangxi Province. It was established in August 1992. It has a total area of 21.48 square kilometers, which comprises about 270 tenant firms and over 30,000 employees. The zone has a mix of sectors, including automobile and auto parts, bio-pharmaceuticals, and IT instrument and equip- ment as its leading industries. They each take up 21.5 percent, 13.7 percent , and 7.4 percent of the total number of firms in the park. 63 In terms of revenues, in 2016, firms in FHTZ generated a total value-added of RMB29.2 billion (US$4.2 billion at the exchange rate on October 15, 2018), and the three leading industries generated 34.2 percent , 15.2 percent , and 20.0 percent of the total revenues, respectively. 64 In February 2015, FHTZ was upgraded to a national-level high-tech zone by the State Council and currently ranks 109 of all 156 national high-tech zones for overall performance in terms of innovation capability. 65 Over the past few years, it has been making efforts to become NDRC-certified “Circular Economy Transformation Demonstration IP” and MIIT-certified “National Green IP.” Compared to the MIIT framework, Fuzhou has advanced in moving toward being eco-friendly in energy utilization and industrialization, but has fallen short of being eco-friendly in resource utilization (see box 4.1). It is continuing the process to be fully certified as a green IP in the future. Efforts completed or underway include the following: ‐ Established a circular economy transformation leadership council ‐ Is in the process of producing a circular economy development plan ‐ Formed two circular industrial chains (copper processing and construction material) ‐ Undertaking clean production audits, with audits for 25 firms completed and 15 underway ‐ Started a series of energy conservation and water saving projects ‐ Completed various environment- and energy-related projects (such as constructing a concentrated wastewater treatment plant; switching coal-fired boilers to gas; building natural gas pipelines and network; and installing rooftop solar panels) ‐ Started the “Internet Plus Smart Park” project with the establishment of online supervision systems on both production and environmental protection ‐ Improved pollution prevention and reduction by closing 10 and expelling 2 heavily polluting firms ‐ Conducted an environmental impact assessment of all resident firms and established a normalized environ- mental impact supervision platform. 63 Management Committee of Fuzhou High-Tech Industrial Zone (2017). 64 Management Committee of Fuzhou High-Tech Industrial Zone (2017). 65 The ranking is based on the indicator system constructed by the Ministry of Science and Technology (MOST) and China Academy of Sciences to evaluate the innovation capabilities of national high-tech zones. The system consists of 25 indica- tors divided into five categories: agglomeration of innovation resources; environment of innovation and entrepreneurship; performance of innovation activities; internationalization of innovation; and innovation-driven development. Each national high-tech zone is ranked according to the weighted average of all the scores given to each of the indicators and the weighted average of all scores is used to rank the national high-tech zone in comparison to all the other zones. 32 Box 4.1 Summary of FHTZ’s self-assessment against the MIIT Framework In 2018, FHTZ completed a self-assessment against the MIIT Framework of Green Industrial Parks， using data from 2016. It did fairly well in 13 out of the 24 indicators in 6 categories, and fell short of the remaining 11 ones. The gaps were particularly big in the “resource utilization” category, in which FHTZ failed to meet the requirements of 5 indicators: namely, land productivity rate, comprehensive utilization rate of industrial solid waste, recycling rate of industrial water, recycling rate of reclaimed water, and recycling rate of reused resources. A comparison of FHTZ’s performance under the MIIT Framework and the EIP Framework suggests that under both frameworks, FHTZ fell short of the indicators related to renewable and clean energy; water efficiency, reuse, and recycling; and air, GHG emissions and pollution prevention. Source: World Bank FHTZ was selected for this case study, as part of cooperation with the World Bank, to become a pilot IP in China’s move toward meeting the EIP Framework. In addition, FHTZ, a national-level IP, is a useful blueprint for most “average” IPs in China, which would have difficulty in meeting stringent national and international standards. Finally, FHTZ’s management has an ambitious plan to become a leading green park in China. Preliminary assessment results In May 2018, FHTZ completed a preliminary self-assessment against the EIP Framework (Table 4.1); see Appendix F for detailed results). Although further work is needed to fully flush out the self-assessment on an indicator-by-indicator basis, the preliminary evaluation results indicate great potential for (i) FHTZ to fully comply with the EIP Framework and (ii) for the EIP Framework to serve as a blueprint and reference for the Chinese EIP standards to further improve and better guide the green development of IPs. Table 4.1 Summary of FHTZ’s 2018 self-assessment against the EIP Framework Number of indicators and percent Management Environment Social Economic Prerequisites met 6/6 (100%) 3/6 (50%) 2/2 (100%) 4/4 (100%) Unclear/lack of data but FHTZ believes it meets 0 1/6 (16.7%) 0 0 Prerequisites not met OR data not available but FHTZ 0 2/6 (33.3%) 0 0 believes it does not meet Performance indicators met 2/3 (66.7%) 5/14 (35.7%) 1/11 (9.1%) 0 Unclear/lack of data but FHTZ 1/3 (33.3%) 2/14 (14.3%) 10/11 (90.9%) 3/5 (60%) believes it meets Does not meet performance indicators OR data not 0 7/14 (50%) 0 2/5 (40%) available but FHTZ believes it does not meet Source: World Bank. Note: FHTZ = Fuzhou High-Tech Zone. 33 4.2 Compliance barriers The self-assessment highlights several barriers to achieving full compliance with the EIP Framework (Table 4.1). FHTZ meets most (15/18) of the EIP Framework prerequisites (qualitative standards) across the four categories of the EIP Framework. However, it meets fewer of its performance indicators, which tend to be more quantitative. This reflects one of the leading obstacles for FHTZ to comply with the EIP Framework require- ments – data unavailability. Incomplete infrastructure and insufficient incentives also hamper compliance. Data unavailability As many as 18 EIP Framework prerequisites and performance indicators 66 that are not met by FHTZ could be attributed (fully or partly) to the absence of relevant data. FHTZ does not collect data or keep records on firm-level environmental management and risk control strategies (environmental requirements), the efficiency and effectiveness of grievance management, harassment response, park security management, and community outreach (social requirements) at both the firm and park level, as well as local employment generation and local economy promotion in general (economic requirements). FHTZ believes that it meets most of the require- ments, but without the data it is unable to prove it. FHTZ has a dedicated department in charge of collecting and analyzing park-level statistics. However, most of the data collected measure key economic and environmental performance such as industrial output, income, industrial added value, tax revenue, and energy consumption—in line with municipal and provincial require- ments. However, data beyond municipal or provincial requirements are usually not collected. FHTZ seems to be well positioned to expand its data collection and meet the EIP requirements, in line with international good practice in park performance monitoring (Box 4.2). The benefits of enhanced monitoring would go beyond the compliance with the EIP standards: they would also help further enhance the park’s efficiency and attractiveness to investors. Box 4.2 Performance monitoring and data collection systems for EIPs The establishment and effective implementation of a strong monitoring system, based on sound indica- tors and data collection mechanisms, have been highlighted as key elements to improve EIP perfor- mances and ensure accountability (UNIDO 2017). This system should provide an adequate balance of economic, environmental and social indicators, reflecting the local context and priorities. UNIDO provides further recommendations regarding the choice of indicators, including that they (i) be easy to understand and communicate even to nonexperts; (ii) reflect relevant environmental, social, and economic impacts or benefits that can be influenced at the company and/or park level; and (iii) be based on reliable, available, or easily obtainable data that is updated regularly. Around the world, (eco-)indus- trial parks have followed a wide variety of practices regarding performance monitoring beyond regula- tory requirements. Relatively few parks regularly monitor and publish data on key impacts, especially beyond park boundaries. 66 Data are unavailable for 1 environmental prerequisite and 1 out of 3 managerial indicators, 2 out of 14 environmental indicators, 10 out of 11 social indicators, and 3 out of 5 economic performance indicators. 34 The establishment and effective implementation of a strong monitoring system, based on sound indica- tors and data collection mechanisms, have been highlighted as key elements to improve EIP perfor- mances and ensure accountability (UNIDO 2017). This system should provide an adequate balance of economic, environmental and social indicators, reflecting the local context and priorities. UNIDO provides further recommendations regarding the choice of indicators, including that they (i) be easy to understand and communicate even to nonexperts; (ii) reflect relevant environmental, social, and economic impacts or benefits that can be influenced at the company and/or park level; and (iii) be based on reliable, available, or easily obtainable data that is updated regularly. Around the world, (eco-)indus- trial parks have followed a wide variety of practices regarding performance monitoring beyond regula- tory requirements. Relatively few parks regularly monitor and publish data on key impacts, especially beyond park boundaries. A good example of the integrated assessment of the economic, social and environmental performances of industrial areas is provided by the Kwinana Industrial Area (KIA), and the broader Western Trade Coast (WTC) industrial region it belongs to, in western Australia. The Kwinana Industries Council (KIC) and WTC Industries Committee have taken the lead in preparing repeated integrated assessments of the industrial region’s environmental, social, and economic impacts. These assessments were published in 1990, 2002, 2007 (for KIA only), and 2014 (for the WTC), allowing trends to be identified over time. These periodic assessments complement more continuous monitoring of key dimensions, such as air and water quality. The scope of the analysis has gradually expanded to cover a large range of issues relevant to the zone and surrounding community. Regarding economic benefits (such as output, jobs and wages, and investment), the latest assessment looked not only at direct impacts from firms located in the zone, but also considered broader local impacts in the surrounding region. For instance, while the WTC was estimated to generate A$15.6 billion in sales and 13,757 jobs, the corre- sponding indirect impacts were A$10,3 billion and 18,274 jobs. On the social side, the assessment notably looked at the composition of the labor force (for example, in terms of gender, age, and residence), employee transportation modes, provision of social services and benefits for employees, skill development, and community engagement. Finally, the report also assessed environmental aspects, including pollution levels, development of resource efficiency/cleaner production, and indus- trial synergies. Another good example is regional regulation of “Ecologically Equipped Industrial Areas” in Italy, which requires the management body of EIPs to perform an analysis of the environment in the area in and surrounding the park, and of the main pressures exerted by industries. This analysis aims to lead to the establishment of a program and action plan to address the main issues, and should be updated at least every three years, or any time a change with significant environmental implications occurs in the park or surrounding area . Sources: http://www.westerntradecoast.wa.gov.au; https://kic.org.au; WTCIC (2014); UNIDO (2016, 2017); Daddi et al. (2016). Note : EIP = eco-industrial park. 35 Incomplete infrastructure Specific infrastructure could be improved or added within FHTZ to better comply with certain environmental performance requirements in the EIP Framework. FHTZ fails to meet two EIP Framework environmental prerequisites and three performance indicators due to an absence of internationally certified environmental/en- ergy management systems, waste heat recovery capacity, a monitoring system of the emission of greenhouse gases (GHG) and other pollutants within the park, an energy consumption metering and monitoring system, and sufficient capacity for water and waste reuse. As explained in the previous section, the Chinese EIP standards that FHTZ and other IPs are striving to comply with generally do not specify required “green infrastructure” (except for wastewater treatment facilities, green building, and public buses in the MIIT and MEE standards). This difference between the Chinese standards and the EIP Framework may contribute to the performance gap of FHTZ against the EIP Framework on this level. Using the EIP Framework as a reference to assess green infrastructure needs could be useful to further the green transformation of FHTZ and other Chinese IPs, and to improve Chinese EIP standards. Insufficient incentives Insufficient incentives can explain the gaps between FHTZ’s current performance and several EIP Framework performance indicators, both economic (such as promoting local SMEs) and environmental (such as maintain- ing a functioning EMS/EnMS in line with international standards; more ambitious renewable energy use than the national average level; more aggressive carbon intensity reduction and energy intensity improvement; and waste reuse and appropriate disposal) . Projects have been designed by FHTZ to move toward meeting requirements in renewable energy use, carbon intensity, and energy efficiency. However, FHTZ management argues that it would be difficult to identify further potential for increasing energy efficiency and the use of renewable energy in the brownfield considering the existing energy use structure (electricity mainly from the grid) and the cost of upgrading or changing the current infrastructure. Incentives to increase the use of renewables and energy efficiency depend on several context-specific regulatory, economic, and technical factors, which should be considered when setting EIP performance standards. These considerations also suggest a role for more awareness raising and technical support to identify profitable investment opportunities in renewable energy and energy efficiency at the park and firm level. Insufficient incentives to go beyond domestic requirements and standards, or low awareness of the benefits of doing so, can also explain FHTZ’s performance gap in meeting other EIP Framework requirements, such as: 36 - EMS/EnMS in line with international standards:67 FHTZ argues that meeting international standards does not provide sufficient additional incentives in terms of investor attraction, public support and recognition, and economic benefits. Unless specifically required by provincial or national standards, IPs may not voluntarily make efforts to meet such requirements. However, many IPs in China and elsewhere have sought international certification for their EMS and have reaped corresponding environmental and economic benefits, including in terms of attracting additional domestic and foreign investment. (Box 4.3). Sound systems and processes for continuous improvement have been highlighted as a key success factor for EIPs by a global assessment of EIPs in developing and emerging countries conducted by the United Nations Industrial Development Organization (UNIDO 2016). Promoting the adoption of certified EMS/EnMS at the park and firm level could be considered by FHTZ and for Chinese EIP standards. - Linkages with local businesses: FHTZ benefits the local economy by providing employment, contributing to the local and regional GDP, and stimulating the growth of local enterprises. However, FHTZ explained that tenant firms rarely procure products and services from local enterprises; instead, they source their inputs from the most competitive suppliers in a larger market. The targets for local sourcing in the EIP Framework are indicative, 68 and the appropriate level is context-specific. Such indicators are mostly relevant in countries where foreign-owned companies in IPs or Special Economic Zones largely rely on imported inputs and do not foster significant domestic value addition. This is less of an issue in China, which has successfully fostered linkages between industrial zones/parks and local suppliers to enhance domestic value added and to strengthen the local skills and capacity base. Performance monitoring by FHTZ and other EIPs in China could nonetheless look at local-level efforts to promote more advanced forms of linkages, such as industrial symbiosis, which is a key element of the circular economy and has been successfully fostered through dedicated initiatives in sever- al countries, including China (Box 4.4). Box 4.3 Environmental management systems and ISO 14000 standards for IEs Environmental management systems (EMS) can be defined as a system of organizational objectives, policies, and processes adopted by an organization with the aim to achieve domestic environmental compliance but also to continuously improve environmental performance and operating efficiency, including for nonregulated issues. The main elements of sound EMS are defined internationally through the ISO 1400 series of voluntary standards and guidelines. This includes the ISO 14001 standard, for which the organization can self-declare its participation or formally register, which requires verification by an accredited third party. Countries can develop their own schemes to accredit certifiers and approve training programs. The adoption of EMS and ISO 14001 certification have been actively promoted among industrial companies in China since the late 1990s, notably through the adoption of accreditation mechanisms and the designation of pilot regions and cities for the promotion of ISO 14000. 67 The EIP Framework suggests this requirement for firms with at least 250 employees. 68 The EIP Framework mentions that local sourcing is to be promoted by EIPs “when appropriate and cost effective to do so.” 37 While generally applied at the level of an individual company, EMS and ISO 14001 can also be adopted by larger organizations, such as industrial estates. This can be done to manage the environmental impact of an estate’s own activities and services, which is mostly relevant if the estate management is responsi- ble for major services, such as common effluent treatment plants (CETPs) and solid waste management facilities. Various industrial estates in countries such as Belgium, France, Germany, Japan, Indonesia, the Philippines, Spain, and Thailand have obtained ISO 14001 certification for their activities over the last two decades. A more ambitious version is that of a comprehensive EMS (CEMS), in which estate management and tenant companies each establish their own certified EMS and adopt joint policies and activities to address common issues at the estate level. Given the possible reluctance or incapacity of some tenant companies (especially SMEs) to invest in a formal EMS, the intermediate option of an “environmental quality charter” has been promoted in France by the association Orée. Estate managers and tenants sign a contractual charter specifying their respective environmental responsibilities and areas of collaboration. In China, the State Environment Protection Administration (SEPA) launched an IP-wide ISO 14001 demonstration program in 1999. Several industrial estates have been certified since then and have promoted the use of EMS among their tenant companies, which has been credited with improved environmental management as well as diverse economic benefits (including increased attractiveness for foreign investors) and social benefits in these estates. Given the tendency of Chinese industrial estates to be large and include industrial and residential areas, these EMS generally address the environmental impacts of both. For instance, the Dalian Economic and Technological Development Zone (DETDZ) adopted an EMS covering air emission control, integrated management of water and of solid waste, emergency preparedness, and promotion of cleaner production and supported ISO 14001 certification among local enterprises through technical assistance and partial payment of certification costs. Sources: Geng and Côté (2003); UNEP (2001); FOEN (2014). Note: IP = industrial park; ISO = International Organization for Standardization. For more on ISO 14001 certification, see https://www.iso.org/iso-14001-environmental-management.html 38 Box 4.4 Fostering industrial symbiosis through regional networks Industrial symbiosis (IS) is the process by which by-products or waste (such as material, water, and heat) from one industry that would otherwise have been discarded become valuable inputs for one or several other industries. This can benefit all parties involved economically and can generate environ- mental gains. There has been an expert debate since this concept emerged in the 1990s to determine what the success drivers of IS are, and whether such relationships between firms could be planned from scratch (Costa and Ferrao 2010). While IS is largely seen as a business-driven process, as in the case of the most famous example of Kalundborg in Denmark, a it is widely recognized that appropriate regulato- ry and institutional frameworks can play an important role to facilitate the emergence of successful symbiotic exchanges. Along with other countries, such as the United Kingdom, Australia, and Korea, China has been one of the countries where policy makers have sought to promote IS over the last two decades. One approach to do so is the establishment of national/regional IS networks. This arrangement has been successfully implemented in the United Kingdom under the National Industrial Symbiosis Programme (NISP). Inspired by an earlier similar initiative in Mexico, a regional IS network initiative was first piloted in the Humber region in 2000 by the UK Business Council for Sustainable Develop- ment, in cooperation with an academic institution and local business groups. It has subsequently been extended to other regions, and coordinated at the national level under NISP with government funding since 2004. Activities under the different regional initiatives included convening stakeholders, raising awareness , playing a coordination role to address potential barriers to IS or leverage opportunities/resources (tech- nical, economic, political, informational, social), providing data collection and analysis, offering support to design and implement symbiotic exchanges, and conducting independent impact evalua- tions. The experience has shown that it was essential to identify well-established and capable local institutions and practitioners with deep knowledge of local industries to animate the network, and to ensure the participation of committed champions from key local companies. Moreover, NISP was facilitated by conducive policies (such as a resource productivity policy) and tax incentives (including a climate change levy and a landfill tax and credit), although some regulations hampered IS (such as those restricting the alternative use of waste). After five years, NISP had over 12,500 member companies (mostly SMEs) and contributed to signifi- cant economic and environmental gains, including reducing the use of virgin material by almost 10 million tons, diverting 7 million tons of waste from landfill, reducing carbon emissions by over 6 million tons, enabling ₤156 million in cost savings and ₤176 million in additional sales for participating firms, creating 3,683 jobs and saving 5,087 ones.b NISP has been recognized as best practice by the EU and has been emulated in several other countries, including Brazil, South Africa,c and Canada.d 39 In China, IS has been included in the scope of EIP development early on. NISP implemented a pilot circular economy project in Yunan Province in 2008, and established a partnership with the Tianjin Economic Development Area (TEDA) in 2010 to develop an IS network in the surrounding Tianjin Binhai New Area (TBNA), as a step toward introducing this approach nation-wide. However, this coop- eration initially struggled to generate broad interest from local companies, due to a less conducive policy environment compared to the United Kingdom (including lack of regulatory or fiscal disincen- tives to engage in landfilling). Between 2010 and 2013, the program was nonetheless credited with having facilitated 99 synergies and diverted 1,430,000 tons of material from landfill.e The Eco-Center established by TEDA management to implement the program was maintained after its completion to continue promoting industrial symbiosis and other environmentally sound business practices in TBNA.f Beside TEDA, other IPs in China have had a long and successful experience fostering IS, such as the Rizhao Economic Technological Development Area (REDA) (Yu, Han, and Cui 2015). Sources: Mirata (2004); Laybourn and Morrissey (2009); Costa and Ferrao (2010); Wang, Deutz, and Gibbs (2015); Wang, Deutz, and Chen (2017); Yu, Han, and Cui (2015). a. http://www.symbiosis.dk/en/. b. https://www.international-synergies.com/project-types/government c. http://greencape.co.za/wisp/. d. http://nispcanada.ca. e. It must be noted, however, that a substantial IS base had already been developed in TEDA since the 1990s, with active involvement of TEDA management, notably with the establishment of a dedicated information platform to facilitate by-product exchanges among tenants (Geng, Haight, and Zhu 2007; Shi, Chertow, and Song 2010). f. http://www.ecoteda.org/english/. 40 41 Fiscal and financial instruments to promote and develop EIPs The experience in China and beyond shows that IPs and their tenant firms do not always have the information, technical capacity, and financial capacity necessary to improve their environmental performance and shift toward an EIP model. This section assesses the set of fiscal incentives and financial instruments used by MIIT, NDRC, and MEE to foster this shift, assesses their strengths, and offers ideas for further improvement. 5.1 Evaluation of the incentive frameworks of the Chinese EIP standards MEE ‐ Supportive financial policies using provincial/local public finance The Guidelines on the Management of National Eco-Industrial Parks briefly state that provincial and local governments, as well as their environmental protection departments, should formulate supportive policies for EIPs to prioritize projects such as infrastructure for pollution prevention and control, energy/resources efficien- cy and eco-industrial chains (MEE, MOC, and MOST 2015). Specific supportive funds or preferential taxation policies should also be in place to support such projects. In December 2011,69 MEE, MOFCOM, and MOST published more comprehensive guidelines on the incentive framework for supporting EIPs.70 The Guiding Notice encourages public funds for energy conservation and emission reduction, green development, technological innovation, and environmental protection at the provin- cial and local level to support EIPs. It also encourages the establishment of public funds that specifically support EIP development. Loans with preferential interest rate and preferential taxation policy are also required to be in place to assist key projects and research within EIPs. In addition, the Guiding Notice also encourages IPs to establish “special construction funds” for EIP development to support projects on park planning, infrastructure sharing, and industrial symbiosis, as well as the capacity building of IPs (for example, through information sharing platform, consulting services, innovation activities, and R&D). ‐ Financing from financial institutions and other private sources In addition to financial support from provincial/local public finance, the Guiding Notice also proposes to guide and promote financial institutions to provide financial support for the development of EIPs. Domestic and foreign private investors are encouraged to participate and assist the construction of EIPs. 69 The Ministry of Environmental Protection (MEP) at that time. 70 Guiding Notice on Strengthening the Development of National Eco-Industrial Parks (MEE, MOC, and MOST 2011). EIPs here mean MEE-certified “National Demonstration Eco-Industrial Parks” (国家生态工业示范园区). 42 ‐ Nonfinancial incentives In addition to financial support provided to EIPs, nonfinancial incentives are also in place. The Guiding Notice proposes to improve the “evaluation system for the comprehensive development of national development zones” by including the establishment of EIPs as a key indicator. Provincial and local departments of commerce are required to include indicators relevant to the construction of EIPs in the assessment of industrial zones’ “investment/business environment and competitiveness,” and gradually increase the weight of such indicators. EIPs with notable performances will be honored and awarded. However, it is not clear how well these incentives have worked so far. NDRC and MOF ‐ Direct subsidies from NDRC and MOF Unlike indirect support from the MEE, the NDRC, working together with MOF, provides direct financial support for selected green transformation projects proposed by demonstration IPs. 71 Each year, interested IPs are required to draft an Implementation Plan for Circular Economy Transformation according to the published guidelines. 72 Through assessment and recommendation at the provincial level, and evaluation and selection by the NDRC and MOF at national level, certain investment projects in the implementation plans proposed by IPs are financially supported by the MOF and NDRC using funds from the central government’s budget. ‐ General fiscal and financial support from public finance and public-private partnership In April 2017, NDRC, together with 13 other government ministries and departments, 73 adopted An Action Plan for Leading Circular Economy Development, in which “circular economy transformation of IPs” is one of the key projects (NRDC 2017). The Action Plan proposes to financially support projects relevant to circular economy transformation and development with funds from public finance, as well as the leveraging of private capital through public-private partnerships (PPPs). It also proposes to promote the use of green finance, includ- ing green credits, bonds, insurance funds, and industry funds, to support circular economy transformation projects. NDRC also provides financial support to circular economy transformation projects. Akin to the MIIT incentive framework, NDRC provides incentives (including access to green finance) for both IPs and tenant firms for the promotion of circular economy, although the link between getting access to financial support and residing in green-certified IPs is not explicitly specified. MIIT ‐ Supportive fiscal/financial policy at the national and provincial level According to the Notice on the Establishment of a Green Manufacturing System, which sets the MIIT’s green IP standard, the MIIT “will use ‘funds for industrial transformation and upgrade’, special funds for 71 Notice on Recommending Key Candidate Industrial Parks for Circular Economy Transformation in 2017 (NDRC and MOF 2017b). 72 Guideline for Industrial Parks on Drafting Implementation Plan for Circular Economy Transformation.（NDRC and MOF 2017b; NDRC 2015b) 73 MOST, MIIT, MOF, MEE, MOC, Ministry of Natural Resources, Ministry of Housing and Urban-Rural Development, Ministry of Water Resources, Ministry of Agriculture and Rural Affairs, State-owned Assets Supervision and Administra- tion Commission of the State Council, State Administration of Taxation, National Bureau of Statistics, National Forestry and Grassland Administration. 43 industrial transformation and upgrade’, special funds for construction, green credits, and other supportive financial policies to assist the building of a green manufacturing system (including green factories, green products, green industrial parks, and green industrial chains)” (MITT 2016d). Furthermore, products from the green manufacturing system are prioritized in government procurement. Other relevant documents from MIIT74 emphasize the objective to promote the development of green IPs and firms through supportive fiscal instruments75 and green finance. Provincial government and financial76 institutions are equally required to support such projects. ‐ Credit support through cooperation with China Development Bank (CDB) In November 2016, MIIT and CDB reached an agreement to offer credit support for the “Made in China 2025 Strategy,” which includes the development of green factories, firms, and IPs. 77 CDB will provide no less than RMB 300 billion of financing during the 13th Five Year Plan period (2016−2020) for selected projects in the form of loans, investment, bonds, leasing, and securities. MIIT and CDB subsequently clarified priority project categories, including resource efficiency and green transformation of industrial production (with the establish- ment of green factories, IPs, and industrial chains as key priorities); digitalization of energy management; clean production; and comprehensive utilization of resources 78—all of which are closely related to EIPs and are in line with the requirements in both the Chinese standards and the EIP Framework. The maturity of CDB loans is 5 to 10 years, and both firms and IPs are encouraged to apply. Application should be submitted to provincial Department of Industry and Information Technology (DIIT) first and be evaluated by provincial DIIT and CDB branch. Shortlisted projects (no more than 10 projects per province) are then recommended to MIIT. CDB decides which projects to offer green credits to, as well as the amount of loans. In summary, MIIT has a broad array of instruments in place to promote the green transformation and develop- ment of IPs, their compliance with the MIIT green IP standards, and more generally, the building of the green manufacturing system. Supportive policies and financing are provided from government departments at both the national and provincial level, as well as from green finance, including from CDB. Sources of financial support are diverse, and incentives are provided for both firms and IPs. Importantly, a link between getting access to financial support for firms and residing in green-certified IPs is established. Summary All three Chinese green standard-makers have a broad set of policy instruments in place to promote indirect compliance with the Chinese green standards, and the green transformation and development of IPs overall. The sources of incentives are various, including direct subsidies from the central government’s budget; supportive fiscal policies from national, provincial, and local governments; financing from financial institu- tions; and preferential tax rates and interest rates (for loans); as well as nonfinancial incentives. To enhance 74 See the Plan for Industrial Green Development (2016−2020) (MIIT 2016c); Implementation Plan for the 2016 Action on Green Manufacturing (MIIT 2016a); and Notice on Establishing the Integration of Green Manufacturing Systems (MIIT and MOF 2016). 75 Including budgetary resources from the central government ; special funds for construction; other funds relevant to technological transformation, energy conservation and emission reduction, and clean production; preferential taxation policy; government procurement of green products; and financing from public-private partnerships. 76 Including expanding the scale of green credits and green bonds, establishing green industry development funds, innovat- ing new green financial instruments and services, linking “green performance” of firms to their credit rating, and encourag- ing financial institutions to provide more convenient and preferential credit support and guarantee service for the green transformation of SMEs. 77 Strategic Cooperation Agreement on Jointly Promoting the Implementation of the ‘Made in China 2025 Strategy’ (MIIT and CDB 2016). 78 Notice on Recommending Key Green Credit Projects of Industrial Energy Conservation and Green Development in 2017 (MIIT and CDB 2017). 44 the efficiency of public financing, it will be important to ensure that the different fiscal incentives to support EIPs adopted in recent years are not duplicative but complementary, and are regularly evaluated to ensure value-for-money. Most of the incentives are provided for both IPs and firms, but these are often separate. A more explicit link could thus be established between the provision of incentives for firms and their location in an EIP. This would provide additional incentives for IPs to comply with the green standards because in addition to the incentives for parks themselves, resident firms within parks would also expect to comply with green standards to get access to additional financial support. IPs with a larger percentage of resident firms that are green-certified ( for such standards as EDGE79 , LEED80 , ISO14001/5001) or have demonstrated other efforts in green transfor- mation and upgrade could be prioritized for financial support, which could potentially strengthen incentives for both IPs and firms. Finally, it would also be useful to provide direct incentives to parks for compliance with the MEE and MIIT green standards, in the form of, for instance, direct subsidies, akin to those provided by NDRC. 5.2 Green finance for the green transformation and development of IPs in China The Chinese authorities have increasingly considered green finance as an important tool to support the large investments required to build an “ecological civilization” in China. One of the first government documents relevant to green finance was jointly published by the China Banking Regulatory Commission (CBRC), People’s Bank of China (PBoC), and the Ministry of Environmental Protection (MEP) in July 2007. 81 The Opinions explicitly required that bank loans should preferentially support green industries that promote circu- lar economy development, energy efficiency, and pollution reduction, while strictly limiting the provision of bank loans to industries with high pollution and emissions. Subsequently, a comprehensive and consolidated policy framework to establish a green financial system was adopted by seven government ministries and departments in 2016. 82 Since then, green finance has developed rapidly in China, making it one of its leading green financial markets worldwide.83 For instance, Chinese green bond issuance aligned with international definitions reached US$22.9 billion in 2017, accounting for 15 percent of the record US$155.5 global issuance and making China the second largest green bond market behind the United States (Climate Bonds Initiative 2018). China’s green credit takes up about 90 percent of the total green financial market (Yicai.com 2018). By the end of 2017, the balance of green credit issued by 21 major Chinese banking institutions was about 8.5 trillion RMB, totaling approximately 9 percent of the total credit balance (Yicai.com 2018). This section presents key green finance instruments most closely related to EIP promotion and development in China, namely green credit, green bonds, green development funds, and international cooperation. 79 EDGE (Excellence in Design for Greater Efficiencies), is a green building certification system developed by the Interna- tional Finance Corporation (IFC), part of the World Bank Group, to promote resource-efficiency in building design. More information on: https://www.edgebuildings.com/marketing/edge/ 80 LEED (Leadership in Energy and Environmental Design) is a green building rating system developed by the U.S. Green Building Council. More information on: https://new.usgbc.org/leed 81 Opinions on Enforcing Environmental Protection Regulations and Preventing Credit Risks (CBRC, PBoC, and MEP 2007). 82 Guideline on Establishing a Green Finance System (PBoC et al. 2016). 83 For an overview, see, for instance, IIGF and UNEP (2017). 45 Green credit Green credit is a major area of green finance in China, which has grown rapidly in recent years and has received significant policy support. Under the instructions of CBRC, banks are required to increase lending to green projects, and banking regulatory commissions at all levels are required to enhance their regulatory activities in the area of green credit. Moreover, to promote transparency and enhance supervision of banks, CBRC has formulated the Statistical System of Green Credit,84 requiring banks to collect and disclose data on their loans to firms with significant risks in environment and security, as well as on their loans to projects and services in energy conservation and environmental protection (CBRC 2013). Lastly, to further incentivize banks in issuing green credit, CBRC has created an evaluation system of green banks and designed a set of qualitative and quan- titative indicators for performance appraisal and evaluation, such as whether the bank has established its strate- gy, goal, and specific measures for developing green credit, and whether the bank has classified its clients according to environmental and social risks when issuing loans.85 In the current green credit policy system, projects supporting environmental protection, resource efficiency, clean energy, green production, and green transportation and building are the ones that get the most support. Industrial parks are highly encouraged to apply. For example, in 2016, ten Chinese commercial banks signed a memorandum with the Shanghai Municipal Economic and Information Commission agreeing to provide RMB 50 billion in loans to key green transformation projects within IPs during the implementation of the 13th Five-Year Plan period (2016−2020) (People.cn 2016). This is by far the largest green credit program that specifically targets the promotion of green IPs. In another example, in 2017, MIIT and China Development Bank (CDB) jointly launched a program for developing green credits for projects in key areas of energy conser- vation and green development; green industrial parks are given priority in getting loans compared to other parks meeting all the same other conditions. 86 Green bonds In December 2015, the NDRC initiated the use of green bonds in the Chinese financial market by allowing firms to issue green bonds to finance green development projects.87 The NDRC adopted guidelines, which specify preferential policies such as a higher maximum proportion of capital collected through green bonds in total investments or exemption from regular quota restrictions on bond issuance to encourage and promote the use of green bonds among local governments. In addition, local governments are required to actively guide private investors to participate in green projects and support the issuance of green bonds and the implementa- tion of green projects through investment aid, interest subsidy, and direct capital injection. Lastly, a combina- tion of green bonds and special construction funds for investment in EIP infrastructure is encouraged: green projects that have already issued green bonds are prioritized in receiving special construction funds. 88 Several key project types mentioned in the NDRC’s Guidelines are relevant for EIPs, including technological upgrade for resource efficiency and emission reduction, energy efficiency, renewable energy, circular economy upgrade, pollution prevention and waste disposal, and “ecological civilization” and low-carbon demonstration zones. Some IPs have already issued green bonds. For instance, Shanghai Lingang Economic Development Co. Ltd., which develops and operates IPs, issued a US$160 million bond in March 2018 to finance the construc- tion of green-certified office buildings in a selected IP (Climate Bonds Initiative 2018). 84 Notice on Guiding the Use of Green Credits (CBRC 2012); Statistical System of Green Credit (CBRC 2013). 85 Notice on Issuing Key Evaluation Indicators of Issuing Green Credit (CBRC 2014). 86 Notice on Recommending Key Green Credits Projects of Industrial Energy Saving and Green Development in 2017 (MIIT and CDB 2017). See also CSRC 2017. 87 Guideline on the Issuance of Green Bonds (NDRC 2015c). 88 These are special-purpose funds run by different central government departments (专项建设基金). 46 Green development funds Green development funds to be established at different administrative levels are the third financial instrument for promoting the development of EIPs. 89 China plans to combine existing funds for environmental protection into a national green development fund and invest in green industries. The central government also encourages financially capable local governments to establish regional green development funds. By the end of 2016, more than 50 green development funds have been established by various provincial and municipal governments, including Zhejiang Industrial Fund, Guangdong Environmental Protection Fund, and Xinjiang Green Industrial Fund at the provincial level, and Pu’er (Yunan) Green Economic Development Fund, Zhangjiakou (Hebei) Green Industrial Development Fund, and Xin’anjiang (Anhui) Green Development Fund at the municipal level (Sohu.com 2018). Nongovernmental green development funds of various types (established by domestic and foreign investors) are also supported. For example, the US-China Green Fund was announced in the US-China Strategic and Economic Dialogue in 2016 and managed by US-China Green Investment Management Ltd (US-China Green Fund 2017). China Green Energy Development Fund was founded by China Green Fund, the Academy of China Energy at Peking University, and Beijing Meilinfudi Energy and Technology Consulting Company (China Green Times 2011). As of the end of 2017, there were about 250 green funds (governmental and nongovernmental) located in all provinces across the country. 90 Green financing from international institutions In addition to domestic sources, international institutions are also an increasingly important option for financ- ing green development in China. The Guideline on Establishing a Green Finance System encourages coopera- tion on green finance with international partners and institutions (PBoC et al. 2016). Joint-venture green devel- opment funds are also encouraged to be established together with foreign investors. The Chinese government has, for instance, worked closely with the World Bank Group on green finance. The Bank’s US$200 million lending project on green infrastructural improvement in FHTZ (under preparation) is an ongoing example. A green finance project between the International Finance Corporation (IFC) and the Ma’anshan municipal government (Anhui Province) also started in 2017 to establish the first small and medium commercial bank in China (Ma’anshan Rural Commercial Bank), with green finance as its core business. In 2017, the total scale of Ma’anshan Rural Commercial Bank’s 164 green loans amounted to RMB2.05 billion, covering areas such as renewable energy, water pollution prevention, green building, green agriculture, and energy efficiency. The current scale of the 23 green loans in 2018 has reached RMB 1.22 billion.91 Three to five similar “green commercial banks” are expected to be established through joint efforts by the IFC and Chinese commercial banks (Wei 2017). 89 Guideline on Establishing a Green Finance System (PBoC et al. 2016). 90 Presentation of Dr. Ma Jun at the Green Finance Workshop organized by the World Bank on June 26, 2018. 91 Presentation given by Ma’anshan Rural Commercial Bank at the Green Finance Workshop held by the World Bank in Beijing on June 26, 2018. 47 Summary 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. Among other general issues for the implementation of green finance, this will require (i) coordination with the different EIP standards in place, as well as with industrial and other relevant policies; (ii) increased focus on data collection and the evaluation of green finance initiatives’ impacts; and (iii) capacity building for green finance at the local level for local authorities, financial institu- tions, IPs, and industrial firms alike (IIGF and UNEP 2017). Public fiscal incentives, while important, will not be sufficient 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 goal. Likewise, the MOF and NDRC have developed the policy framework for green PPPs (NDRC and MOF 2014), which have grown rapidly and could provide sufficient financing of green infrastruc- ture in EIPs. 48 49 Conclusions and Policy Recommendations This report reviewed China’s policy and regulatory framework for greening IPs, which will be a key element of building an “ecological civilization.” IPs have become a major source of resource use and pollution, as well as a major generator of waste, but they also offer opportunities to target efforts to mitigate adverse environmen- tal impacts from industries. An important instrument to guide this process is the definition of national EIP standards. China has been a trailblazer by adopting several such standards in recent years and promoting them at a large scale. While volun- tary, these standards have started to be adopted by a growing, although still small number of Chinese IPs. They 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, critical implementation issues will have to be addressed, including the mainstreaming of EIPs and building of local capacity in all regions of the country; the strengthening of verification and supervision mechanisms to ensure continuous adherence to the standards by recognized EIPs; and data collection and the quantitative assessment of economic, environmen- tal, and social benefits from EIP models. This report shows that China’s policy and regulatory framework for EIP promotion is comprehensive and has started to drive the green transformation of IPs. A comparison between the Chinese standards and the EIP Framework recently developed by the World Bank Group, UNIDO, and GIZ confirms that both sets of standards are generally aligned, although there are opportunities to further strengthen Chinese standards by more closely aligning them with the EIP Framework. As they continue to evolve, the Chinese policy framework and standards for EIP promotion have significant potential to improve the sustainability of industries and to serve as a model internationally. To contribute to this objective, this report proposes the following policy recommendations: 1. Introduce more ambitious targets to increase the number of EIPs. The proportions of MEE-certified, NDRC-certified, and MIIT-certified EIPs are all lower than 5 percent of the total number of IPs in China. MIIT plans to increase the number of green certified parks to 100 by 2020 (which would increase the proportion of MIIT-certified green IPs to 3.9 percent of the total) and the NDRC plans to support “circular economy upgrade projects” in 75 percent of all national parks and in half of all provincial parks. Nonetheless, the achievement of these targets—which could take time and could face challenges in implementation—would still leave many Chinese IPs uncertified. Thus, China could consider setting more ambitious targets to promote EIPs. It could become mandatory, for instance, for all national IPs to gradually achieve compliance with national EIP standards by a specific date, taking the starting points of different IPs into account (for example, 10 percent of all national IPs should achieve compliance by 2020, 50 percent by 2025, and 100 percent by 2030). As part of this effort, it would be useful to scrap limits on the number of parks that can seek EIP certification. 50 2. Consider consolidating, updating, and streamlining EIP standards. The coexistence of three sets of standards managed by different government ministries and with significant overlap leads to a lack of clarity for IP managers and industries. Based on the experience acquired to date with the different standards, a consolidat- ed set of requirements for EIPs could be prepared and adopted. This new standard could include different categories to cover specific aspects emphasized by current standards, such as circularity. In addition, it would be useful to upgrade the scope of requirements and indicator, by, for instance, making all requirements explicit, adding indicators on processes and systems to achieve environmental targets, and developing indicators on the management of social aspects, which would allow the Chinese standards to become more aligned with the EIP Framework and become a global blueprint. Moreover, as recommended in the EIP Framework(Box 6.1), China could adopt a more complex framework that allows for tiering (such as bronze-level, silver-level, and gold-lev- el or one-star, two-star, three-star certification) to encourage competition between EIPs and continuous improvement. This effort could build on the green index used in the MIIT standard, for instance. Lastly, if consolidating the standards proves difficult in the short term, efforts could be made in the meantime to stream- line the disparate and cumbersome application procedures for each of the certificates. Box 6.1 Example of a tiered EIP certification system The figure below presents an illustrative example of approach for assessing EIP performance through a tiered certification system. Starting from the understanding that compliance with all applicable interna- tional, national, and local regulations should be the minimum requirement for any IP, this system includes three successive performance levels. Bronze-level certification would be awarded to IPs meet- ing the minimum requirements under the EIP Framework. The silver and gold levels would be reserved to EIPs meeting more stringent requirements. This system would send clearer signals about each EIP’s performance, foster competition among EIPs, and encourage continuous improvement by each individ- ual IP. Source: WBG, UNIDO, and GIZ (2017), p. 61 51 3 Seek an optimal set of indicators to balance economic competitiveness and environmental protection. An important objective of EIPs is to simultaneously achieve increased economic competitiveness and lower environmental impact. However, when comparing the three sets of Chinese EIP standards among themselves and with the EIP Framework, it is difficult to identify which indicators are best placed to achieve such a balance. Identifying an optimal set of indicators and targets, based on the economic modelling of IP’s economic and environmental performance and marginal trade-offs between them, would be useful. 4. Improve data collection and analysis systems to track IP performance against domestic and interna- tional EIP standards and expand access to information. Robust performance monitoring is key to track IPs’ progress against all environmental, social, and economic goals and EIP requirements, and to ensure transparen- cy and accountability. However, the comparative analysis and FHTZ case study suggest that management of Chinese IPs often does not have access to sufficient data to conduct such monitoring. To address this issue, China could put more emphasis on park-level data collection systems for EIP compliance. This could include the requirement for EIPs to conduct periodic assessments of economic, social, and environmental impacts within and beyond park gates, or to establish real-time environmental monitoring systems and publish the data collected on a common platform that would enable a comparison of IPs based on their environmental perfor- mance. Such results could be summarized in a yearly environmental report, a common platform, or a nation- wide ranking, which could help enhance park performance transparency and public engagement, strengthen incentives to improve environmental performance, and help build consensus on which indicators should be monitored and enforced at the institutional level. 5. Strengthen enforcement of existing regulations. While China has made considerable progress in building a comprehensive green regulatory framework for industrial parks, many of the regulations are not always fully enforced. This is because of several reasons, including insufficient administrative capacity, lack of clarity of the regulations or lack of strong incentives for local authorities to enforce the environmental regulations if they could undermine economic targets. The solution could be to further strengthen the local government capacity by allocating additional resources and providing relevant trainings, simplifying the regulations, and enhancing the transparency of IPs’ environmental performance to “name and shame” those IPs that do not meet the standards. Finally, a stronger central government’s supervision over IPs performance could also be useful. 6. Consider adopting a specific Law on IP Management. Although China has a comprehensive regulatory framework in place, it seems to suffer from excessive complexity, fragmentation, and possible duplication. To alleviate these concerns, the adoption of a stand-alone legislative act to promote efficient management of IPs and support their green transformation may be beneficial. Several countries, such as Korea, Turkey, and Vietnam, have adopted such laws to provide a clearer and more systematic legislative framework and could share their experience with China. 52 7. Leverage green finance for EIP development. As China continues to develop its green financial system, it will be important to ensure that green finance is fully leveraged to support the development of EIPs. The policy push to develop green credit, bonds, and PPPs should be well coordinated with the EIP strategy to ensure that sufficient financial resources can be channeled to meet the large need for green infrastructure projects in EIPs. To start, the main green credit and green bond initiatives could be reviewed to ensure that they give priority to projects supporting the greening of IPs and their tenants. Appendixes Please note that the English translation in the appendixes is meant only as a reference for non-Chinese speakers. Please refer to the original Chinese texts for any clarifications. Appendix A. Regulatory framework of IP management and EIP promotion in China Article I-6: “Firms and enterprises should prevent or reduce environmental pollution and ecological degradation, and should be legally responsible for the damage caused.” Article II-19: “Any industrial project which would potentially cause environmen- tal impacts should be approved by an environmental impact assessment (EIA).” Article IV-40: “Firms and enterprises should prioritize the use of clean energy, Environmental less-polluting technologies and equipment, and technologies that enable compre- hensive use and harmless disposal of waste.” Laws Protection Law NPC January 1, 2015 Article IV-41: “Industrial projects should be constructed together with pollution (NPC 2015) control facilities, and should be designed, installed, and applied simultaneously.” Article IV-42: “Enterprises that produce pollution should perform due diligence in preventing and controlling the production of waste gas, waste water, solid waste, etc.” Article IV-46: “The use and sale of industrial technologies, equipment, and products which cause severe environmental pollution are strictly forbidden.” Chapter VI: “Enterprises that violate the articles of Law of Environmental Protection should be held legally responsible based on relevant regulations.” 53 54 Article III-16: “Industrial/construction projects should be approved by an EIA before the construction/production starts.” Article III-17: “An EIA report of industrial/construction projects should include: basic information about the project; information about the surrounding environ- mental of the project; analysis, prediction, and assessment of potential environ- Environmen- mental impacts caused by the project; technological and economic demonstration NPC September 1, tal Impact of the measures taken by the project operator to protect the environment; cost-ben- Assessment 2016 efit analysis of the environmental impacts caused by the project; suggestions Law regarding the appropriate level of environmental supervision on the project; conclusions of the EIA.” (NPC 2016c) Article III-27: “When the construction and operation of the industrial project does not conform to the EIA report submitted, a second EIA should be conducted. Corrective suggestions should be provided to the project operator to conform to the original EIA report.” Chapter IV: “Enterprises that violate the articles of Environmental Impact Assess- ment Law should be held legally responsible based on relevant regulations” Article III-18: “An EIA should be conducted for all new, retrofitted, and extension Cleaner industrial projects. The materials used for production, the comprehensive use of Production resources, and the disposal and management of waste should be analyzed and technologies and equipment which have high resource-efficiency and low waste Promotion production should be prioritized,” Law Article III-24: “The construction of industrial projects should be designed and (NPC 2012) built using energy-saving and water-saving materials.” NPC July 1, 2012 Article III-26: “When economically and technically feasible, solid waste and waste heat from production should be recycled and reused by either the industrial project itself or others.” Article III-28: “Firms and enterprises should carefully supervise the resource use and waste production during the production process.” Chapter V: “Enterprises that violate the articles of Law of Clean Production Promotion should be held legally responsible based on relevant regulations” Article III-20: “Industrial enterprises should use water-saving technologies and facilities in production. Water usage should be monitored throughout the produc- tion process.” Circular Article IV-29: “All IPs should organize all firms within the parks to comprehen- sively use resources for production and promote the development of circular Economy January 1, economy.” Promotion 2009 “IPs are encouraged to participate in the exchange and utilization of waste, NPC Law gradient utilization of energy, intensive use of land, and circular use of water”; (NPC 2009a) “infrastructure and other equipment are encouraged to be shared among firms.” “All IPs should legally conduct EIAs and undertake necessary measures of environmental protection and pollution control to make sure the environmental quality within the IPs meets relevant requirements.” Article I-5: “Firms and enterprises whose waste disposal or storage does not meet Environmen- the national or local environmental requirements should pay an environmental tal Protection tax.” January 1, Tax Law NPC Chapter II: “Firms and enterprises whose air emissions, water pollution, solid 2018 waste production, and industrial noise pollution exceed the reference level (NPC 2018) (required by this Law) should pay an environmental tax according to the emission levels of pollutants.” Article III-21: “Firms and enterprises that produce industrial waste water should obtain an ‘emission permit’ before emitting waste water.” Article IV-44: “Industrial firms should reduce the emission of waste water and pollutants by upgrading waste water treatment technologies and reusing waste Water water to the maximum extent.” Pollution Article IV-45: “Industrial firms should take effective measures to collect and Prevention manage all the waste water created to prevent environmental pollution. Toxic and Control NPC June 27, 2017 industrial waste water should be collected and managed separately and is not allowed to be emitted after dilution”; “industrial zones should build their own Law waste water treatment facilities, install automatic monitoring systems, connect the (NPC 2017) system with the local environmental protection department’s supervision system, and ensure the effective operation of the system.” “Industrial waste water should be pre-treated before being emitted into waste water treatment facilities.” Article IV-48: “Industrial firms should apply clean production technologies to make more effective use of raw materials and reduce the creation of waste water.” 55 56 Article III-19: “Industrial firms that emit industrial air pollutants (listed in Article 78 of this Law) should obtain emission permits before emitting pollutants.” Article III-24: “Industrial firms that emit industrial air pollutants (listed in Article Air Pollution 78 of this Law) should install and effectively use real-time automatic air pollutant Prevention January 1, monitoring systems, connect the system with local environmental protection and Control department’s supervision system, and keep the information public at all times.” 2016 NPC Article IV-43: “Industrial firms that emit TSP (total suspended particulates), SOx Law (sulfur oxides), and NOx (nitrogen oxides) should apply clean production technol- (NPC 2016a) ogies and install pollutant control facilities to reduce air emissions to the maxi- mum extent.” “Industrial firms should recycle combustible waste gas created during industrial production.” Article III-31: “Industrial firms should select raw materials, energy, and other Law on the resources— as well as apply advanced production technologies – that reduce the Prevention creation of industrial solid waste and lower the harm brought by industrial solid and Control waste.” of Environ- November 7, Article III-32: “Industrial firms should report accurate information on the type, NPC amount, flow direction, storage, and disposal of industrial solid waste to local mental 2016 environmental protection departments.” Pollution by Article III-33: “Industrial firms should make effective use of solid waste created Solid Waste based on their economic and technological conditions. For solid waste that cannot (NPC 2016d) be utilized, specific places for safe storage or harmless disposal of solid waste should be built.” Renewable Article IV-17: “Firms and enterprises are encouraged to use solar-powered water Energy Law December 26, NPC heating system, solar heating and cooling system, and solar PV (photovoltaic) (NPC 2009) 2009 systems.” Energy Article III-30: “High energy-consuming industrial firms should upgrade their Conservation NPC production technologies to be ‘energy-saving.’” July 2, 2016 Law Article III-31: “Industrial firms are encouraged to apply advanced energy use (NPC 2016b) monitoring systems and energy use control technologies.” Ten Measures Measure III: “Promote clean production: air pollutant emissions from key industri- of Air Pollution al sectors should be reduce by at least 30 percent.” Prevention and State June 14, 2013 Measure V: “Construction of any new project is not allowed before being Control Council approved by an EIA.” (State Council Measure VII: “Enact more stringent laws, regulations, and standards regarding air 2013) pollutant emission to ‘force’ more rapid industrial upgrading.” Article I-1: “Water pollution management in industrial zones is key and should be further enhanced”; “industrial waste water in industrial zones must be pretreated to Action Plan for meet relevant requirements before emitting into waste water treatment facilities.; Water Pollution “For both new and retrofitting industrial zones, waste water treatment facilities Prevention and must be designed and built simultaneously.” Regulations Control MEE April 16, 2015 “Industrial zones should install real-time automatic monitoring systems for waste (State Council water emissions.” 2015a) Article II-5: “Phase out outdated industrial production facilities and technologies and ensure that new facilities and technologies meet the latest environmental requirements.” Article II-7: “Promote the recycle and reuse of industrial waste water. Industrial production should prioritize the use of recycled water.” Article VI-18: “Industrial production that produces heavy metal are encouraged to Action Plan for apply advanced and appropriate production technologies. By 2020, heavy metal Soil Pollution State emission from industrial production must be at least 10 percent lower than 2013 Prevention and May 28, 2016 Council level.” Control (State Council “Industrial solid waste should be properly treated or disposed to prevent leakage 2016b) into the soil.” Section 1, paragraph 2: “Development must be green, circular, and low-carbon General development. A balance between economic development and environmental Guideline on protection should be achieved.” the Industrial Section 1, paragraph 3: “Further enhance the control and management of industrial Reform of State pollution.” National Ecological September Council Section 5, paragraph 18: “Gradually establish the ‘quota management scheme’ of Policies Civilization 21, 2015 (State Council industrial water usage for industries that consume large amounts of water.” 2015c) Section 5, paragraph 26: “Further improve the reuse and recycle of resources and materials. For certain raw materials, manufacturers are required to use a certain percentage of materials that are regenerated from used materials or resources.” 57 58 Notice by the Section 3, paragraph 5 proposes to promote green manufacturing and establish a State Council green manufacturing system, including the development of green IPs: “…to May 8, develop green IPs and promote industrial symbiosis within IPs… support green on the “Made State 2015 in China 2025” firms that implement green development strategy, green standards, green manage- Council ment, and green production.” Project (State Council The “Made in China 2025” project also proposes to establish 100 green demon- 2015b) stration IPs and 1,000 green demonstration factories by 2020. Article 43-1: “Promote energy saving in industrial sectors.” 13th Five-Year Plan on the Article 43-5: “Promote and accelerate the ‘circular economy transformation’ in IPs. Promote industrial symbiosis between enterprises and between industries.” Economic and Social Article 44-2: “Implement plans and policies that ensure all industrial polluters NDRC March meet emission standards.” Development 16, 2016 of the People’s “Enhance the supervision on industrial pollution and publish the names of indus- Republic of trial firms which do not meet emission standards.” China Article 46-1: “Effectively control carbon emissions from the industrial sector and (NDRC 2016b) promote low-carbon development of the industrial sector.” Section 1, “key objectives”: “Establish a preliminary green, circular, and low-car- bon industry system. To achieve circular production of enterprises, [promote] circular development of IPs, and circular combination of different industries so Action Plan for that resource efficiency is increased and waste generation is reduced.” Leading Circular Section 2, paragraph 5: “Design specific circular economy development plans for new and retrofitted IPs to meet the requirements of having ‘reasonable spatial Economy NDRC April 21, arrangement, optimal industry structure, circular industry chains, efficient resource Develop- 2017 use, concentrated pollution management, green infrastructure, and normalized ment(NDRC park operation and management’ within IPs. Upgrade existing IPs to move toward 2017) circular economy performance, establish circular economy industrial chain, and strengthen connections between enterprises and between industries.” Section 5, paragraph 17: “Establish circular economy performance evaluation systems based on the two indicators: resource productivity and the resource recycling rate. Conduct evaluation of IPs regularly on their circular economy performance.” Section 7, paragraph 25: “Draft and implement an Action Plan on Circular Economy Upgrade for IPs. Each province should draft and implement its own provincial action plans. Encourage the national EIPs to lead the “circular economy upgrade” and include the evaluation of this upgrade in the general IP assessment scheme. By 2020, a “circular economy upgrade is planned to get started in 75 percent of national IPs and 50 percent of provincial IPs.” The Guidelines clearly introduce the requirements and procedure of application, Guidelines on the Management of National establishment, approval, performance check, and management for an ordinary IP Eco-Industrial Parks MEE, MOC, December 16, MOST 2015 to become a national EIP. Supportive policies for becoming EIPs are briefly (MEE, MOC, and MOST 2015) introduced, and negative consequences for approved EIPs to fail to maintain good performance are described as well. Guiding Notice on Strengthen- The Guiding Notice specifically covers the development and promotion of EIPs in MEE, MOC, ing the Development of MOST December 5, National Eco-Industrial Parks 2011 China, describing the significance, general requirements, key objectives and tasks, (MEE, MOC, and MOSt 2011) supportive policies, and measures for establishing EIPs. The Plan outlines the blueprint for the green development of China’s industrial sector during the 13th Five-Year Plan period. The establishment of a green Plan for Industrial Green Development (2016− manufacturing system is among the ten key objectives, including the construction MIIT June 30, 2016 2020) of green IPs (together with the development of green products, green factories, and (MIIT 2016c) green industrial chains). The Plan proposes to establish 100 representative and high-level demonstration green IPs by 2020. The Standard establishes evaluating methods, indicators, and methods for data collection and the calculation method of indicators. Standard for National Demonstration Eco-in- MEE January 1, 2016 It is used as a reference for the assessment and evaluation of National Demonstra- dustrial Parks (MEE 2016) tion EIPs (whether an EIP is qualified as a National Demonstration EIP), which Standards facilitates the construction and management of EIPs. & indicators Appendix 2 of this Notice introduces the requirements for the evaluation of Notice on the Establish- ment of A Green “Green IPs” (what requirements should be met to qualify as a “green IP”), the Manufacturing System MIIT September 3, 2016 qualification indicators used to evaluate the “greenness” of IPs, and the calculation (MIIT 2016b) methods for the “green index for IPs.” 59 60 The NDRC standard includes a total of 31 indicators, categorized into 8 groups: resource productivity (5); resource consumption (5); comprehensive utilization of Notice on resources (5); pollutant emissions (8); other indicators (3); characteristic indicators Recommend- (to be filled in by industrial parks (5); projects subsidized by central government ing Key Candidate finance (3); and self-implemented projects (2). March 29, Industrial Parks NDRC, 2017 The standard emphasizes the circular economy performance of IPs, leading to a for Circular MOF Economy focus on resource productivity, efficiency, and pollutant emissions. Transformation in 2017 The standard does not set target value for indicators. Instead, it provides an (NRDC and information sheet for IPs’ self-assessment against their previous performance and MOF 2017b) estimated future progress. Specification The Specification establishes the basic requirements for Circular Economy for Circular Performance Evaluation of IPs, the indicators for the evaluation—namely, the Economy Performance “resource productivity” (economic output/resource input) and “resource recycling March 1, 2017 Evaluation of CNIS rate” (recycled resources/total waste created) — and the calculation method of the Industrial Parks (CNIS 2017) “Circular Economy Index.” It is used to evaluate the circular economy perfor- mance of national and provincial industrial zones/parks. Source: World Bank compilations. Note: Please note that the English translation in the appendix is meant only as a reference for non-Chinese speakers. Please refer to the original Chinese texts for clarification. CNIS =China National Institute of Standardization; EIA = environmental impact assessment; EIP = eco-industrial park; IP = industrial park; MEE = Ministry of Environmental Protection; MIIT = Ministry of Ministry of Industry and Information Technology; MOC = Ministry of Commerce; MOST = Ministry of Science and Technology; NDRC = National Development and Reform Commission; NPC = National People’s Congress. 61 Appendix B. Standard for National Demonstration EIPs (MEE) Require Compulsory or No Indicators Unit - Category optional ment Industrial output from high- 1 tech firms/total industrial % ≥30 output Industrial added value (IAV) RMB10,000 2 ≥15 Meet at least 1 Economic per capita /person of these 4 development IAV growth rate of the IP in 3 % ≥15 requirements the past 3 years IAV generated from reuse and 4 recycling of resources/total % ≥30 IAV Number of newly established 5 / ≥6 Compulsory eco-industrial chains Industrial Comprehensive utilization 6 % ≥70 Meet at least 1 symbiosis rate of industrial solid waste of these 2 Circular utilization rate of 7 % ≥80 requirements reusable resources IAV per unit of land for RMB100 8 ≥9 industrial use million /km2 Meet at least 1 Resource saving Growth rate of IAV per unit of these 2 9 of land for industrial use in % ≥6 requirements the past 3 years ≤0.6 when Annual IAV Resource growth rate growth saving of total rate is Energy consumption elasticity energy positive; 10 Compulsory rate consump- ≥0.6 tion/annual when growth rate IAV 62 ≤0.6 when Annual IAV growth rate growth of total rate is Energy consumption elasticity energy positive; 10 Compulsory rate consump- ≥0.6 tion/annual when growth rate IAV of IAV) growth rate is negative Ton of Resource Total energy consumption per standard saving 11 ≤0.5 Meet at least 1 unit of IAV coal/ of these 2 RMB10,000 requirements % of renewable energy 12 % ≥9 consumption ≤0.55 when IAV Annual growth growth rate rate is of fresh Fresh water usage elasticity positive; 13 water usage/ Compulsory rate ≥0.55 annual when growth rate IAV of IAV) growth rate is negative Fresh water usage per unit of m3/RMB10, Meet at least 1 of 14 ≤8 these 3 IAV 000 requirements 63 Reuse rate of industrial 15 % ≥75 waste water At least 20% for cities with Meet at least water 1 of these 3 16 Reuse rate of reclaimed water % shortage; requirements 30% for Jing-Jin- Ji region; and 10% for others Key pollution emitters in IPs 17 Yes/No Yes Compulsory meet emission requirements Total emission of national and 18 local key pollutants in IPs Yes/No Yes Compulsory meet emission requirements Number of extremely severe 19 and severe emergent Number 0 Compulsory environmental accidents in IPs Soundness/completeness of 20 IPs’ environmental % 100 Compulsory Environ- management ability mental Enforcement rate of clean protection 21 production verification for key % 100 Compulsory firms in IPs Concentrated wastewater 22 Yes/No Yes Compulsory treatment facilities Soundness/completeness of 23 IPs’ environmental risk % 100 Compulsory control system Reuse and safe disposal rate 24 of industrial solid waste % 100 Compulsory (including dangerous waste) 64 Reuse and safe disposal rate of 24 industrial solid waste (includ- ing dangerous waste) ≤0.3 Annual when growth rate IAV of pollutant growth emission/ rate is Emission elasticity rate of key annual positive; growth rate Compulsory 25 pollutants ≥0.3 of IAV) when IAV growth rate is negative Carbon emission abatement 26 % ≥3 Compulsory rate per unit of IAV Wastewater emission per unit Ton/ 27 ≤7 of IAV RMB10,000 Meet at least 1 of these 2 Ton/ Solid waste generation per unit requirements 28 RMB10,000 ≤0.1 of IAV RMB Green coverage rate (area covered 29 % ≥15 Compulsory by plants/total area of IP) Environmental information 30 disclosure rate for key firms in IPs % Compulsory 100 Soundness/completeness of Information 31 ecological industry informa- % 100 Compulsory disclosure tion platform Promotional activities with the 32 Times/year ≥2 Compulsory topic of ecological industry Source: World Bank compilations. Note: Please note that the English translation in the appendix is meant only as a reference for non-Chinese speakers and readers. Please refer to the original Chinese texts for any clarifications. When the economic output of a certain industrial sector exceeds 70 percent of the total industrial output of an IP, it is considered a Level I industry under the clean production evaluation system, or internationally advanced level. IAV = industrial added value; IP = industrial park; MEE = Ministry of Ecology and Environment. 65 Appendix C. Basic requirements and performance indicators of applying for circular economy transfor- mation demonstration IPs (NDRC and MOF) Basic requirements Circular economy transformation demonstrations IPs must meet the following requirements from the National Development and Reform Commission (NDRC) and the Ministry of Finance (MOF): - The applicant IP should have already submitted the Demand for Circular Economy Transformation during the 13th Five-Year Period a according to the requirements by the NDRC in the Notice on Conducting Surveys of the Demand of IPs for Circular Economy Transformation.b - The recommended IPs from each province should be on the list of the Catalogue of Verified Development Zones in China,c or development zones that have been approved by the State Council since 2007, or national circular economy pilot zones that have already been verified since 2007. - The applicant IP should be in line with the general plan of land use and the general plan of urban develop- ment. - Projects within the applicant IP should accord with national industry policies. - The applicant IP should have clear boundaries and a managerial committee or an investment/operation entity in place for park management. - The applicant IP should reach a certain level of industry basis and industrial scale. - The applicant IP should have relatively large potentials for land use. - The applicant IP has a relatively large amount of waste generation with relatively large potentials in the “reduce, reuse, and recycle” of resource utilization and circular economy transformation. - The applicant IP has sound/complete infrastructure and environmental protection facilities that are in line with national standards. The park has not had serious environmental pollution accidents or other unexpected incidents in the past three years. - The applicant IP has the foundation for circular economy transformation, and has already started relevant preparation or work. - Priority goes to IPs recommended by demonstration cities for fiscal policies in energy conservation and national demonstration cities or counties for circular economy development; national and provincial circular economy transformation pilots are prioritized. Source: NDRC and MOF (2017b) Note: IP = industrial park. a. 十三五”循环化改造需求 b. 国家发展改革委办公厅关于开展园区循环化改造需求调查的通知（发改办环资〔2016〕513号） c. 中国开发区审核公告目录（2007年第18号） 66 Table C.1 Performance indicators Categories No. Indicators Unit 1 Total industrial output of the IP RMB10,000 2 *Resource productivity RMB10,000/ton Resource 3 *Energy productivity RMB10,000/ton of standard coal productivity 4 *Land productivity RMB10,000 /hectare 5 Water resource productivity RMB/m3 6 *Total energy consumption 10,000 tons of standard coal *Total consumption of water 7 m3 resources 8 *Water usage per unit of GDP m3/RMB10,000 Resource Energy consumption per unit of Tons of standard 9 consumption industrial output coal/RMB10,000 Key product I: energy consumption 10 Tons of standard coal/ton per unit of production Key product I: water consumption m3/ton per unit of production *Comprehensive utilization of 11 10,000 tons industrial solid waste *Comprehensive utilization rate of Comprehen- 12 ％ industrial solid waste sive utilization 13 *Reuse of industrial wastewater 10,000 m3 of resources 14 *Reuse rate of industrial wastewater ％ Comprehensive utilization of used 15 10,000 tons resources (including imports) 16 *SO2 emission 10,000 tons Pollutant 17 *COD emission 10,000 tons emissions 18 *Ammonia and NO x emission 10,000 tons 67 19 *Nitride emission 10,000 tons Pollutant *CO2 emission per unit of local Ton/ emissions 20 Pollutant economic output RMB10,000 emissions 21 Industrial solid waste generation 10,000 tons 22 Industrial solid waste disposal 10,000 tons 23 Industrial wastewater emission 10,000 m3 *Connectivity of the IP’s circular 24 ％ economy industrial chain Other *Non-fossil fuel consumption / total indicators 25 ％ primary energy consumption 26 Ratio of renewable energy ％ Characteristic indicators Projects 27 Number of projects Number subsidized by 28 Total investment RMB10,000 central government Subsidy from central government 29 RMB10,000 finance finance Self- 30 Number of projects Number implement 31 Total investment RMB10,000 projects Source: NDRC and MOF (2017c) Note：Please note that the English translation in the appendix is meant only as a reference for non-Chinese speakers and readers. Please refer to the original Chinese texts for any clarifications. Indicators marked with asterisks (*) are key indicators and must be filled in the table. IP = industrial park; CO2 = carbon dioxide; COD = Chemical Oxygen Demand; NOX = nitrogen oxide; SO2 = sulfur dioxide. 68 Appendix D. Requirements/Qualifications of Green IPs (MIIT) Basic requirements Green IPs must meet the following basic requirements from the Ministry of Industry and Information Technology (MIIT): - IPs must comply with and effectively implement relevant regulations and policies on green, circular, and low-carbon economy that were established on both the national and provincial/municipal levels. - IPs must have had no severe environmental accidents (resulting in major pollution or ecological damage) in the past three years. - IPs must achieve the goal regarding energy efficiency and carbon reduction set by the national or provincial/- municipal government. - The level of emissions of key pollutants must not exceed the limit set by national or provincial/municipal government. - All key enterprises must pass the Clean Production Examination. Key enterprises are enterprises that are required by the Law of Clean Production Promotion to pass the Clean Production Examination. - Enterprises should not use outdated technologies and equipment, or produce products, that are listed in “elim- ination directory.” - A specific institute for green development should be established in the parks with at least two professionals. - Parks are encouraged to establish and operate environmental management systems, energy management systems, and energy surveillance platforms. - Parks are encouraged to use renewable energy, such as wind and solar. General Reference Compulsory No. Specific indicators indicators value or optional Energy industrial added value (IAV)/energy input 1 3 Compulsory utilization ratio (RME10,000/tce) green index 2 renewable energy (%) 15 Compulsory (EG) 3 clean energy (%) 75 Compulsory 4 IAV/water input ratio (RMB/m ) 3 1,500 Compulsory 5 IAV/land use ratio (100 million RMB/km2) 15 Compulsory Resource solid waste that is comprehensively utilized utilization 6 95 Compulsory (%) green index 7 water (for industrial use) that is reused (%) 90 Compulsory (RG) Select 2 out 8 reclaimed water that is reused (%) 30 of 4 69 9 residual heat that is reused (%) 60 Select 2 out 10 waste gas that is recycled/reused (%) 90 of 4 11 renewable resources that are reused (%) 80 12 wastewater treatment facilities (Yes/No) Yes Compulsory green buildings among all newly constructed 13 30 industrial buildings (%) Select 1 out Infrastructure green buildings among all newly constructed of 2 green index 14 60 public buildings (%) (IG) park area that can be covered by public 15 90 Select 1 out transport (%) of 2 16 renewable energy public buses (%) 30 17 IAV from high-tech industries/total IAV (%) 30 Compulsory Industry green 18 IAV from green industries/total IAV (%) 30 Compulsory index (CG) 19 IAV per capita (RMB10,000/person) 15 Select 1 out 20 modern service industry (%) 30 of 2 industrial solid waste (dangerous waste 21 100 Compulsory included) properly disposed and utilized (%) carbon emission reduction % per RMB10,000 22 3 Compulsory of IAV (%) wastewater emission per IAV Ecological 23 5 Compulsory (ton/RMB10,000) environment 24 elasticity rate of main pollutantsa 0.3 Compulsory green index days when air quality falls into the first two (HG) 25 80 Compulsory tiers (“Very good” and “Good”) (%) 26 green coverage rate (%) 30 27 road area that is covered by tree shadows (%) 80 Select 1 out parking lot area that is covered by tree of 3 28 80 shadow (%) 70 soundness of the Green IP Standard System 29 Sound Compulsory (Sound/Not sound) Management completed a development plan of the Green green index 30 Yes Compulsory IP (Yes/No) (MG) soundness of the Green IP Information 31 Sound Compulsory Platform (Sound/Not sound) Source: MIIT (2016b) Note: IAV = industrial added value; IP = industrial park; tce = ton of standard coal equivalent a.The elasticity rate of a certain pollutant = the annual rate of increase of emissions (%)/the annual growth rate of industrial added value (%); the elasticity rate of key pollutants = the sum of elasticity rates of pollutants/number of key pollutants. Method of calculating the IP green index and other green indexes The IP green index is calculated as follows: where: GI is the green index of IPs, EG is the energy utilization green index EGi is the index value of indicator i (within the EG category) of the IP, and EGbi is the reference value of indicator i (within the EG category). This formula also applies to the: -Resource utilization green index (RG) -Infrastructure green index (IG) -Industry green index (CG) -Ecological environment green index (HG) -Management green index (MG). Note: Please note that the English translation in the appendix is meant only as a reference for non-Chinese speakers and readers. Please refer to the original Chinese texts for any clarifications. 71 Appendix E. Comparison of “China Green Triangle” against the EIP Framework Table E.1 A detailed comparison of the three Chinese IP green standards The EIP Framework MIIT NDRC MEE Park management (prerequisites) Topic Subtopic Park management entity √√√ √√√ √√√ Park (Available [Yes/No]) BR-6 BR-5 EP-20 management Park property, common √√ √√ √ services infrastructure and services IG-12, BR-7 BR-9 EP-22, ID-31 (Available [Yes/No]) √√ Monitoring performance and risks √√ × EP-20, ID-30, Monitoring (Available [Yes/No]) MG-30, 31 31 and risk Information on applicable management √√ √√ regulations and standards × MG-29 ID-30, 31 (Available [Yes/No]) Planning and Master plan √√ √ × zoning (Available [Yes/No]) MG-30, 31 ID-31 Park management (performance indicators) Topic Subtopic (unit [target value]) Park management empowerment × × × Park (% of firms [100%]) management Park management entity property services and common infrastructure × × × (% of firms [75%]) 72 EIP performance and critical risk √√ √√ Monitoring management MG-31 EP-23, ID-31 and risk × (frequency of reports [every 6 (frequency (frequency not management months]) not stated) stated) Environment (prerequisites) Topic Subtopic √ √ Environmental/Energy MG-31 Management EP-20, ID-31 Management Systems (EMS and (ISO and × (ISO certified EnMS, respectively) certified monitoring standards not (Available [Yes/No]) standards not stated) stated) √√ √ MG-29~31 ID-30, 31 Energy efficiency (not × (no specific (Available [Yes/No]) specifically programs in on energy place) efficiency) Energy √ √√ CUR-15 RG-9 Exchange of waste heat energy (not (not strategy, × (Available [Yes/No]) specificall but y on heat requirement) recovery) √√ CUR- √√ √√ Water efficiency, reuse and 13,14 RG-7,8 RS-15,16 Water recycling (not plan, (not plan, but (not plan, but (Available [Yes/No]) only requirement) requirement) indicators ) 73 √ √√ PE-20; √√ EG-2,3; HG- OI-25,26 RS-12; EP-26 22 (only (target for (target for includes Air, GHG emissions and pollution carbon carbon CO2 prevention reduction, no reduction, no emission Climate (Available [Yes/No]) monitoring monitoring and change and the program program renewable natural required for required for energy environment other GHGs) other GHGs) indicators ) √ √ Environmental assessment and HG-26~28 EP-29 ecosystem services (green × (green coverage (Available [Yes/No]) coverage in in particular) particular) Environment (performance indicators) Topic Subtopic (unit [target value]) √ Environmental/Energy BR-7, MG- √ Management Management Systems (EMS and 31 EP-20, ID-31 and EnMS, respectively) (ISO × (ISO certified monitoring (% of firms with >250 employees certified standards not which have such systems [40%]) standards not stated) stated) Energy consumption (% of combined park & firm level Energy × × × energy consumption metered and monitored [90%]) 74 √√ PE-20; √√√ Renewable and clean energy OI-25,26 √√√ EG-2,3; HG- (% of renewable energy use in (require RS-12; EP-26 22 park relative to national average % data on (target for (target for [≥]; max. carbon intensity target renewable renewable renewable kg CO2e/kWh [in line with local energy % energy % and Energy energy % Energy norms and industry sector and carbon and carbon benchmarks]) carbon reduction) reduction) emissions ) √√ √√√ RP-3, √√√ Energy efficiency EG-1 RC-9,10 RS-10,11 (kWh/$ turnover [in line with local (industrial (no (energy input / norms and industry sector added value / specific industrial added benchmarks]) energy input) target is value) set) √ RP-5, √ RC-8 √ Water consumption RG-4 (require RS-13,14 (% of water demand that is (requirement data on (limits on water sustainable[100%]) on water use water usage) efficiency) resource Water productivi ty) √√ √√ IG-12 Water treatment EP-22 (only (% of waste water treated/total × (only requires requires WW waste water [95%]) WW treatment treatment facilities) facilities) 75 √√√ √√√ √√ Water efficiency, reuse and recycling RG-7,8 RS-15,16 CUR-14 (% of water reused/total water consumed (90%) (higher (75%) (higher (no target [50%]) target value than target value than value is set) EIP) EIP) √√√ √√√ √√ Waste/by-products re-use and recycling RG-6 IS-6 CUR-12 (% of solid waste reused/total waste (95%) (higher (70%) − (higher (no target [20%]) target value than target value than value is set) EIP) EIP) √√√ √√√ Dangerous and toxic materials HG-21 EP-24 (% of firms which appropriately handle × (target value (target value such materials [100%]) [100%]) [100%]) Waste disposal × × × (% of waste to landfill [<50%]) √ √ Flora and fauna HG-26~28 EP-29 (% of open space used for native flora and (green coverage × (green coverage fauna [5%]) instead of native instead of native flora and fauna) flora and fauna) √√ √√ BR-3,4 Air, GHG emissions, and pollution EP-17,18,20, HG-24,25 prevention 21,23 (emission (% of firms which have pollution (emission requirements for prevention and emission reduction × requirements for all firms & strategies beyond national regulations key firms & risk environmental [50%]; % of largest polluters which have management management a risk management framework [30%]) framework on park framework on level) park level) 76 Social (performance indicators) Topic Subtopic (unit [target value]) OH&S management system (% of firms with more than 250 × × × employees that have a well- functioning OH&S system [75%]) Grievance management (% of grievances addressed within 90 days [100%]; % of grievances Social brought to conclusion [60%]; % of × × × management firms with more than 250 systems employees that have a code of conduct system to deal with grievances [75%]) Harassment response (% of firms with more than 250 employees that have a harassment × × × prevention and response system in place [75%]) Primary social infrastructure (% of surveyed employees × × × reporting satisfaction with social Social infrastructure [80%]) infrastructure IP security (% of reported security and safety × × × issues adequately addressed within 30 days [100%]) 77 Capacity building (% of firms with more than 250 Social employees with a program for infrastructure skills/vocational training × × × [75%]; % of female workforce who benefit from such program [≥ of]) √ MG-31 √ Community dialogue (a green IP ID-30,31 (% of surveyed community information × (information members who are satisfied with Local platform for platform for community dialogue [80%]) community info info disclosure) outreach disclosure) √√√ Community outreach ID-32 (No. of outreach activities/year × × (target value [h [2]) ac Economic (prerequisites) Topic Subtopic Employment Type of employment × × × generation (Available [Yes/No]) Local business SME development and SME × × × (Available [Yes/No]) promotion √ Market demand for EIP services Economic MG-30 and infrastructure × × value creation (IP (Available [Yes/No]) development 78 Economic (performance indicators) Topic Subtopic (unit [target value]) Local employment generation (% of employees who live within × × × Employment daily commuting distance [60%]) generation Type of employment (% of employees employed × × × through direct employment [25%]) Local value added (% of firms using local suppliers or Local business service providers for munity and SME dialogue [ training [75%];25%]; % × × × promotion of total procurement value of park management entity by local firms or service providers [90%]) Investment-ready park for firms Economic (average percent occupancy rate – × × × value creation rented or used by resident firms over 5 years [50%]) Source: World Bank compilation Note: The number of check markets (√) refer to the extent of compatibility/similarity between requirements/stan- dards. √√√ = high level of compatibility/similarity √√ = medium level of compatibility/similarity √ = low level of compatibility/similarity but still share similarities × = no or extremely low compatibility/similarity The letters and numbers in the final three columns refer to the index and indicators' number. BR = basic requirements; CUR = comprehensive utilization of resources; EIP = eco-industrial park; EP = environmental protection; GHG = greenhouse gas emissions; HG = ecological environment green index; ISO = International Organization for Standardization; ID = information disclosure; MEE = Ministry of Ecology and Environment; IG = infrastructure green index; MIIT = Ministry of Industry and Information Technology; MG = management green index; NDRC = National Development and Reform Commission; RS = resource saving; OH&S = occupational health and safety; CO2 = carbon dioxide; SME = small and medium enterprise. 79 Table E.2 A detailed comparison between the Chinese standards and the EIP Framework The EIP Framework standards MIIT NDRC MEE √√√ 1/5 0 1/5 √√ 3/5 0 2/5 √ 1/5 0 2/5 Prerequisites × 0 5/5 0 (subtopics) (5) √/× 5/0 0/5 5/0 No. of 10 0 9 Park √ management √√√ 0 0 0 √√ 1/3 0 1/3 Performance √ 0 0 0 indicators × 2/3 3/3 2/3 (subtopics) (3) √/× 1/2 0/3 1/2 No. of 2 0 2 √ √√√ 0 0 0 √√ 4/6 1/6 2/6 √ 2/6 2/6 3/6 Prerequisites × 0 3/6 1/6 (subtopics) (6) √/× 6/0 3/3 5/1 No. of 10 4 7 √ Environment √√√ 5/12 0 5/12 √√ 2/12 4/12 2/12 Performance √ 3/12 1/12 3/12 indicators × 2/12 7/12 2/12 (subtopics) √/× 10/2 5/7 10/2 (12) No. of 22 9 22 √ 80 √√√ 0 0 0 √√ 1/2 0 0 √ 0 0 0 Prerequisites × 1/2 2/2 2/2 (subtopics) (2) √/× 1/1 0/2 0/2 No. of 2 0 0 √ Social √√√ 0 0 1/8 √√ 0 0 0 Performance √ 1/8 0 1/8 indicators × 7/8 8/8 6/8 (subtopics) (8) √/× 1/7 0/8 2/6 No. of 1 0 4 √ √√√ 0 0 0 √√ 0 0 0 √ 1/4 0 0 Prerequisites × 3/4 4/4 4/4 (subtopics) (4) √/× 1/3 0/4 0/4 No. of 1 0 0 √ Economic √√√ 0 0 0 √√ 0 0 0 Performance √ 0 0 0 indicators × 4/4 4/4 4/4 (subtopics) (4) √/× 0/4 0/4 0/4 No. of 0 0 0 √ 81 √√√ 1/17 0 1/17 √√ 8/17 1/17 4/17 Prerequisites √ 4/17 2/17 5/17 (subtopics) × 4/17 14/17 7/17 (17) √ /× 13/4 3/14 10/7 No. of 23 4 16 √ Total √√√ 5/27 0 6/27 √√ 3/27 4/27 3/27 Performance √ 4/27 1/27 4/27 indicators × 15/27 22/27 14/27 (subtopics) √ /× 12/15 5/22 13/14 (27) No. of 25 9 28 √ Source: World Bank compilation Note: EIP = eco-industrial park; MEE = Ministry of Ecology and Environment; MIIT = Ministry of Industry and Information Technology; NDRC = National Development and Reform Commission 82 Appendix F. Self-assessment by Fuzhou High-tech Zone against the EIP Framework Items in white: Meet EIP standards Items in blue: Data are unavailable, but the Zone believes that it meets EIP standards Items in orange: Does not meet EIP standards OR data are unavailable but the Zone believes it does not meet EIP standards Require- ment Explanation and proposed plan to close the EIP standards Description met? gaps (√/×) Park management (prerequisites) Topic Subtopic The Fuzhou high-tech zone management A distinct park management entity exists to committee (FZHT MC hereafter) is in charge of Park management entity handle park planning, operations and √ economic, social, and management affairs management, and monitoring. within the zone. Park management entity to manage and maintain the IP property, common infrastructure, and services as prescribed in the tenant contract and the park’s Master Plan. This should include, but is not limited to the following: Park • Property management, including plot allotments, reallotments, development, and land use monitoring. management • Utilities, roads, and technical units such as waste and wastewater treatment The FZHT MC established departments (such as services plants and operations, power and energy systems. Park property, common a land resource bureau, construction bureau, and • Waste collection areas and services. infrastructure and • Maintenance and repair workshops. √ environmental protection bureau) that manage services • Security and emergency response services and facilities. • Common landscaping, buffer zones, street lighting, security surveillance, various common affairs. Simultaneously, FZHT and street cleaning. MC hires a third party to provide more • Common employee and tenant facilities. • Provide facilitating services to and between tenant firms (for example, professional services. networking, collaboration, and training opportunities). • Engagement with the park’s stakeholders and business representatives. Park management entity maintains an EIP framework monitoring system in place, tracking: • Progress on environmental, social, and economic performance at the park level. • Critical risk factors and related responses, at least for: Relevant managerial departments and √ o Risk points where the accidental release of monitoring system are in place. poisonous solid, liquid, and gaseous effluents, including during transportation and Monitoring disposal ,when fire hazards are possible. performance and risks o Applicable natural disaster risks (for example, earthquakes). Monitoring Where required, Park management has a plan in and risk place to react to possible negative impacts due to management climate change risks (heat waves and droughts, storms and floodwater events). All adaption needs √ Relevant plans are in place. for infrastructure and services are identified and in place for the industrial estate to protect against climate change risks and potential damages. Park management entity has a functioning system in place to comply with local/national Information on regulations and international standards applicable applicable regulations to the IP. Park management informs compliance √ N/A and standards by resident firms including compliance information that firms share with the park management entity. 83 84 A Master Plan (or equivalent planning document) for any new and existing IP has been developed and is reviewed periodically (and updated if required), including the following core elements: • Site selection study based on various risk analyses; essential and efficient infrastructure, Socioeconomic development plans, urban Planning and Master plan utilities, and transportation network; √ development plans, land resource utilization zoning environmental and social issues; internal park plans, and industrial plans are all in place. land zoning; buffer zone around the park; procedure to safely locate high risk industries; and cluster synergistic industries. • Integration into Master Plan of relevant requirements specified in this EIP framework that have spatial implications. Park management (performance indicators) Subtopic Topic (unit [target value]) Proportion of firms in the IP to have signed a residency contract/park charter/code of conduct (depending on what is legally binding on park firms according to the existing Park management 100% legislation in the country); and additional legally binding N/A empowerment arrangements that empower the park management entity [100%] Park to perform its responsibilities and tasks and charge fees (sometimes absorbed in rental fees) for common services. management This may include transparent fees for services pertaining to the achievement of EIP performance targets. services The resident firms indicate satisfaction with regard to Park management entity Park surveys firm satisfaction with the park the provision of services and common infrastructure by ≥95% property and common management every six months. The average the park management’s entity (or alternative agency, [75%] infrastructure satisfaction rate is above 95%. where applicable). Park management entity regularly monitors and prepares consolidated reports regarding the Varies achievement of target values (as documented in The Zone conducts monthly report and analysis from Monitoring EIP performance and this framework) to encompass the following: of the Zone’s economic performance, monthly and risk critical risk • Environmental performance The Zone also prepares a semiannual report and to management management • Social performance analysis on environmental and social semiannua • Economic performance performance of the Zone. lly • Critical risk management at the level of the park. Environment (prerequisites) Topic Sub-topic The Zone’s environmental protection bureau Park management entity operates an monitors and manage environmental protection Environmental/Energy environmental/energy management system in Management activities, but has not yet established nationally Management Systems line with internationally certified standards, and × or internationally certified management systems (EMS and EnMS, monitoring park performance and supporting monitoring The Zone plans to establish an online respectively) resident firms in the maintenance of their own monitoring system to improve the level of firm-level management systems. “smart management.” Policies supporting firms’ energy saving Supporting programs and documents are in place transformation and clean production are in to improve the energy efficiency of resident Energy efficiency √ place. firms, especially for the top 50 percent of major Data are available for firms’ energy energy-consuming businesses in the park. consumption. Energy An industrial heat recovery strategy is in place to investigate opportunities for heat and energy The Zone supports waste heat recovery, but no Exchange of waste heat recovery for the major energy-consuming firms √ firm within the Zone has the capacity to recover energy in the park. (Typically, these are firms that waste heat. individually consume at least 10 percent−20 percent of total firm level energy consumption). 85 86 Park management entity has demonstrable plans and (preferably) prior documented evidence to The Zone encourages and guides firms in water Water efficiency, reuse, increase water reuse in the short and medium saving and reuse. Water √ and recycling term. This would be achieved by either reuse of Rain water collection and waste water treatment industrial effluents or by rainwater/storm water facilities are in place collection. A program is established to monitor, mitigate No data on GHG emission are being collected and/or minimize greenhouse gas (GHG) Air, GHG emissions, or monitored. Jiangxi Province investigates emissions, such as carbon dioxide (CO2), and pollution × carbon emissions of firms with an annual Climate methane (CH4), and nitrogen oxide (NOx). There prevention energy consumption of more than 5,000 tons change and is clear evidence of steps taken to introduce standard coal. The Zone has only 3 such firms. the natural mitigation activities. environment The park management entity has a plan in place An EIA report and relevant management Environmental to assess operational environmental impacts, and policies are in place. assessment and √ aims to limit the impact on prioritized local An EIA is also done for every new company. ecosystem services ecosystem services. entering the Zone. Environment (performance indicators) Topic Subtopic (unit [target value]) Proportion of resident firms with more According to primary surveys, 9 firms within Management than 250 employees that have an Environmental/energy 8.82% the Zone obtained ISO certification, 3 of which and environmental/energy management management systems [40%] have 250+ employees. A total of 34 firms monitoring system in place that is in line with within the park have 250+ employees. internationally certified standards. Proportion of combined park facilities and The Zone’s bureau of statistics conducts firm-level energy consumption, for which Data not monthly energy consumption investigation of Energy Energy consumption metering and monitoring systems are in available firms, but real-time metering and monitoring place. systems are not in place The Zone’s percentage of renewable energy use Total renewable energy use in the IP is < in 2016 was 7.8%; power generated from equal to or greater than the annual [≥] renewable energy constituted 25.4% of total national average energy mix. power consumption in 2016. Park management entity sets and works toward ambitious ) maximum carbon No specific plan on GHG emission control is in Renewable and clean energy intensity targets beyond industry norms: place within the Zone; however, in the Jiangxi Energy Energy maximum kilograms of carbon dioxide No target Provincial 13th Five-Year Plan, CO2 emission equivalent (kg CO2e)/kilowatt hour (kWh) is set per unit of industrial output in Fuzhou should be for the park and its residents. Targets reduced by 18.5% by 2020 (with 2015 emission should be established for the short, level as benchmark). medium, and long term. Park management entity sets and works toward ambitious maximum energy intensity targets per production unit Energy efficiency N/A N/A (kWh/$ turnover) for the park and its residents. Targets should be established for the short, medium, and long term. Total water demand from firms in IP that does not have significant negative 100% Water consumption /N/A impacts on local water sources or local [100%] communities. Proportion of industrial wastewater Water generated by IP and resident firms that is 100% Water treatment N/A treated to appropriate environmental [95%] standards. Proportion of total industrial wastewater Water efficiency, reuse, and 30% from firms in the park that is reused N/A recycling [50%] responsibly within or outside the IP. 87 88 Proportion of solid waste generated by Waste/by-products reuse and firms, which is reused by other firms, 86% N/A recycling neighboring communities, or [20%] municipalities. Waste and Proportion of firms in park, which material use 100% Dangerous and toxic materials appropriately handle, store, transport and N/A [100%] dispose of toxic and hazardous materials. Maximum proportion of wastes generated 100% Waste disposal All waste goes to landfills. by firms in the IP that goes to landfills. [<50%] Minimum proportion of open space in the 46% Flora and fauna Green coverage rate of the Zone reaches 46%. park used for native flora and fauna. [5%] All firms must establish pollution prevention Proportion of firms in park that have Data N/A and reduction strategies to ensure that they meet pollution prevention and emission but emission requirements. reduction strategies to reduce the intensity believes to Climate EIA and energy consumption investigation must and mass flow of pollution/emission be 100% change and be conducted and environmental protection and release beyond national regulations. [50%] the natural Air, GHG emissions, and energy saving are compulsory requirements environment pollution prevention Proportion of largest polluters in IP that All firms must have environmental risk Data N/A have a risk management framework in management framework in place to ensure no but place that: (a) identifies the aspects that environmental accident could occur. believes to have an impact on the environment, and An EIA must be conducted and avoiding be 100% (b) assign a level of significance to each environmental accidents is a compulsory [30%] environmental aspect. requirement Social (prerequisites) Topic Subtopic The Zone’s bureau of social affairs, bureau of Social Dedicated personnel exist (as part of the human resources and social security, and the management Management team park management entity) to plan and √ department of housing management are in systems manage social quality standards. charge of planning and managing social development. Provision of fundamental social infrastructure in the IP or its proximity also facilitate and encourage women’s employment, for example, lavatories and public toilets (for men and women), Social Primary social infrastructure drinking water fountains, provision of √ N/A infrastructure cafeterias within reach of the employees, recreational areas, and childcare programs. This infrastructure needs to be fully operational to encourage women’s employment. 89 90 Social (performance indicators) Topic Subtopic (unit [target value]) Data N/A All firms must establish a safe production and Percentage of all firms in the IP with more but vocational health management framework to than 250 employees that have a well- OH&S management system believes to ensure employees’ health and that no production functioning OH&S management system in be 100% accident would occur. These are compulsory place. [75%] requirements Data N/A The Zone provides a variety of ways for firms Percentage of grievances received by the but to express grievances, as well as corresponding park management entity that are believes to grievance resolving mechanisms, including site addressed within 90 days. be 100% surveys in firms, regular sessions with firms, [100%] and a service hotline for firms. Data N/A Social Percentage of grievances received by the but Almost all reasonable grievances can be management Grievance management park management entity that were brought believes to resolved. systems to conclusion. be >90% [60%] Data N/A Percentage of all firms in the IP with more The Zone believes that all firms with more than but than 250 employees that have a code of 250 employees have administrative departments believes to conduct system in place to deal with in charge of managing and resolving grievances be 100% grievances. from employees. [75%] Data N/A Percentage of all firms in the IP with more but The Zone believes that all firms with more than than 250 employees that have a Harassment response believes to 250 employees have a harassment prevention harassment prevention and response be 100% and response system in place. system in place. [75%] Percentage of the surveyed employees’ Primary social infrastructure reporting satisfaction with social Data N/A infrastructure. Data N/A Percentage of reported security and safety but The Zone has relevant operation and Industrial park security issues that are adequately addressed believes to maintenance department handling all kinds of within 30 days. be 100% security and safety issues [100%] Social Percentage of all firms in the IP with more infrastructure than 250 employees with a program for 100% N/A skills/vocational training and [75%] development. Capacity building General supporting infrastructure and programs Percentage of female workforce who for skill development in the Zone are available benefit from available supporting Data N/A to all, so in principle, all female workforce can infrastructure/programs for skills benefit unless some are not willing to development. participate. Over 80 percent of the surveyed The Zone has established information disclosure Community dialogue community members are satisfied with the Data N/A and feedback framework, but has not done the community dialogue. surveys in question, Local Number of outreach activities Data are N/A, but the Zone does have outreach community implemented by the park management activities such as worker recruitment, blood outreach Community outreach entity annually that are regarded as Data N/A donations, and festival galas. These activities positive by over 80 percent of the receive a high level of recognition from surveyed community members. community members. 91 92 Economic (prerequisites) Topic Subtopic Park management entity has plans to generate specific numbers and types of Employment Type of employment jobs (including diversity and √ N/A generation inclusiveness) in line with government targets. Park management entity allows and Local business promotes the establishment of SMEs that and SME SME development √ N/A provide services and add value to park promotion residents. A market demand and feasibility study, supported by a business plan, for specific Market demand for EIP “green” infrastructure and service √ N/A services and infrastructure offerings has been undertaken to justify Economic planning and implementation in the IP. value creation Tracked by the park management entity, EIP meets economic interests the IP fulfils relevant government targets, √ N/A of the government including domestic, foreign direct investment, and tax revenues. Economic (performance indicators) Subtopic Topic (unit [target value]) Workers and employees within the Zone are mostly residents from neighborhood Data N/A communities or migrant workers living in dorms but Local employment Percentage of total workers employed in IP who provided by the Zone. believes to generation live within daily commuting distance. Only those (very few) who are temporarily be >95% employed or salespeople who are business trips Employment [60%] on a regular basis do not live within daily generation commuting distance. Data N/A Percentage of total firm workers in IP employed but A preliminary but thorough investigation through direct employment (that is, not employed Type of employment believes to suggests that most (if not all) employees are on a fee-for-output basis or provided through a be >90% directly employed by firms. labor supply firm) and permanent contracts. [25%] 93 94 Firms normally compare and select products or services on a large scale in a big “competitive Data N/A market” Percentage of resident firms using local suppliers but The transportation system in Fuzhou is or service providers for at least 80 percent of believes to relatively advanced; procurement outside their total procurement value. be <25% Fuzhou is easy. Local business [25%] The industrial chain in the Zone is not and SME Local value added complete. Some products and services need to promotion be purchased outside the Zone. The Zone purchases a great variety of goods and Data N/A services from different industries/businesses; Percentage of total procurement value of park but however, most firms within the Zone are IT, management entity supplied by local firms or believes to bio-pharmaceutical, automobile, renewable service providers. be <90% energy firms: The 90% of local procurement [90%] value is just impossible to meet. Land demand from the development of IPs is steady; in fact, many projects are unable to enter the Zone because they do not have the quota for Data N/A land use (as required by the local government, The ratio of rented or used space by resident but Economic Investment-ready park rights for land use take the form of “land quota” firms compared to the total amount of available believes to value creation for firms and are distributed to projects each year. space earmarked for resident firms within IPs. be >50% Projects without such quota are not allowed to [50%] operate). The current ratio is 69.9% (area developed: 15 km2; total area of the Zone: 21.48 km2) Source: World Bank compilation Note: N/A = not available. EIA = environmental impact assessment; EIP = eco-industrial park; FHTZ MC = Fuzhou high-tech zone management committee; IP = industrial park; OH&S = occupational health and safety. Appendix G. Financial instrument/policies promoting the development of EIPs in China Enacted Green finance and other preferential Title Fiscal support from government Preferential taxation policy by financial policies Article 8: Local governments at all levels shall See Article 21 column See Article 21 increase the financial investment in protecting and improving the environment as well as See Article 22 See Article 22 preventing and controlling pollution and other public hazards, and improve the efficiency of using fiscal funds. Article 11: Governments shall grant awards to entities and individuals that make outstanding contributions to the protection and improvement of the environment. Article 21: The State shall adopt policies and measures in respects of finance, tax, price, and Environmental government procurement to encourage and Laws Protection NPC support the development of environmental Law protection industries related to environmental protection technologies and equipment, integrated use of resources, and environmental services. Article 22: For enterprises and institutions and other producers and operators that further reduce the discharge of pollutants based on the legal requirements for discharge of pollutants, the people's governments shall encourage and support them by using policies and measures in respects of finance, tax, price, and government procurement in accordance with the law. 95 96 Article 7: The State Council shall formulate fiscal See Article 7 Article 35: With Article 32: The people's governments shall give and tax policies conducive to the implementation of respect to products produced commendations and rewards to those units and cleaner production. from wastes and materials individuals that have made conspicuous Cleaner Article 34: Funding from the Small- and Medium- reclaimed from wastes, the achievements in the work of realizing cleaner Production NPC Sized Enterprise Development Fund established in taxation authorities shall reduce production. Promotion Law accordance with national regulations shall be set or exempt these from value- aside to support cleaner production for small- and added tax in accordance with medium-sized enterprises in accordance with their relevant national regulations. needs. Article 42: State Council and provincial/municipal Article 44: The State offers Article 45: For projects on comprehensive Circular governments have established specific funding for preferential tax rate for utilization of resources, financial institutions shall Economy NPC the promotion of circular economy, supporting the industrial projects that promote provide preferential loan support and offer relevant Promotion Law operation of key circular economy industrial circular economy financial services projects Article 4: Where an enterprise, public institution or any other producer or operator falls under any of the following circumstances, it shall not be deemed as directly discharging pollutants to the environment, and shall not pay environmental protection tax on the Environmental corresponding pollutants: Protection Tax NPC N/AN/A N/AN/A (1) It discharges taxable Law pollutants to a centralized sewage or domestic garbage treatment site established in accordance with the law. (2) It stores or disposes of solid wastes at any facility or site that meets the national and local environmental protection standards. Article 24: The State sets up specific funding to Renewable NPC support key demonstration projects which N/AN/A N/AN/A Energy Law apply renewable energy. Article 60: Central and provincial government Article 62: The State Article 65: The State guides financial Energy set up specific funding to facilitate the implements preferential institutions to provide preferential loans for Conservation NPC implementation of key energy-saving industrial taxation policies for energy- projects under energy-saving upgrade. Law project. saving projects or activities. Article 16: Establish incentive schemes and encourage industrial zones to use water Article 14: Further improve resource more efficiently (reach higher Action Plan the preferential taxation standards). Support demonstration projects for Water policies and ensure solid regarding clean production, water saving, and Pollution MEP N/AN/A implementation of the pollution control. Prevention policies for comprehensive Article 17: Promote green finance. Financial and Control utilization of resources. institutions such as state-owned policy-related banks shall support projects related to circular economy and clean production. National Section 8, paragraph 45: Establish green policies General finance system. Encourage financial Guideline on institutions to increase the issuance of “green the loans” and support green credits through State Institutional N/A N/A interest subsidy from public finance; encourage Council Reform of financial institutions and enterprises to issue Ecological green bonds; further support the use of green Civilization insurance in sectors with high environmental risks. 97 98 Section 4, paragraph 3: Further improve supportive Section 4, paragraph 4: financial policies for the “Made in China 2025” Implement preferential taxation project; expand the sources of financing and lower Notice by the policies for the transformation Section 4, paragraph 4: Strengthen fiscal support the cost of capital collection for the manufacturing State Council and upgrade of the State from public finance to relevant projects and sector; encourage development banks to increase on the “Made manufacturing sector; carry Council increase the efficiency of the use of public the amount of loans to manufacturing firms; in China 2025” forward reforms in value-added financing. establish a multi-level capital market and Project tax to release the taxation encourage capable firms to collect capital through burden for manufacturing IPOs [initial public offerings] and various types of enterprises financial instruments. th The 13 Five- Article 43-7: Establish and improve the incentive Year Plan on schemes for environmental protection. Expand the Economic NDRC N/A N/A fiscal policies which promote energy saving and and Social pollution reduction Development Section 8, paragraph 37: Promote the use of green Action Plan for Section 8, paragraph 37: The Action Plan proposes Section 8, paragraph 36: credits, green bonds, insurance funds, and green Leading to financially support projects relevant to circular Preferential taxation policies for industry funds to support circular economy Circular NDRC economy transformation and development through projects or enterprises that use transformation projects; Economy the use of funds from public finance, and further resources comprehensively for encourage the PPP model and involve more private Development increase the efficiency of using public finance. production. capital into green investments. Article 32: Provincial or local governments should set up Guidelines on Article 32: Provincial or local governments should specific funds or offer the MEP, set up specific funds or offer preferential tax rates preferential tax rates for EIPs Management of MOC, for EIPs that carry forward projects on that carry forward projects on N/A National Eco- MOST infrastructure for pollution control, comprehensive infrastructure for pollution IPs utilization of resources, and eco-industrial chains control, comprehensive utilization of resources, and eco- industrial chains Section 5, paragraph 22: The Guiding Notice Section 5, paragraph 22: In addition, the Guiding Guiding Notice encourages public funds for energy conservation Section 5, paragraph 22: Loans Notice also encourages IPs to establish “special on and emission reduction, green development, with preferential interest rate construction funds” for EIP development to Strengthening MEP, technological innovation, and environmental and preferential taxation policy support projects on park planning, infrastructure the MOC, protection at provincial and local level to lean are also required to be in place sharing, and industrial symbiosis, as well as the Development of MOST toward the development of EIPs. Public funds that to assist key projects and capacity building of IPs (for example, through National Eco- specifically support EIP development are research within EIPs. information sharing platforms, consulting services, IPs encouraged to be established to provide fiscal innovation activities, and R&D). subsidy for the establishment of EIPs. Section 4, paragraph 3: Further strengthen and Section 4, paragraph 4: Further increase the use of make effective use of supportive fiscal policies green finance (expand the scale of green credits Section 4, paragraph 3: Further (funding from the central government’s budget, and green bonds, establish green industry strengthen and make effective Plan for special funds for construction, other funds relevant development funds, innovate new green financial use of supportive taxation Industrial to technological transformation, energy instruments and services, link “green performance” policies (preferential taxation Green MIIT conservation and emission reduction, clean of firms to their credit rating, encourage financial policy) in promoting the Development production, and government procurement of green institutions to provide more convenient and development of green IPs, green (2016−2020) products, as well as financing from public-private preferential credit support and guarantee service firms, and the green partnership) in promoting the development of green for the green transformation of SMEs) in manufacturing system overall. IPs, green firms, and the green manufacturing promoting the development of green IPs, green system overall. firms, and the green manufacturing system overall. 99 100 Standard Section 6, paragraph 2: MIIT will use “funds Section 6, paragraph 2: MIIT will use green s and for industrial transformation and upgrade” (工 credits and other supportive financial policies indicators 业转型升级资金), special funds for to assist the building of a green manufacturing Notice on the construction (专项建设基金), and other system (including green factories, green Establishment supportive financial policies to assist the products, green IPs, and green industrial of a Green MIIT building of a green manufacturing system N/A chains); Manufacturin (including green factories, green products, MIIT encourages financial institutions to g System green IPs, and green industrial chains). provide preferential financial support for Furthermore, products from the green industrial zones and enterprises that promote manufacturing system are prioritized in green manufacturing government procurement. Section 3, paragraph 3: Through assessment Notice on and recommendation at provincial level, and Recommend- evaluation and selection by the NDRC and ing Key MOF at national level, certain investment Candidate IPs projects in the implementation plan proposed NDRC N/A N/A for Circular by selected IPs are financially supported by the Economy MOF and NDRC by using funds from the Transforma- central government’s budget (the specific tion in 2017 monetary amount depends on each year’s financial budget). Source: World Bank compilation Note: EIP = eco-industrial park; MEE = Ministry of Ecology and Environment; MIIT = Ministry of Industry and Information Technology; NDRC = National Development and Reform Commission 101 Appendix H. Comparison between the Chinese EIP standards Source: World Bank compilation Note: MEE = Ministry of Environment Protection; MIIT = Ministry of Industry and Information Technology; NDRC = National Development and Reform Commission. 102 Appendix I. An overview of the WBG/UNIDO/GIZ International Framework for EIPs Aims and Objectives Despite the growing interest for eco-industrial parks (EIPs) globally, the lack of national or international standards has become an obstacle to their development and credibility. Many IP have claimed the “eco” label, but the concrete features this refers to on the ground differ widely (UNIDO 2016). The aim of the EIP Frame- work published by the World Bank, UNIDO, and GIZ in December 2017 is to provide a common set of EIP standards, which could be relevant model for all countries willing to promote EIPs and use them as a basis to develop national standards. The EIP framework can thus guide policy makers and practitioners to identify the critical elements that governments and the private sector should focus on establishing for sustainable EIPs. The EIP framework is intended to apply to all types of existing and planned IPs in developed, transition, and developing countries, covering all industrial sectors. It is expected to provide a common understanding of EIP at the international level, with broadly applicable performance requirements that can be tailored to national contexts. Requirements for EIPs The EIP framework divides EIP performance requirements into four categories, namely: park management performance, environmental performance, social performance, and economic performance. Core topics under each category are presented in Figure I.1. Figure I.1 Core EIP categories and topics Source: WBG, UNIDO, and GIZ (2017). 103 Compliance with applicable national and local regulations is a prerequisite for all EIPs, whatever the geograph- ical location and specific characteristics of the park. The performance requirements for EIPs in this framework aim to go beyond compliance with local and national environmental and social regulations (“Compliance Plus”). EIPs are encouraged to go beyond these requirements and performance expectations where it is techni- cally, socially, and financially feasible and cost effective to do so. The requirements within each category are divided into prerequisites and performance indicators. To be deemed an EIP, a park is expected to be compliant with all relevant prerequisites and performance expectations. The EIP performance requirements set the baseline expectations for EIPs globally, although sensitivity to local contexts is required (for example, when setting thresholds for fuel and industry mix, energy intensity, waste disposal, as well as requirements of the higher-level governance structures, institutions, regulating bodies, and so on). 104 Appendix J. Examples of potential incentives for complying with EIP standards Incentives are a key factor determining the willingness and motivation of an industrial park (IP) to become green and seek compliance with eco-industrial park (EIP) standards. Figure J.1 lists potential incentives for complying with EIP standards, which can be divided into two mutually supportive categories: financial incen- tives and nonfinancial incentives. Figure J.1 Potential incentives for complying with EIP standards Government subsidy Financial incentives Access to green finance Preferential tax rate Domestic and foreign investment Improved green image Improved productivity Non-financial incentives Compliance with international buyer's standards Better relations with local communities Reduced exposure to environmental and social risks Enhanced innovation Source: World Bank. 105 Financial incentives Major financial incentives to comply with the EIP Framework include: -Access to government subsidy: Compliance with domestic and international EIP standards would potentially help IPs obtain government subsidies. For example, the National Development and Reform Commission (NDRC) directly offers subsidies to selected investment projects proposed by “circular economy upgrade” demonstration parks. -Better access to green financing: Becoming certified as an EIP can enhance access to the growing set of green finance opportunities offered both by the public and private sectors (see Chapter 5). -Preferential tax rate: The third potential financial incentive for compliance with green standards, subject to fiscal constraints, could be lower tax rates for tenant companies in EIPs. Such an approach could be piloted in selected parks and, if successful, rolled out to the rest of the country. -Domestic and foreign investment: Meeting green standards (especially international standards) could bring IPs additional foreign investment, especially in the environmentally sensitive high-value-added industries. In addition, increased foreign investment (from economically and environmentally more advanced countries) would also help increase environmental awareness through more stringent environmental standards on production and higher environmental management targets (Box J.1.). Box J.1 Influence of foreign investment on environmental awareness Thang Long IP Corporation (TLIP) in Vietnam is a Japanese-Vietnamese initiative that targets compa- nies with investment projects that use modern and high-end manufacturing technologies that are also environmentally friendly, clean or/and energy-efficient. Reported achievements in environmental management have been the treatment of wastewater, emissions and odor (companies must install their own systems), treatment of solid and hazardous waste, and management of trees and plants (23 percent of area cover). Given that all the companies in TLIP are Japanese or Japan-Vietnam joint ventures, the average environmental awareness level is considerably high. This understanding of environmental responsibili- ty, together with the requirement of the TLIP Corporation, has resulted in the tenant companies adher- ing to high environmental management targets. The best examples of these companies include leading Japanese electronics companies such as Panasonic and Canon. These companies are pursuing policies guided by an ecoefficiency perspective, especially toward energy and materials. For example, Panason- ic is creating model factories that not only develop eco-products according to sustainable industry practices, but also take a lead role in promoting greater eco-awareness in the community through outreach activities. Source: UNIDO (2016). 106 Nonfinancial incentives Major nonfinancial incentives include: - Improved green image: Becoming an internationally certified EIP can make a park a role model at both the international and national level and enhance its corporate social responsibility (CSR). This, in turn, could increase its attractiveness vis-à-vis domestic and foreign investors. - Improved productivity: A natural advantage of complying with the green standards is improved productiv- ity with more efficient use of resources. Both the Chinese standards and the EIP Framework have require- ments on energy/resource efficiency and the reuse and recycle of resources. - Compliance with international buyers’ standards: Meeting the EIP Framework requirements and becom- ing recognized as an international EIP would bring parks benefits in terms of attractiveness for international buyers. With increasing environmental awareness worldwide, buyers would increasingly prefer products made by green manufacturers in EIPs. Some international buyers follow or set procurement standards to ensure the “greenness” of the products they purchase. Compliance with domestic and international green standards would attract such “green buyers,” and thus incentivize the development of EIPs. - Better relations with local communities: The EIP Framework has a specific focus on socioeconomic performance of IPs, measuring parks’ performance in driving the local economy and local employment. Requirements on environmental performance would also provide a cleaner and healthier environment for local residents through pollution control and environmental quality monitoring. Meeting such requirements would help IPs establish better relations with the local community, which is, in return, beneficial to the steady and long-term development of IPs. Reciprocal relationships could potentially incentivize IPs to comply with EIP standards. - Reduced exposure to environmental and social risks: Compliance with both domestic and international green standards (especially on environmental and social performance) also means strengthened capacity in environmental and social risk management, reducing environmental and social risks. - Enhanced innovation: The innovative capacity of IPs could also be enhanced through projects and capaci- ty building in the context of meeting EIP requirements, which improves the overall competitiveness of IPs. 107 References Bai, Lu, Qi Qiao, Yang Yao, Jing Guo, and Minghui Xie. 2014. “Insights on the Development Progress of National Demonstration Eco-Industrial Parks in China.” Journal of Cleaner Production 70 (1): 4–14. CBRC (China Banking Regulatory Commission). 2012. 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