Improve the mechanisms, standards, regulatory supervision, and governance systems that are designed to support the sustainable use of resources

2.1 Speed up the building of market mechanisms with respect to resources and improve resource allocation efficiency

This goal involves advancing the reform of China’s economic institutional structures in a stable but proactive way and across the breadth of structures as well as in depth. It means accelerating the improvement of the socialist market-economy structure, building up modernized market-economy systems, substantially reducing the direct government allocation of resources, and pushing forward resource allocation that goes through market competition in order to maximize benefits and achieve optimum efficiencies.

• • Step up efforts to improve the property rights system that applies to natural resource assets. As per the attributes of China’s system, whereby natural resources are owned by ‘all of the people’ and ‘collectives,’ this calls for defining the ownership of all kinds of natural resources in more explicit teims and carrying out registration that confirms these ownership rights. It means clarifying the rights and responsibilities of different kinds of ownership by different entities, including ownership rights, contracted-usage rights, and operating rights. In requires forming a property rights system that applies to natural resource assets, that clarifies ownership of lights, and that makes rights and accountabilities explicit, thereby allowing for effective regulatory supervision. It also requires improving the legal system so that equal protection can be provided to all parties holding ownership rights of natural resource assets as per laws. Specific steps are as follows.
• • Improve market mechanisms that require compensation in return for using resources. Accelerate price reform as it applies to natural resources and their products, and improve mechanisms that allow price formation to be done primarily by the market. Ensure that prices reflect market supply and demand to the fiillest extent, as well as the degree of scarcity of resources, and ensure that prices incorporate the cost of damage to the environment and restoration. Push forward price reform with respect to the prices of water, oil, natural gas, and electricity. Release controls over prices that are in competitive parts of the economy, and to the greatest degree possible reduce the scope of things for which government sets prices. With respect to regulatory supervision of prices that are in a monopoly situation, improve transparency, and allow for public participation in regulatory oversight.
• • Broaden market entry. That is, allow different types of entities to enter into the market for resources by eradicating all forms of administration-granted

• (government-granted) monopoly. China’s non-govermnent-owned capital has real power and great depth - it is fiilly capable of playing a greater role in the sphere of developing and using global resources.¹ We must, therefore, speed up the establishment of market rules and regulations within China that are open, fair, and transparent. We must implement a market-entry system that is unified nationwide so that all market entities can enter various resource fields on an equal basis and in accordance with laws. We must accelerate reform of corporations that are administration-granted monopolies, and we must take away any of their noncorporate functions that verge on being governmental.
• 2.2 Improve standards that relate to resources and the environment, in order to improve resource efficiency and protect the environment

Standards can both guide and constrain the behavior of producers and consiuners, including various suggested standards as well as mandatory standards that relate to resources and the environment. They can aid in conserving resources and protecting the environment. In order to improve the efficiency with which resources are used as well as protect the environment, China must invest more policy resources in upgrading applicable standards. It must strengthen its overall system of standards and must constantly upgrade that system. It thereby can guide and encourage corporations to improve the efficiency with which they use resources while at the same time protecting the resource environment.

Mandatory standards are the most effective means by which to guide corporate behavior, correct inadequacies of the market, and push forward the sustainable use of resources. Standards that are scientifically established and constantly upgraded can serve as explicit signals for corporations to put greater research and development (R&D) into products. They can reduce uncertainties of the market, increase investor confidence, fuel innovations, and scale up ecologically oiiented technologies as well as lower costs. They can increase market competition on products that already exist. Energy conservation and improving resource efficiency can only be realized by formulating strict standards. This is particularly true in the realm of home appliances, lighting equipment, and construction materials. As new forms of energy enter the market, they also require the support of standards. We should strengthen the energy conservation, land conservation, water conservation, environmental, technological, and security aspects of market-access requirements. In these critical areas, we must ensure that China’s standards are in line with and keep up with international standards.

We should formulate and revise a set of standards that relate to such things as energy consumption, water consumption, land consumption, pollutant emissions, product quality, and environmental quality. We should implement a ‘front-runner system’ becoming a world leader with respect to energy efficiency and emissions and pick up the pace on upgrading standards. This involves improving standards as they relate to energy conservation, in a timely fashion renewing the energy efficiency requirements of products, putting restrictions on high energy-consuming industries, and putting (mandatory) standards on the energy efficiency of building materials. It involves implementing an action plan for energy conservation by the people as a whole, and applying higher standards to the conservation of energy, water, land, materials, and metals. It means encouraging the public to take the initiative in reducing water and energy consumption. We must upgrade the standards that apply to the construction of high-rise buildings, railroads, and bridges; raise standards that relate to pollutant emissions; and strengthen the enforcement of rules that hold polluters accountable. In areas where the carrying capacity of the environment is limited and where ecosystems are vulnerable and environmental risks are high, we should impose stringent discharge and emission limits. We should accelerate the formulation of standards for waste classification and recycling. We should set up unified (nationwide) standards on ‘green products,’ as well as certification and labeling systems.

We should encourage all local jurisdictions to formulate stricter local (provincial) standards as well. They should set up certification systems for energy efficiency and environmental indicators that are not only in line with international systems but also appropriate to China’s national circumstances.

2.3 Improve the effectiveness of governmental regulatory’ supervision and strengthen environmental regulatory’ supervision

A broad range of negative externalities often accompanies the process of exploiting and using resources. In order to avoid the market disorders and loss of social well-being that can arise from these negative effects, regulatory supervision of the environment by the government is necessary. In the form of laws, the government formulates standards regarding all kinds of polluting discharges, but in order to actually control such discharges, it must protect the ecological environment through effective regulatory supervision.

In this regard, we must accelerate the establishment of modem regulatory systems and improve the effectiveness of regulatory supervision. This involves revising and improving the system of laws and regulations that applies to the enviromrrent but also ensuring that the judicial system handles environmental cases on a regular, standardized, and professional basis. We must improve the organizational structures and functions of environmental authorities, as well as their methods for achieving internal coordination. We must improve both internal and external accountability mechanisms for environmental regulatory supervision. We start by really improving the ways regulatory supervisors themselves are managed, since that is how to improve the institutional structures that handle environmental regulation. This involves improving procedures atrd ensuring that key links in procedvtres are carried out properly, which, in turn, means setting up a system of environmental impact assessrrrent that also monitors regulatory supervision.

In the near term, we should emphasize the fact that regulation must be done according to laws, and we must ensure that it is open, fair, and just. We handle those who break the law or disregard regulations with the same impartial approach and apply punishments by using legal procedures. The aim is to correct the shortterm oppoitunistic behavior of corporations. It is to put an end to prejudice against other forms of ownership (private) and to stop freewheeling jurisdiction over resources. We must send the proper signal to all market participants that regulatory supervision will be conducted according to law, with real consequences.

2.4 Improve the governance systems that pertain to the sustainable development of resources and the environment

Coordinate resource and environmental governance from an overall perspective and establish governance systems that are comprehensive in nature and incoiporate sustainable development. This includes achieving the following key tasks.

• • Actively promote open disclosure of information about resources and the environment. Put major effort behind promoting ‘energy-efficiency labeling’ and other green environmental-protection labeling. Ensure that scientific knowledge is broadly available and provide valid knowledge and information so that the public can decide to consume environmentally friendly products and sendees. Strengthen the disclosure of information about any environmental pollutants that relate to the use of agricultural land, water resources, and forestry resources. Release information in a timely manner - this involves creating a sound repotting system and strengthening regulatory oversight by the public. Create a system that includes a blacklist of entities that break the law with respect to polluting emissions, and that monitors the ‘credit rating’ of corporations with respect to the environment. Strengthen the self- evaluation systems of corporations with respect to polluting emissions and improve systems that allow their environmental information to be open to the public. Improve systems that allow for lawsuits to be brought in the public interest. Improve the environmental impact assessment system with respect to large projects as well as policies.
• • Improve two-way communication mechanisms. This involves improving the public hearings system as it relates to laws, regulations, and policies regarding the environment. We should start pilot programs in which (specialized private) organizations procure public sendees in the areas of resources and the environment. Set up a sound system for public petitioning so that flashpoints and environmental issues of great concern to the public can be addressed. Finally, we should make use of social media to be able to have two-way communication with the public on resource and environmental issues.
• • Improve the extent to which environmental governance is inscribed in law. This involves improving the legislation relating to resources and the environment such that it forms a sound system of laws and regulations, which, in turn, means passing detailed regulations that are manageable and can actually be implemented. We should launch governance of resources and the environment as per laws and regulations - this includes raising levels of enforcement and the ability to enforce. It also means reducing the kind of governance that simply launches ‘movements’ and applies the same solution to any problem.
• • Improve and further develop the results-based performance evaluation system. We must correct the inclination to evaluate administrative performance purely by measuring economic growth. We should design and adjust evaluation criteria depending on regions, stages of development, and specific environmental and resource conditions. Within the performance evaluation system, we should put greater emphasis on such indicators as the extent of resource consumption, damage to the environment, and ecological improvements.
• • Improve the accountability mechanisms that relate to resources and the environment. We should make environmental accountabilities explicit by improving legal, regulatory, and policy systems. We should link accountabilities to relevant government departments, corporations, and other organizations, as well as individuals, and make any dereliction of dirty or illegal behavior by units or individuals accountable by law. Effective accountability must especially be focused on local (provincial) governments and leading cadres in the field of resources and environmental governance, and in this regard, action should be taken according to the Auditing Regulations to Do with Leading Cadres who Have Departed from their Posts, with Respect to Natural Resource Assets (trial implementation) and the Program for Reforming the Compensation System for Damage Done to the Environment. By strengthening the rule of law and administrative accountability, we set up long-term mechanisms that define responsibilities and allow for tracing back accountabilities. The purpose is to restrain the impulses of government departments, corporations, and individuals who seek to maximize their own short-term interests.