China’s environmental protection system covers multiple levels, including laws, administrative regulations, local regulations and departmental/provincial rules, and standards such as national (GB), industry (HJ) and local (DB) standards.

Core Principles and Key Legislation

Guiding principles

As stipulated in the Environmental Protection Law and the draft of the Ecological and Environmental Code (which advanced to second reading in 2025), guiding principles include prevention first, systematic governance, ecological priority, green development, public participation and liability for damages.

Main laws (38 in total)

• Comprehensive basic systems: Environmental Protection Law, Environmental Impact Assessment Law, specific regional or river basin protection laws (Yangtze, Yellow River, Black Land and the Ecological Protection of the Qinghai-Tibet Plateau) and tax laws (Environmental Protection Tax Law, Resource Tax Law).
• Pollution prevention: Six laws covering industrial waste gas, wastewater, solid waste, soil, noise and radioactive substances. In the draft of the “Pollution Prevention and Control Section of the Ecological and Environmental Code”, new provisions on chemical substances, electromagnetic radiation and light pollution prevention and control were added.
• Circular economy: Two laws (Law on Promoting Cleaner Production, Law on Promoting Circular Economy).
• Ecological protection: Seven laws including the Wildlife Protection Law, the Wetland Protection Law and the 2025-adopted National Park Law.
• Energy and resources: 14 separate laws (details not elaborated).

Supporting Regulations and Judicial Interpretations

The State Council has issued regulations such as the Regulations on Environmental Protection of Construction Projects and the Regulations on Sewage Disposal Permits; local governments have formulated corresponding local rules.

Since 2023, the Supreme People’s Court and Procuratorate have updated judicial interpretations concerning environmental pollution crimes, ecological tort liability and related litigation evidence.

Codification Approach

The Ecological and Environmental Code adopts “moderate codification”, integrating ten laws (basic systems, pollution prevention) into the Code while retaining 28 other separate laws on ecology, energy and resources.       

China’s environmental regulatory system follows a central-local vertical leadership and cross-ministerial horizontal collaboration structure, with the following core authorities.

Central-Level Core Bodies

National Leading Group for Ecological and Environmental Protection Inspection

This Group operates under the leadership of the Political Bureau of the Central Committee of the Communist Party of China (CPC) and its Standing Committee. Its core responsibilities are to co-ordinate and guide central ecological and environmental protection inspections; deploy inspection work; report progress to the CPC Central Committee and the State Council; and deliberate on key matters such as inspection system norms, plans and reports. Its office is located in the Ministry of Ecology and Environment, undertaking daily work and organising inspection implementation.

Ministry of Ecology and Environment

As the national authority for overall co-ordination of ecological and environmental work, the key responsibilities of the Ministry of Ecology and Environment (MEE) include:

• formulating departmental rules and standards for national ecological and environmental monitoring, pollution prevention and control, pollutant discharge permits and environmental impact assessment (EIA);
• managing “core environmental protection” tasks such as emission reduction target assessment; overall co-ordination of EIA approval for national key construction projects; automatic monitoring of key national pollutant-discharging entities; carbon emission rights trading; nuclear and radiation safety supervision; and addressing climate change; and
• leading inspections, by assigning six regional inspection bureaus (covering North China, East China, South China, Northwestern China, Southwestern China and Northeast China) to conduct cross-provincial unannounced inspections on local governments and enterprises.

Local Ecological and Environmental Bureaus (EEBs)

The Environmental Protection Law stipulates that local people’s governments are responsible for environmental quality within their administrative regions; EEBs at or above the county level oversee regional ecological and environmental work. Local comprehensive ecological and environmental law enforcement teams undertake over 80% of daily law enforcement.

Their specific functions encompass handling approval matters such as issuing pollutant discharge permits, conducting EIA for construction projects, issuing hazardous waste operation permits, conducting law enforcement actions including annual “random selection of inspectors and inspected entities” spot checks, the imposition of administrative penalties, and the implementation of credit evaluation for relevant entities.

Other Relevant Ministries and Commissions

A range of key ministries and commissions collaborate to oversee sector-specific environmental governance, with each undertaking distinct responsibilities aligned with their administrative scope:

• the National Development and Reform Commission manages total energy consumption, carbon intensity reduction targets and resource recycling bases, promoting industrial structure adjustment and energy policy development;
• the Ministry of Industry and Information Technology develops and implements industry plans, policies and standards, covering cleaner production audits, green factories and green supply chains;
• the Ministry of Housing and Urban-Rural Development oversees building energy efficiency, urban sewage management, waste classification assessment and the planning of wastewater treatment facilities;
• the State Taxation Administration handles the collection and management of environmental protection taxes, the verification of pollutant discharge coefficients and cross-departmental data comparison; and
• the Ministry of Transport is responsible for environmental protection within the transportation industry.

To ensure policy and law enforcement implementation, China’s regulatory co-operation relies on two core pillars: vertical responsibility transmission and horizontal cross-departmental co-ordination, which work together to form a comprehensive support system.

Vertical Co-Operation Mechanism

The vertical co-operation mechanism follows the principle of “central overall planning, provincial overall responsibility and municipal/county implementation”:

• The National Leading Group for Ecological Civilisation System Reform and its office (housed in the MEE) formulates national environmental policies, standards and inspection plans.
• Provincial governments co-ordinate regional work and supervise municipal/county-level policy implementation.
• Municipal/county governments conduct on-site law enforcement and daily supervision for grassroots implementation.
• Provincial-level environmental inspection mechanisms (aligned with the central model) have also been set up, forming a “central-provincial” two-tier inspection system covering all administrative regions.

Horizontal Co-Operation Mechanism

The horizontal co-operation mechanism, tasked with major cross-departmental environmental matters, is led by the central government. It adopts four key co-operation methods:

• inter-ministerial joint meetings, where relevant ministries hold regular discussions to resolve cross-sector environmental issues;
• joint document issuance, through which multiple ministries jointly release policy documents to unify standards and implementation requirements;
• parallel approval, where for projects involving multiple departments, relevant authorities conduct approval procedures simultaneously to improve efficiency; and
• information sharing platforms, which are unified data platforms established to share environmental monitoring data, enterprise credit information and law enforcement records among ministries and local authorities, thereby avoiding information silos.

China has a hierarchical environmental system integrating management of “natural resources, pollution prevention and control, ecological protection” with the Environmental Protection Law as the foundation, plus other laws, regulations and rules. It has achieved a transformation from the fragmented management of pollution control targets and protected objects to the protection of the entire ecosystem, covering multiple areas such as air, soil, forests, oceans and more.

In addition to the pollution prevention and control laws and ecological protection regional laws specified in 1.1 Environmental Protection Policies, Principles and Laws, other key contents and systems are as follows.

Key Element/Resource Protection Laws

• Land: The Land Administration Law and Regulations on the Protection of Basic Farmland establish the total farmland retention target and the red line for permanent basic farmland.
• Water: The Water Law implements water quantity allocation, total pollutant discharge control and cross-basin pollution prevention.
• Forests: The Forest Law stipulates quota-based logging, ecological compensation for public welfare forests, and forest carbon sinks.
• Grasslands: The Grassland Law specifies grass–livestock balance, grazing bans and rest periods, and grassland ecological compensation.
• Wetlands: The Wetland Protection Law establishes a hierarchical wetland management system, an approval system for wetland occupation and expropriation, and an “occupation–compensation balance” mechanism.
• Ocean: The Marine Environmental Protection Law and Law on the Administration of Sea Areas Use implement marine functional zoning, red-line area control and an approval system for marine outfall discharge.
• Mineral resources: The Mineral Resources Law and Resource Tax Law impose resource taxes, establish funds for mine geological environment restoration and promote the development of green mines.
• Wildlife: The Wildlife Protection Law and Regulations on the Protection of Wild Plants develop species lists, protect habitats and prohibit illegal hunting, trapping and trading.

Key Systems and Tools

• Spatial planning: “Three Zones and Three Lines” restricts development outside ecological red lines.
• EIA and “Three Simultaneities”: Construction projects need EIA; environmental facilities must be built/accepted with the project.
• Pollutant management: Enterprises use “single permits”; total emissions are quota-controlled.
• Compensation and liability: Ecological compensation for key zones; those damaging ecology must compensate and restore.
• Resource rights registration: Clear property rights for environmental assets to enable paid use and damage traceability.

The penalties for violating the Environmental Protection Law and related laws depend on the consequences of the offence. If it constitutes a criminal offence, criminal liability will be pursued in accordance with the law. If it does not yet constitute a crime, it will be punished in accordance with the Administrative Penalties Law and the Measures on Administrative Penalties for the Ecological Environment. (For more details, please refer to 5.1 Key Types of Liability.)

According to the Civil Code, pollution of the environment and damage to the ecology are subject to tort liability. This includes stopping the infringement, removing obstructions, eliminating dangers, repairing the ecological environment, and apologising and compensating for damages. (For more details, please refer to 5.1 Key Types of Liability.)

MEE and EEB investigators have the right to:

• enter relevant sites for inspection, reconnaissance, voice recording, photographing, video recording and on-site sampling, monitoring and testing;
• question the business entities and relevant personnel and request them to explain relevant matters and provide relevant materials; and
• review and copy production records, wastewater discharge records and other relevant documents.

When facing government inspection, dishonesty or obstructing law enforcement will be fined by the EEB.

Approval of Environmental Impact Assessments

According to the Environmental Impact Assessment Law and the Regulations on the Environmental Protection Management of Construction Projects, construction projects that may cause significant or mild environmental impacts must carry out EIA and compile EIA reports, and obtain approval from the local EEB or the MEE.

Pollutant Discharge Permits

The Regulation on the Administration of Pollutant Discharge Permits (PDPs) officially implements regulations and emission standards regarding the issuance of PDPs. Pollutant-discharging industries are required to obtain a PDP or carry out emissions registration before the emissions/waste are discharged.

Drainage Permits

According to the Regulations on Urban Drainage and Sewage Treatment, enterprises, institutions and individual industrial and commercial households engaged in industrial, construction, catering, medical and other activities need to apply to the urban drainage authorities for a drainage permit if they discharge sewage into urban drainage pipelines. This permit is issued by a construction authority rather than the EEB. Drainage permits are valid for five years.

X-Ray Radiation Safety Licences

According to the Regulations on the Safety and Protection of Radioisotopes and Radiation Devices, an enterprise that produces, sells or uses radiation and radiological devices must obtain a Radiation Safety Licence in accordance with the provisions therein. The licence is valid for five years.

Hazardous Waste Business/Collection Licences

According the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste, enterprises engaged in collecting, storing, utilising and disposing of hazardous waste must apply for a Hazardous Waste Business Licence or a Hazardous Waste Collection Licence, in accordance with relevant state regulations. The former is valid for five years and the latter for three years.

The regulatory approach includes environmental permits, environmental administrative supervision and inspection, and environmental administrative penalties.

An environmental permit is an administrative decision made by an environmental law enforcement agency (in response to an application by an individual or organisation), after examination, to permit the applicant to engage in a certain activity.

Environmental administrative supervision and inspection refers to actions taken by the environmental law enforcement agencies in order to achieve the function of environmental management. The administrative component determines whether environmental protection laws and regulations and specific administrative requirements are being complied with.

Environmental administrative penalties are administrative sanctions imposed by a specific environmental law enforcement agency on a citizen or organisation that violates environmental laws and regulations. The penalties are divided into behavioural penalties, property penalties and warnings. This penalty system, combined with ecological damage compensation mechanisms, ensures accountability for non-compliance and reinforces the authority of environmental policies.       

According to the Administrative Licensing Law, environmental permits/approvals obtained in accordance with the law shall not be transferred.       

Violations of environmental permits or approvals can lead to administrative penalties being imposed by the environmental protection authorities. These penalties may include fines, warnings, or orders to cease operations, revoke or suspend the permits/approvals or rectify the violations. In cases of severe violations, individuals or entities responsible may face criminal charges. This can result in imprisonment and substantial fines. Violators may also be required to remediate environmental damage or pay compensation for environmental damage caused by their actions. (For more details, see 5.1 Key Types of Liability.)

China’s environmental legal liability covers three types: criminal, administrative and civil, with liable subjects including enterprises, enterprise managers and individuals who commit pollution or damage acts.

The Draft Ecological and Environmental Code (Second Reading) has revised the limitation period for administrative violations, extending the period for violations causing harmful consequences such as environmental pollution and ecological damage from the previous two years to five years.

Environmental Criminal Liability

Environmental criminal liability mainly involves three crimes: environmental pollution (Criminal Law, Article 338), destroying computer information systems (Article 226), and issuing false EIA or environmental monitoring certificates (Article 229).

Per the Criminal Law Amendment (XI) of 2020, enterprises and their managers can be held criminally liable for serious environmental pollution. Enterprises typically face criminal fines; individuals may be sentenced to up to seven years in prison plus fines. For severe illegal acts that cause grave consequences (eg, causing injuries/deaths), imprisonment can be extended up to a maximum of 15 years.

Environmental Administrative Liability

Environmental administrative liability mainly includes administrative penalties and compulsory enforcement measures.

Per the Administrative Penalties Law and ecological environment penalty measures, penalty types cover:

• warnings, fines and confiscation of illegal gains/property;
• temporary licence detention, qualification downgrade and licence revocation;
• production/business restrictions, suspension or closure;
• time-limited demolition;
• administrative detention; and
• other legally prescribed penalties.

Violators failing to rectify within deadlines may face daily fines to increase penalty intensity. For serious violations, authorities may also impose compulsory measures such as sealing up or confiscating property.

Environmental Civil Liability

Environmental civil liability mainly applies to environmental pollution and ecological damage, with liability forms under the Civil Code including: 

• cessation of the infringement;
• removal of obstacles;
• elimination of danger;
• restitution of property;
• restoration to the original condition;
• repair, reworking or replacement;
• continued performance;
• compensation for loss;
• payment of liquidated damages;
• elimination of adverse effects and rehabilitation of reputation; and
• offering an official apology.

Polluters must bear tort liability if their acts harm others; the infringed can claim for compensation, an apology or restoration. For ecological damage, provincial/municipal governments and their designated agencies or legal organisations may claim damages from polluters.

This liability follows the no-fault principle and inverse burden of proof: the actor must prove no liability grounds (as per law) and no causal link between their act and the damage. Public interest litigation is also involved in civil liability (see 11.1 Civil Claims).

The Draft Ecological and Environmental Code (Second Reading) has also adjusted the statute of limitations for initiating environmental civil lawsuits, increasing it from the previous three years to five years. The limitation period shall commence from the date on which the party knows or ought to know of the damage sustained and the identity of the person liable.

Historical pollution problems mainly concern soil and groundwater pollution. Given that the historical pollution prevention and control facilities and environmental management system were not satisfied, there may be landfill waste, chemical leakage and sudden accidents that result in soil and groundwater pollution.

When the land is handed over to the next owner or returned to the government, it may be found that the damage caused by the historical pollution accident still exists. The land needs to be investigated and evaluated according to the current laws and regulations or even organised for restoration. Responsibility for restoration is still allocated according to the “polluter pays” principle. The “Changzhou poisoned land” case found that the operator that caused historical pollution should bear the environmental tort liability.

Civil Law/Codes, Tortious Liability and Key Defences

China’s civil liability for compensation adopts the principle of “filling up”. The main defences against environmental civil liability are:

• the limitation period of three years (for continuing acts, from the date of the end of the act) has expired;
• force majeure exists; or
• there has been fault on the part of a third party or the victim.

Administrative Liability and Key Defences

The main defences against environmental administrative liability are:

• limitation period – if normal/general illegal acts are not found within two years, there should be no administrative punishment, but the limitation period will be extended to five years for acts that involve citizens’ lives, health and safety, financial safety and causing harmful consequences;
• the identification of the responsible person is inaccurate;
• the fact determination is inaccurate and the evidence lacks authenticity, legitimacy and relevance;
• the law enforcement procedures are not in compliance with law;
• the suspects did not commit intentional or negligent mistakes; or
• the illegal circumstances are minor or the consequences are not serious.

In recent years, various provinces and cities have introduced a “list of exemptions for minor offences” and discretionary rules.

An enterprise that violates the laws and regulations relating to environmental protection may be subject to criminal, civil or administrative liability. (For more details, see 5.1 Key Types of Liability.) In addition, this may have a negative impact on the environmental credit evaluation of the enterprise. It will be subject to negative public evaluation results, suffer loss of eligibility for government procurement, be impacted regarding bank loan financing, and be subject to more frequent supervision and other disciplinary actions.       

Per the Environmental Protection Tax Law, enterprises that directly discharge taxable pollutants into the environment must pay the Environmental Protection Tax. Taxable pollutants include noise, air pollutants, water pollutants and solid waste, as specified in the Table of Environmental Protection Tax Items and the Table of Taxable Pollutants and Equivalent Values.

In October 2025, the Standing Committee of the National People’s Congress amended the Environmental Protection Tax Law, authorising the State Council to launch a pilot programme that levies the Environmental Protection Tax on enterprises that directly emit volatile organic compounds not listed in the Table of Taxable Pollutants and Equivalent Values.

Another type of green tax is the Resource Tax. The Resource Tax Law defines taxable products as energy minerals (oil, natural gas, coal, geothermal, etc), metal minerals, non-metallic minerals, hydrous minerals and salt. Enterprises developing taxable resources within China’s territory and its jurisdiction over other sea areas must pay the Resource Tax per the law.

Tax Incentives

Environmental Protection Tax breaks

Per the Environmental Protection Tax Law and its implementing regulations, if the concentration of taxable air/water pollutants is 30% below national/local limits, only 75% of the tax is levied; if it is 50% below limits, only 50% is levied. Legally established urban-rural sewage/domestic waste centralised treatment sites that discharge pollutants within standards are exempt from this tax.

Enterprise Income Tax and VAT incentives

Per the Regulations for the Implementation of the Enterprise Income Tax Law, the environmental treatment industry and businesses investing in pollution control equipment or energy-saving technologies may qualify for incentives. However, enterprises with over CNY100,000 in administrative penalties lose VAT refund eligibility for six months.

Green Credit and Credit Management

Financial institutions offer preferential credit to businesses meeting environmental criteria. Per the Enterprise Environmental Credit Evaluation Measures (Trial), enterprises are rated A, B, C or D based on environmental behaviour.

A credit repair system exists (eg, Shanghai’s trial regulations). Enterprises that rectify environmental violations can apply to the penalty-imposing department to restore their ecological and environmental credit.

Environmental Certifications

Obtaining environmental certifications, such as the “Green Label” or “Environmental Management System” certifications, can enhance a company’s reputation and market access. This creates incentives for environmental responsibility.

Penalties for Bad Environmental Citizenship

The penalties for bad environmental citizenship are mainly criminal, civil and administrative liability or a lower credit rating. (For more details, see 5.1 Key Types of Liability.)

A parent company has independent legal status and normally is not impacted by the environment liability caused by its subsidiaries. However, if the parent company has engaged in acts that are related to the causes of an environmental accident (eg, excessive control), the subsidiaries’ illegal behaviours could also be attributed to the parent company. Hence, in particular cases, the shareholders might bear civil, administrative or even criminal liability.

A wastewater company in Nanjing repeatedly discharged high-concentration wastewater and toxic and hazardous sludge waste into the Yangtze River, causing enormous ecological and environmental damage. The wastewater company paid the ecological environment restoration fee in the final reconciliation agreement, and its parent company assumed joint and several liability.

China’s ESG framework is built on laws, national strategies (eg, the Dual-Carbon Strategy) and regulatory documents, with clear norms for environmental protection, social responsibility and corporate governance, supported by systematic reporting, monitoring and enforcement mechanisms.

Core ESG Requirements

Environmental

Core environmental requirements focus on pollution control and low-carbon development. Enterprises must obtain pollutant discharge permits, control emissions of air/water pollutants and solid waste, and install real-time monitoring equipment. High-energy industries (steel, power) must meet energy consumption and carbon intensity targets and avoid damaging ecological red lines.

Social

Core social requirements centre on stakeholder rights. Regarding employees, enterprises must comply with the Labour Law (minimum wage, social insurance, safe working conditions, no child/forced labour). Regarding communities, projects with regional impacts need community communication and support for local public welfare (rural revitalisation). Regarding consumers, the Consumer Rights Protection Law requires product safety, truthful information disclosure and proper complaint handling.

Governance

Core governance requirements emphasise standardised governance. Listed companies (per the Securities Law) need sound boards, independent directors and internal controls; all enterprises must establish anti-corruption mechanisms to prohibit commercial bribery (per the Anti-Unfair Competition Law). Listed companies and state-owned enterprises (SOEs) must disclose governance information (shareholder equity, related-party transactions) transparently.

Reporting: Mandatory and Voluntary

The following reporting is mandatory:

• A-share listed companies (since 2022) must disclose annual ESG reports (or ESG sections in annual reports) via stock exchanges.
• High-pollution/emission firms need to provide detailed environmental data (emissions, energy consumption).
• Central SOEs and key local SOEs must submit annual social responsibility reports covering ESG performance.

In terms of voluntary reporting, non-listed enterprises can refer to the Guidelines for Social Responsibility of Enterprises or international frameworks (GRI Standards) to disclose ESG information, thus enhancing brand reputation. Reports must include specific indicators.

Monitoring: Multi-Party Supervision

Government monitoring

• The MEE uses national real-time networks to monitor pollutant emissions and conducts central ecological inspections.
• The Ministry of Human Resources supervises labour law compliance.
• The China Securities Regulatory Commission oversees listed companies’ governance and disclosure.

Monitoring by third parties and the public

• Qualified institutions (environmental monitoring firms, ESG rating agencies) verify carbon data and evaluate ESG performance.
• Citizens and organisations supervise via the MEE’s 12369 hotline or online platforms, with legal rights to access ESG information and file complaints.

Enforcement: Penalties and Incentives

In China’s ESG enforcement framework, a dual mechanism of penalties for non-compliance and incentives for good performance is implemented to ensure adherence to ESG requirements. (For more details, please refer to 5.1 Key Types of Liability and 6.3 Incentives, Exemptions and Penalties.)       

Regular Inspection

Regular inspections are conducted by environmental authorities such as the MEE and local EEBs to check compliance with environmental laws, such as adherence to pollutant discharge standards and permit requirements.

Cleaner Production Audit

Cleaner production audits assess a company’s environmental performance in reducing pollution and resource waste, split into mandatory and voluntary types:

• Mandatory audits: Required by the government or relevant organisations (per Interim Measures on Cleaner Production Audits), with standards and participation rules set by authorities – typically applied to high-pollution, high-energy-consuming enterprises.
• Voluntary audits: Initiated by companies themselves, with self-determined participation scope and criteria.

Carbon Verification (Carbon Audit)

Carbon verification is a key requirement for enterprises covered by national or local carbon markets (eg, power, steel, cement industries) which follows national standards to confirm emission sources, calculation methods and data validity – ensuring compliance with carbon quota allocation and emission reduction targets. It focuses on verifying the accuracy and completeness of a company’s carbon emission data. It is implemented by third-party institutions accredited by the MEE or local carbon management departments.

According to the Criminal Law and relevant provisions, if the environmental pollution crimes are unit crimes, the directly responsible persons in charge and other responsible persons should be fined and punished. The “directly responsible persons in charge” include the actual controller of the unit, the principal person in charge or the authorised person in charge, and senior management personnel.

In environmental administrative liability, administrative detention measures are targeted at company executives and other directly responsible persons. The detention is less than 15 days for the following acts:

• refusing to stop construction when there is no EIA;
• refusing to stop discharging even though there is no valid discharge permit;
• dishonesty with regard to discharging and data; or
• producing or using forbidden pesticide.

China does not yet have an environmental liability insurance system for individual executives. There may be some commercial insurance companies that offer something similar. However, except for the situation of environmental accidents causing damage, the aforesaid violations of laws resulting in administrative or criminal liability may be excluded from the insurance coverage.

China’s environmental insurance (green insurance) is focused on high-risk industries such as petrochemicals, hazardous waste treatment and heavy industry, with major insurers offering products and local governments providing premium subsidies. It mainly covers third-party losses from pollution, pollution remediation costs and related legal/assessment fees.

There is no national mandatory requirement, but per policies such as the Guiding Opinions on Carrying out the Pilot Work of Compulsory Environmental Pollution Liability Insurance, enterprises in “high-risk, high-pollution” fields must purchase environmental insurance; others participate voluntarily.

Some risks are uninsurable:

• harm from intentional/grossly negligent acts due to breach of insurance good faith;
• long-term ecological damage with unquantifiable costs/scales;
• losses from legal non-compliance; and
• catastrophic risks exceeding insurers’ risk-bearing capacity.       

The Environmental Protection Law does not directly regulate the environmental protection responsibilities of financial institutions and lenders. Accordingly, the China Banking Regulatory Commission (CBRC) issued Green Credit Guidelines to provide guidance for the development of green credit for banking financial institutions, and proposed that environmental risk assessment and management should be strengthened. The CBRC also proposed that pre-loan due diligence should be undertaken and customers with non-compliant environmental and social performance should not be granted credit.

According to the Green Credit Guidelines, banking financial institutions must establish and constantly improve a system of environmental procedures – including social risk management policy – developing the customer’s environmental and social risk assessment standards and social risk evaluation and classification. The results should be the basis of rating, credit access, management and exit.

If necessary, qualified and independent third parties may also be engaged to evaluate or audit the activities of banking financial institutions, so as to fulfil their environmental and social responsibilities.

In China, environmental civil claims can be brought in three main circumstances:

• Personal/property damage:If an enterprise or individual causes personal injury or property loss to others via environmental pollution or ecological damage, an injured party can file a civil lawsuit for tort liability under the Civil Code and environmental laws.
• Public interest/ecological damage: For pollution harming the public interest, procuratorates and qualified environmental NGOs can sue polluters (environmental public interest litigation). Provincial/municipal governments or their departments may first negotiate for compensation; if negotiations fail, they can sue for ecological and environmental damages.
• Breach of contract: If parties agreed on environmental obligations in a contract, the party violating these obligations is liable for breach, and the other party can claim remedies via a breach-of-contract lawsuit.       

Punitive damages are clearly stipulated in the Civil Code (which did not exist before December 2020). Where the infringer intentionally pollutes the environment and damages the ecology in violation of the law and causes serious consequences, the infringed will have the right to request corresponding punitive damages. There are three conditions:

• violation of laws;
• intentional violation; and
• causing serious consequences.       

Class or group actions are possible under the Civil Procedure Law, mainly via two forms of joint litigation:

• Representative litigation with determined group size: When a group of numerous people has the same environmental claim, they elect a representative to sue. The representative’s legal actions bind all group members.
• Representative litigation with undetermined group size: If the claim object is similar but the number of claimants is unclear when suing, the court issues a public notice for potential claimants to register. Registered claimants elect a representative, and the representative’s actions bind all registered members.       

Public Interest Lawsuit on the Preventive Protection of Green Peafowls

In 2016, the construction of a first-class hydropower station started in a location in Yunnan province. Its submerged area happened to be the core habitat of the green peafowl, a national first-class protected animal. At that time, there were only over 200 green peafowls left in the wild, making it an endangered species. The destruction of its habitat would pose a survival crisis for the species.

In 2017, after discovering this risk, the environmental organisation “Friends of Nature” filed a public interest lawsuit, demanding the suspension of the hydropower station’s construction. This case became China’s first preventive public interest lawsuit for wildlife protection.

The focus of the court’s trial was “whether intervention is allowed when environmental risks have not yet occurred”. In March 2020, Kunming Intermediate People’s Court, in the first instance, found that the hydropower station’s construction posed a major survival risk to the green peafowl’s habitat, and ruled to stop the construction and prohibit water impoundment by damming. In December of the same year, Yunnan Higher People’s Court upheld the original judgment in the second instance.

This case broke through the traditional judicial concept of “remedy only after damage occurs” and established the ecological judicial principle of “protection first, prevention foremost”, drawing a legal red line for biodiversity protection. The case also prompted Yunnan to include the green peafowl’s habitat in the ecological protection red line and forced major projects to strengthen ecological assessments. It was rated as the top case among the world’s top ten biodiversity cases by the United Nations Environment Programme.         

Article 153 of the Civil Code stipulates that a juristic act violating the imperative provisions of any law or administrative regulation shall be void, unless the imperative provisions do not result in the nullity of the juristic act.

The parties may agree on the allocation of the responsibility and liability for the prevention and control of pollution through agreement, without violating the mandatory provisions of laws and administrative regulations. When environmental violations occur, one party has the right to require the other party to bear the corresponding liability for pollution. However, the responsibility for pollution prevention and control agreed through an agreement cannot be a defence against the infringed claiming compensation, nor can it be a defence against administrative punishment.

The core legal framework includes four key laws and regulations:

• the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste (2020 revision);
• Management Measures for the Soil Environment of Contaminated Land;
• Management Measures for the Soil Environment of Industrial and Mining Land (Trial); and
• Soil Environmental Quality, Soil Pollution Risk Control Standards for Construction Land (Trial) (GB 36600 – 2018).

Among them, the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste is the primary rule. It sets targeted prevention requirements based on waste type and harmfulness, covering industrial solid waste, domestic garbage, construction waste, agricultural solid waste and hazardous waste. Industrial solid waste and hazardous waste are subject to stricter management and heavier penalties.

Additionally, many local governments have released their own domestic garbage management regulations, which specify requirements for domestic garbage classification, collection, transportation and disposal.

According to Article 45 of the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste , the main entities responsible for solid waste pollution control are:

• the person liable for solid waste pollution;
• the land use right holder; and
• local people’s governments and their relevant departments.

The law consistently upholds the “polluter pays” principle. For environmental public interest lawsuits, defendants may assume remediation liability in two ways: organising and conducting environmental remediation themselves, or covering the remediation costs. If the polluters lack the ability or willingness to act, they can fund a third party to carry out the soil remediation.

Based on the Interim Measures for the Determination of Persons Responsible for Soil Pollution on Construction Land and the Interim Measures for the Determination of Persons Responsible for Soil Pollution on Agricultural Land, the administrative liability of persons responsible for soil pollution can be determined. The foregoing two measures do not apply when determining the person liable for soil pollution in civil disputes over soil pollution between responsible parties and individuals.

Civil liability is determined on the basis of the “polluter pays” principle and the Civil Code in relation to torts provisions.

Tort Liability Litigation

According to Article 96 of the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste , a person can bear tort liability. In civil disputes arising from solid waste pollution, the parties concerned may apply to the competent ecological and environmental authorities of the local people’s government for mediation and processing or may bring a lawsuit to court.

Public Interest Litigation

According to Article 97 of the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste, if solid waste pollution damages national interests or social public interests, procuratorates and NGOs may bring a lawsuit to court in accordance with the Environmental Protection Law, the Civil Procedure Law, the Administrative Procedure Law and other laws.

As for organisations, according to Article 58 of the Environmental Protection Law, social organisations that meet certain conditions may bring a lawsuit to court against acts polluting the environment, damaging the ecology and damaging public interest. (For more detail, see 10.1 Civil Claims.)

The process of investigating environmental accidents is based on the Measures for Investigation and Punishment of Environmental Emergencies promulgated by the EEB from 1 March 2015 onwards. The investigation process is as follows:

• handle the scene and take emergency measures to control pollution;
• on-site investigation, extract evidentiary materials, and report;
• find out the cause and nature of the incident and handle the accidents according to law on the basis of preliminary investigation;
• implement the handling suggestions; and
• prepare an environmental emergencies investigation report, including an overview of the incident, causes, responsibility determination and handling suggestions.       

Key Policies

Dual-Carbon Strategy

Announced in 2020, the Dual-Carbon Strategy aims to peak carbon emissions before 2030 and achieve carbon neutrality before 2060. A central government document integrates this into economic and social development, focusing on green energy transition.

National Climate Change Adaptation Strategy 2035

Issued by 17 state departments, the National Climate Change Adaptation Strategy defines key areas and measures for climate adaptation by 2035. Local governments have also launched provincial action plans and city-level adaptation pilots.

Key Principles

• Adhere to sustainable development, balancing economic growth with ecological protection.
• Follow the common but differentiated responsibilities principle, urging developed countries to take the lead in emission cuts and support developing nations.
• Emphasise equal mitigation and adaptation, integrating climate action into overall development.

Relevant Laws

• Energy Law (effective 1 January 2025): Establishes a carbon emission “total volume and intensity” dual control system. It requires the State Council to devolve dual control targets to provincial governments.
• Energy Conservation Law: Promotes energy efficiency and cuts greenhouse gas emissions.
• Renewable Energy Law: Supports solar, wind and hydro energy to optimise the energy matrix.
• Circular Economy Promotion Law: Reduces waste and emissions via resource recycling.
• Law on Promoting Clean Production: Reduces emissions from the source.
• Interim Regulations on Carbon Emission Trading: Support the dual control system.

China has set legally-supported greenhouse gas (GHG) targets: peak CO2 before 2030, cut carbon intensity by at least 65% compared to 2005 and reach carbon neutrality by 2060. A new absolute target requires economy-wide net GHG to fall 7–10% below the 2030 peak by 2035, with the non-fossil share rising to at least 30% and wind/solar capacity to 3,600 GW. The new Energy Law and the Carbon Emissions Trading Regulation make these objectives binding on provinces and high-emission firms, with administrative and criminal liability for non-compliance. Sectoral emissions trading system expansion and provincial carbon caps further tighten enforcement.       

Asbestos

China has not fully banned asbestos mines and products, but has been addressing their environmental and health risks for a long time. In 2007, it released the National Standard for Occupational Health Management of Asbestos Operations (GBZ/T 193-2007). This standard sets out practical occupational disease prevention measures and operating procedures to curb asbestos dust emissions and control dust pollution during asbestos-related work, based on occupational health monitoring.

PCBs

China stopped manufacturing power capacitors with PCBs in 1974. In August 1979, it ruled that electrical equipment using PCBs as a medium would no longer be imported; any necessary imports must be approved by the State Council’s competent department.

In 1991, China issued the Regulations on Preventing PCB Electrical Equipment and Its Waste From Polluting the Environment and the Control Standard on PCBs for Waste Slags (replaced by the Standard for Pollution Control on PCB-Contaminated Waste in 2017). These standards specify the types of PCB-containing waste and environmental protection requirements for its entire lifecycle, including cleaning, collection, packaging, transportation, temporary storage, storage and harmless treatment.

Since 1998, China has classified PCB waste as hazardous waste for strict control.

The key laws and regulations on waste management in China are:

• the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste;
• the Law on the Promotion of a Circular Economy;
• the Regulations on the Management of Medical Waste; and
• the Measures for the Management of Hazardous Waste Business Licences.

Depending on waste type and harmfulness, the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste sets requirements for industrial solid waste, domestic garbage, construction waste, agricultural solid waste and hazardous waste pollution prevention, and stricter management and punishment of industrial solid waste and hazardous waste pollution.

Many local governments have issued regulations on the management of domestic garbage. These regulations set requirements for the classification, collection, transportation and disposal of domestic garbage.

According to Article 36 of the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste, industrial solid waste generators must set up a full-process pollution prevention responsibility system – covering waste generation, collection, storage, transportation, utilisation, and disposal.

Generators must verify the qualification and technical capacity of the entrusted party (for waste handling) and sign a written contract. The contract must specify pollution prevention responsibilities and liability consequences for all parties.

If a generator fails to verify the entrusted party’s technical capacity, or fails to include pollution prevention requirements in the contract, it will face administrative penalties. It will also bear joint liability with the entrusted party if environmental pollution or ecological damage occurs.       

Design Requirements for Disassembly, Reassembly and End-of-Life Collection

In China, mandatory design rules only apply to specific products. For electrical and electronic products listed in the Waste Electrical and Electronic Products Treatment Catalogue, producers and importers must design products to support resource reuse and harmless treatment (using recyclable, low-hazard materials) and consider disassembly, reassembly and end-of-life collection. For products not in the Catalogue, such design obligations are mostly voluntary or guided, not mandatory.

Circumstances for Mandatory Take-Back, Recovery, Recycling or Disposal

Producers must handle waste goods in three key scenarios:

• First, for electrical and electronic products in the above-mentioned Catalogue, they must either recycle the waste themselves or entrust qualified parties to do so.
• Second, they must label toxic/hazardous substance content or recycling instructions as required, failing which they may face penalties and be forced to fulfil take-back and recycling duties.
• Third, under the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste, they must recover, recycle or properly dispose of waste products that pose environmental or health risks.

Waste operators have the right to transport, utilise and dispose of industrial solid waste.

Waste operators must fulfil the following key obligations:

• Follow the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste to avoid new pollution during soil remediation; handle waste from land remediation legally.
• Make a plan (detailing transport time, mode, route, destination, final disposal measures, and amount of contaminated soil) for contaminated soil transfer and report to ecological authorities of the original and receiving areas.
• No cross-provincial solid waste transfer for storage/disposal without approval.
• Establish and truthfully record solid waste management accounts.

For liability for breaches of these obligations, see 5. Environmental Liability.

Chinese law obliges enterprises to report environmental data to regulators and the public.

Regulatory Reporting

• Routine: Annual Environmental Statistics (all key emitters), Pollution-Discharge Permit execution report (quarterly/annual), GHG emission verification (ETS-covered firms, by March), Hazardous Waste Management Plan (pre-operation, annual update).
• Event-driven: 24-hour preliminary + three-day detailed report for any discharge/emission exceeding permit limits or causing potential incident; one-hour emergency notification when a sudden environmental accident occurs; immediate “up-chain/down-chain” notification if waste is illegally diverted.

Public Disclosure

Major polluters must upload basic data, discharge totals, carbon emissions and emergency plans to the national disclosure portal within 30 days of filing their permit report and refresh them yearly.

Enterprises required to prepare an EIA report or form must legally disclose the EIA document to solicit public comments pre-construction. Local EEBs must also disclose the pending EIA report before accepting applications and issuing approval decisions.

Consequences for Non-Disclosure or Incomplete Disclosure

Failure triggers correction orders and fines of CNY10,000–200,000, permit suspension or revocation, credit downgrades that raise borrowing costs and bar government procurement, and up to seven years’ prison under the Criminal Law Amendment (XI) of 2020 for falsifying monitoring or carbon data.       

The public can obtain environmental information in two main ways. Firstly, authorities must proactively publish data that affects public interests or needs public participation within 20 working days. Environmental information can be withheld only on the statutory grounds of state secrets, commercial secrets, personal privacy, ongoing investigations or other express legal prohibitions.

Additionally, any citizen or organisation can request further information without demonstrating a special interest, and authorities must respond within 20 to 40 working days; refusals can be challenged in court.

“Public authorities and bodies” includes any administrative organs at all levels, as well as state agencies and public institutions that hold environmental information while performing regulatory or service functions.

Some enterprises are mandatorily required to disclose environmental information in accordance with the Administrative Measures for the Legal Disclosure of Environmental Information of Enterprises.

China has initially established a multi-level green financial product matrix covering green loans, green bonds, green insurance, green funds and investments, green leasing and financial leasing, green trusts and carbon financial products. The key entities responsible for overseeing and promoting green finance include:

• the People’s Bank of China, which sets policies and guidelines relating to green finance and works on promoting environmentally responsible financial practices;
• the National Financial Regulatory Administration, which is responsible for regulating and supervising the banking and insurance sectors; and
• the China Securities Regulatory Commission, which is in charge of regulating and supervising the securities market in China.        

Excessive Emissions Investigation for Land Use Changes/Right Transfers

Per Article 67 of the Law of Prevention and Control of Environmental Pollution Caused by Solid Waste, land use right-holders must conduct soil pollution investigations before changing land use for production or transferring/withdrawing land use rights.

The MEE has issued guidelines (HJ.1-2019 to HJ 25.6-2019 technical standards) to guide such due diligence.

Environmental Risk Assessment in Credit Financing

Banking institutions must conduct environmental due diligence before approving credit, though national environmental laws do not mandate this.

Financial institutions may hire professional bodies to assess green investments and must evaluate investment projects’ environmental risk management capabilities.

Scope of Environmental Due Diligence

To avoid potential environmental legal risks, some enterprises voluntarily conduct special environmental due diligence before listing or M&A. The scope and depth of such diligence are determined by clients’ needs. This diligence forms the basis for subsequent environmental risk control. More enterprises now prioritise pre-investigation and hire professionals (lawyers, technical experts) to identify and manage risks.       

In the process of product sales, procurement vendors have a legal obligation to disclose some environment-related information, such as a seller’s request to the buyer to provide a material safety data sheet.

The Administrative Measures on Restricted Use of Harmful Substances in Electrical and Electronic Products stipulate that sellers of electrical and electronic products must not sell any products that violate the national or industrial standards for limiting the use of harmful substances in those products.

In the process of M&A or real estate transactions, it is not a mandatory legal requirement for the seller to disclose all environmental information. However, the principle of good faith stipulated in Article 7 of the Civil Code is a basic principle that civil subjects should follow when engaging in civil activities. In practice, sellers are usually required to disclose known environmental hazards that may affect the value or usability of the property.

Regulatory Compliance

There may be compliance issues, such as enterprises lacking environmental permits or not holding them in accordance with regulations, enterprises violating environmental laws and regulations, and construction projects not conducting EIAs in accordance with the law.

Pollution and Contamination

There may be pollution and pollution liability issues, including site pollution and the risk of pollution migration. There may also be non-compliance in waste management, such as improper disposal of hazardous waste.

Known and Potential Liabilities

Identification of any existing environmental liabilities – for example, ongoing or pending lawsuits related to environmental damage, or regulatory orders for remediation. Unclear potential future liabilities allocation clauses can lead to disputes between buyers and sellers over responsibility when environmental issues occur. In representation and warranty clauses, if the seller’s statements about the environmental situation are false, the buyer may suffer losses.