Vice Minister of SEPA Pan Yue told the news media today that SEPA and China Insurance Regulatory Commission has jointly issued the Guiding Opinions on Environmental Pollution Liability Insurance, officially drawing the roadmap for establishing the environmental pollution liability insurance system. This year, the two departments will conduct pilot projects in enterprises that produce, operate, store, transport, and use hazardous chemicals, petrochemical enterprises and hazardous waste disposal enterprises that easily have pollutant accidents, and especially the enterprises and sectors that have suffered from major pollution accidents in recent years. After the green credit policy, this is the second environmental economic policy.

Pan Yue said not long ago the Central Economic Working Conference proposed to "speed up to introduce and implement incentive pricing, fiscal, tax and financial policies in favor of energy saving and emission reduction", urgently calling for the environmental sector to shift from relying on administrative approaches too much to employing the economic approaches to promote pollution reduction. Green insurance policy, after the green credit policy, is the second environmental economic policy, and another attempt of SEPA with other relevant departments on establishing the environmental economic policy system.

Pan Yue said right now the country is entering a period with high frequency of environmental pollution accidents. Of the 7,555 large-scale projects in heavy chemical industry, 81% are located in environmentally sensitive areas including the river watersheds and populous areas. 45% of them are sources of major risks, they have correspondent defensive mechanism but there are loopholes, which causes frequent occurrence of pollution accidents that badly pollute the environment, endanger the public health and affect social stability. In 2007, SEPA received the reports of 108 cases of environmental emergencies and handled them, one case every two working days on average. As there's no institutional guarantee for treatment of pollution accidents, the enterprises often fail to assume the responsibility of compensating and restoring the environment, and the victims of the pollution fail to be compensated timely, which trigger many social conflicts. The current situation of "enterprises profit from illicit polluting behaviors and everybody pays for the environmental damages" cannot carry on anymore. It is urgent to establish an effective system for environmental pollution liability insurance.

Pan Yue said environmental pollution liability insurance system is widely adopted in the international community. The enterprises buy insurance from insurers on possible environmental accident risks, and the latter compensate the victims of the pollution accidents. In the past, once major environmental pollution accidents occurred, the enterprises having the accidents cannot but declare bankruptcy facing the huge costs of damages and treatment fees. Not only the victims of the accidents cannot be timely compensated, but the environmental damages can only be treated by government by huge expenses. Therefore, individual victims, enterprises and governments will all suffer from great losses. However, if the enterprises have bought environmental pollution liability insurance, once the accidents happen, the insurers can cover the losses of the victims, the enterprises can avoid bankruptcy, and the government can ease its financial burdens, which meet the common interests of the three parties. But this does not mean that the enterprises may pollute reassured and boldly, because the environmental insurance premium is directly proportional to the severity of the pollution. If the pollution accident poses extremely great risks, it will be hard for the enterprises to bear the expensive insurance premium. Insurers will also employ experts to prevent and control the environmental risks of the insurants. The supervising role of such market mechanism will force the enterprises to reduce pollution. The international experience indicates that a mature green insurance system is win-win for both the economy and the environment. It is also an approach which can mobilize the market forces in a wider scope to enhance the environmental regulation.

Pan Yue said in the 11th Five-Year Plan period, SEPA and China Insurance Regulatory Commission will initially set up the environmental pollution liability insurance system, carry out pilot projects on this system in major industries and areas, and initially develop a list of enterprises and facilities (in major sectors) that buy insurances on the basis of the rate of environmental risks as well as the pollution damage compensation standards. By 2015, we will basically perfect the environmental pollution insurance system, promote it all over the country, and basically improve the various mechanisms for risk assessment, loss assessment, identification of liability, handling of the accidents and compensation.

At the operational level, the environmental pollution liability insurance system will be carried out by the following four steps.

First of all, making the environmental pollution liability insurance legalized. It is suggested to add the clause of "environmental pollution liability insurance" in national and provincial-level environmental laws and regulations. When the conditions are mature, we will enact a special law on environmental liability insurance.

Second, making clear that the object of the environmental pollution liability insurance is mainly the direct losses caused by the environmental pollution due to the accidents. The early pilot projects will be conducted on industries, enterprises and areas that cause great environmental damages, that easily have pollution accidents and whose losses are easily to determine, especially the enterprises that produce, operate, store, transport, and use hazardous chemicals, and petrochemical enterprises and hazardous waste disposal enterprises that are prone to pollution accidents. We shall consider the enterprises and industries that have suffered from major pollution accidents in recent years, while other kinds of them may also carry out the pilot projects voluntarily. The detailed scheme for pilot projects will be proposed by environmental authorities and insurance regulatory authorities.

Third, environmental authorities, insurance regulatory departments and insurance agencies all do their own duties. Environmental authorities propose the list of insurance for the enterprises and the damage compensation standards. Insurance companies develop the environmental liability insurance products, rationally define the scope of the liability, and rate the premiums according to different kinds. Insurance regulatory authorities develop the regulations for insurance industry and regulate the market.

Fourth, environmental and insurance regulatory departments will establish the mechanism for investigating the environmental accidents and identifying the liability, and standard compensation procedures and information disclose system. Enterprises having pollution accidents, related insurers and environmental authorities should make public the information on the accidents by law. When the conditions are ripe, they should work over the mechanism to identify liability by a third party.

Pan Yue said the environmental pollution liability insurance system is widely adopted in the international community. Developed countries like the U.S., Germany, Britain, France, and Sweden and developing countries like India have all introduced this kind of insurance. Among others, the U.S. has integrated this insurance as part of the insurance package of projects. Contractor, sub-contractor, consultancy or designer, whoever he is, cannot get the contract of the project if he fails to buy this insurance when necessary. Germany and India have special laws providing to implement a system dominated by the mandatory liability insurance. Brazil and some other countries have also established the environmental pollution liability insurance system. The experience and lessons of these countries will be good for us to learn from.

At last, Pan Yue emphasized that the country's reality indicated again and again that administrative powers alone are not enough to solve environmental problems and that it is urgently needed to set up a complete and mature set of environmental economic policy system and that SEPA is busy with finishing this plan together with other ministries. However, to set up systems is a long and arduous process because it involves the rearrangement of stakeholders' interests, so it will surely encounter setbacks. The difficulties facing the green credit policy are the clear proof. Therefore, to introduce a new policy is not a plain sailing, instead it probably means more difficulties. But the reality will not allow us to wait and act after we clear the problems but to clear them in our action. SEPA will build a framework of environmental economic policy as soon as possible. On the one hand, the framework will provide a frame basis for all sectors concerned to participate and amend it, on the other hand, it will bring various policies together, providing strong institutional supports for energy saving and emissions reduction and for implementing the scientific outlook on development.