How China’s environmental pollution crackdown affects the agrochemical industry 2018 02-08-2018

The Chinese government is paying greater attention to environmental protection, which has a significant effect on the agrochemical industry, which is one of the heaviest polluting industries in the country.



 


The Chinese government is paying greater attention to environmental protection. Throughout the year 2017, the stricter environmental inspections, the replacement of environmental protection fee with environmental protection tax, and the pollutant discharge permit system helped cleaning the agrochemicals market from heavy polluters and outdated production technology. In China, a major campaign against environmental violations has so far penalized more than 30,000 companies and over 5,700 officials. 


As China’s fight against pollution is getting more fierce, CCM is analyzing how the environmental protection measurements are affecting the agrochemicals industry in 2018 and what international players can expect for the near future. 



Notably, the environmental tax amounts only took up a small proportion in some leading enterprises in China, Specifically, in 2016 the companies only paid taxes according to about 0.10% of their total revenues. According to market intelligence form CCM, large enterprises have complete pollutant discharge disposal facility and environmental equipment, plus the rising pesticide prices compared to their small and medium-sized competitors, so they won't face such great pressure in 2018. 


According to the latest announcement issued by the Ministry of Environmental Protection of the People's Republic of China, air pollution in the industrial important Beijing-Tianjin-Hebei region during 12–17 Januar was the longest pollution since Dec. 2017. In response, the MEP sent letters in advance to Beijing, Tianjin, Hebei, Shanxi, Shandong and Henan to order them to issue an orange alert and implement related emergency measures to relieve the influences of heavily-polluted weather. 


However, illegal pollutant discharge was still found by 28 supervision teams during the inspection. More than 2,000 emergency response sites were inspected in the middle of January, among which 19 were found had not suspended or cut the production and 2 were found discharging excess pollutants or not implementing the minimum emission standards. 


The pollutant discharge permit system can be regarded as a long-term environmental protection supervision system in China. This move is predicted to be beneficial for pesticide enterprises that had invested a large sum in environmental equipment construction. They can earn money as long as they operate smoothly. So far, less than 1000 pesticide enterprises out of the more than 2,000 total companies have applied for the pollutant discharge licenses. Reportedly, due to time limitation and approval process, enterprises that have already applied for the licenses will get the licenses in 1 to 2 months at most, and if not, they will no longer have the licenses. Hence, unqualified enterprises or those did not apply for the licenses are destined to shut down in March at the latest. 



However, China’s efforts to clean up the environment have neither resulted in job losses nor damaged the economy, according to environment minister Li Ganjie. According to him, For the long-term perspective, there is no negatively impact. Strengthening environmental protection would be beneficial for the economic development in the country. 



Companies involved in the Chinese agrochemicals industry have to expect an overall rise in the cost of doing business. However, the scale of the impact will depend on the location of the affected companies, because the pollution tax rates are decided at the provincial level. 


Because of this issue, regions with large manufacturing bases may set their tax rates lower to retain the fiscal revenue. There are also some important exemptions to the Environmental Protection Tax. Firms that discharge pollutants directly to centralized sewage and waste treatment facilities and those that dispose of solid wastes in facilities that meet the local and national standards are exempt from the tax. 


About the article


The information for this article comes from CCM, China’s leading market intelligence provider for the fields of agriculture, chemicals, food and feed.


For more information on the impact of China’s pollution crackdown on the agrochemicals industry, please have a look at CCM’s monthly published Newsletter and get a free trial to CCM’s Online Database.



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