Chinese Environmental Regulations Set to Impact Chemical Market

As China goes to figurative war with its pollution and smog issues they long have been known for, the chemical industry is preparing for the inevitable fallout from the implementations of the new regulations. Beginning January 1, 2018, China is set to enforce its’ new nationwide fees, in the form of taxes, on production facilities and businesses that violate the new pollution thresholds1.

Taxes will vary by the pollution type, location, and severity under the new legal thresholds. Air pollution fees will run 1.2 yuan ($.18 US) to 12 yuan ($1.81 US) per pollutant equivalent value, while noise pollution will run from 350 yuan ($52.69 US) up to 11,200 yuan ($1,686.04 US) per decibel in excess, depending on location and severity1.

In an actual product-based example, businesses will be levied a tax of 1.2 to 12 yuan per .95kg of nitrogen oxide or sulfur dioxide they release to the atmosphere, measured either by an instrument the businesses can choose to self-install, or measurements taken by government officials regularly1.

The impact to the chemical production industry will be especially seen. The major polyethylene and polypropylene market across China has especially been affected as hundreds of downstream companies, producers and production has been shutdown due to the new regulations3. Coal-based chemicals are especially targeted by environmental inspectors, due to the natural high levels of pollution expelled by these types of production lines3. An estimated 10% of China’s ethylene, and 11% of their propylene capacity is coal-based3.

China received an estimated 211.6 billion yuan ($31.85 billion US) in pollution fees under much less strict regulations across a 12 year period, from 2003-2015. According to an official study, China is positioned to collect upwards of 50 billion yuan ($7.53 billion US) per year moving forward1.

The current pollution management system in China, known as the “pollution discharge fee”, had been in place since 1982. Officials say the new regulations will bear more financial weight on companies, and allow for more specific regulating guidelines to effectively manage its long-running pollution concern1.

Today, the pollution issues across China are the cause of 1.6 million deaths annually, a number that’s steady risen over time. And while the impact of these regulations being implemented and managed over the course of these next few months, and even years, may be high from a business and supply chain standpoint, the positive long-term economy, atmosphere and business growth model will be exponential.

In business, securing your supply chain has never been more of a concern. The Chemical Company is committed to our customers and our business partners to have the most robust, diversified and strategic supply chain relationships in the world, providing supply and support when the market is at it’s toughest times. The Chemical Company is committed to partnering not only with sourcing the best products in the world, at the most competitive pricing, but committing to our customers to maintain security of supply.

Sources:

  1. http://www.scmp.com/business/china-business/article/2113650/new-environment-tax-will-hit-businesses-china-hard-say
  2. https://www.bna.com/china-pollution-inspections-n57982088091/
  3. https://www.icis.com/resources/news/2017/09/28/10147554/china-s-green-revolution-disrupts-chemical-supply-chains/

Media Contact:
Ben Sawicki
bsawicki@thechemco.com
(401) 360-2872

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