China Releases Public Comment Version of Amendment to the National Regulation on Administration of Ozone-Depleting Substances

On May 21, 2020, China’s Ministry of Ecology and Environment (MEE) released a draft regulatory amendment entitled the Regulation on the Administration of Ozone Depleting Substances and Hydrofluorocarbons. Written public comments on the amendment will be received until June 22, 2020, China time.

This draft amendment will, if promulgated essentially as proposed, significantly expand the scope of the existing Regulation on Administration of Ozone Depleting Substances (effective June 1, 2010). Importantly, the draft amendment proposes addition of hydrofluorocarbon (HFC) management measures in light of China’s adoption and anticipated ratification of the Kigali Amendment to the Montreal Protocol on Substances That Deplete the Ozone Layer.* For instance, the draft amendment indicates that the Ministry of Ecology and Environment will take the lead in drafting the China ODS Phaseout and HFC Phasedown National Plan for submission to the State Council for approval.**

The draft amendment also strengthens MEE enforcement tools and the scope of liability for those violating the draft amendment’s measures applicable to those producing, using, importing, or exporting regulated ODSs and HFCs. According to MEE’s Introduction to the draft amendment, included with the Circular announcing the draft, these changes draw upon MEE’s decade of experience in implementing the Regulation on Administration of Ozone-Depleting Substances (including recent enforcement campaigns).

Key Aspects of the Draft Amendment

The summary of the draft amendment provided below essentially reflects MEE’s Introduction to the draft amendment, included with the Circular announcing the draft.

Expanded Definitions and Scope. The draft amendment refines the definitions and scopes of production and uses of ODS and HFCs, including clarification of the definition of ODS and HFC production to cover co-production and by-production of ODSs and HFCs. The draft also expands the definition of ODS and HFC uses to include consumption of ODS and HFC blends. Further, the draft provides a more refined description of ODS and HFC uses, dividing such uses into controlled and raw material uses.

Expanded and Strengthened Regulatory Responsibilities. The draft amendment improves the administration system for the production, sale, and use of ODSs and HFCs. As amended, administration of these substances requires, among other things, automatic monitoring and harmless disposal of ODSs and HFCs that are by-products from production processes of other chemicals. Record keeping measures are imposed on all ODS and HFCs uses, except for exempted uses subject to total amount controls. Other amendments include a prohibition on sale of ODSs and HFCs for raw-material uses for controlled uses. The draft amendment also strengthens administration of production, sale, and use of phased-out ODSs and HFCs and imposes trade restrictions on ODSs and HFCs used in maintenance, recycling, and reuse activities.

Updated Regulatory Supervision Measures and Tools. The draft amendment, among other changes, will update regulatory supervision measures and tools, including requiring the publication of enterprise violation information through China’s social credit information sharing platform. The draft amendment also authorizes relevant regulatory agencies to conduct harmless disposal of ODSs and HFCs if the enterprises involved refused to undertake such disposal as ordered. In so requiring, the authorities would delete the provisions included in the Regulation on Administration of ODS (effective 2010) related to confiscation of ODSs and HFCs.***

Strengthened Liability for Violations. The draft amendment strengthens liability for violations of the amendment. The draft amendment adds liability provisions for violation of new requirements, e.g., failure to install or operate automatic monitoring equipment. The amendment also replaces the punishment of “license revocation” with the option to reduce violators’ ODS and/or HFC quotas or cancel such quotas. The amendment also raises the penalties on severe violations by replacing “static” penalties equal to 3 times the ODS market price or disposal cost with ranges of penalties that can be adapted to particular violation situations.   

Enhanced Mechanisms to Support ODS and HFC Administration. The draft amendment enhances the reference to and use of financial, taxation, pricing, and government procurement mechanisms to support scientific research, technology development, and deployment of ODS and HFC alternatives and technologies, as well as the technologies and methods for the testing and monitoring of ODSs and HFCs. In addition, the national government will establish a national atmospheric ODS and HFC monitoring network. Also included is the requirement to incorporate restricted or prohibited ODS or HFC production and use processes, equipment, and products into the National Comprehensive Industrial Policy Catalog, which provides a more comprehensive and centralized reference point for all operations. Further, and notably, the draft amendment recognizes the right of citizens, legal persons, and other organizations to, according to law, obtain information on, participate in, and supervise the production, use, import, and export of ODSs and HFCs. Moreover, the draft amendment expanded the right of reporting illegal activity to HFC-related violations and requires that whistleblower personal information be kept confidential and that whistleblowers be rewarded, once reported information on violations of the Regulation is confirmed.

Bilingual Version of the Draft Amendment

A full bilingual (Chinese-English) version of the Regulation on the Administration of Ozone Depleting Substances (ODSs) and Hydrofluorocarbons (HFCs) (Draft Amendment for Comments), including our draft English translation for reference purposes, is available here. Our translation of the Circular accompanying the draft amendment is available here.

*See for background and context, Xiaopu Sun and Tad Ferris, The Kigali Amendment’s and China’s Critical Roles in Evolving the Montreal Protocol, Natural Resources & Environment 33(2), 2018.

** Article 5 of the draft amendment provides that the Ministry of Ecology and Environment takes the lead to draft National Plan for the Phaseout of ODSs and the Phasedown of HFCs for submission to the State Council for approval. The draft Amendment does not contain this plan, but sets the “regulatory foundation” for future, detailed HFC-related regulatory actions (including finalization of such a Plan), once China ratifies the Kigali Amendment to the Montreal Protocol on Substances That Deplete the Ozone Layer.

*** For example, Article 31 of the Regulation on Administration of ODS (effective 2010) requires that in the case of ODS production without a quota permit, the ODSs produced will be confiscated.  Under the draft amendment, Article 33 provides that in the case of ODS and HFC production without a quota permit, the ODSs and HFCs produced have to be harmlessly disposed. It also authorizes local departments of ecology and environment to conduct harmless disposal of ODSs and HFCs if the enterprises involved refused to undertake such disposal as ordered. The cost of such harmless disposal would be borne by the enterprise.