Policy Brief - Enhancing air quality in North East Asia

Enhancing air quality in North East Asia: Regulatory frameworks, enforcement and co-operation POLICY BRIEF

OECD . 3

ACRONYMS AND ABBREVIATIONS

Enhancing air quality in North East Asia Regulatory frameworks, enforcement and co-operation

PUBE

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TABLE OF CONTENTS

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Table of Contents Acronyms and abbreviations .......................................................................................... 5 Air quality in China, Korea and Japan ............................................................................. 7 The policy mix to address air pollution: regulatory instruments ...................................... 11 The use of emission pricing instruments ....................................................................... 17 Addressing mobile sources of air pollution .................................................................... 21 Policy implementation.................................................................................................. 25 International regulatory co-operation for air pollution in Northeast Asia .......................... 29 Recommendations ...................................................................................................... 35 References ................................................................................................................. 41

Tables Table 1. Domestic Air Quality Standards and WHO Guidelines ............................................... 12

Figures Figure 1. Share of population exposed to PM2.5 concentration above 15 and 10 μg/m3 ............. 8 Figure 2. Exposure to PM2.5 in selected regions ........................................................................ 9 Figure 3. Emission decoupling ............................................................................................... 10 Figure 4. China, Japan and Korea: Effective tax rates on energy use in national currency and EUR/GJ, 2015. .............................................................................................................. 19 Figure 5. Global passenger electric car stock. ........................................................................ 22 Figure 6. China – use of environmental administrative penalties, 2015-18 ............................... 27 Figure 7. The variety of IRC mechanisms ............................................................................... 29 Figure 8. Overlaps in constituencies and topics of IRC arrangements for air quality in NorthEast Asia........................................................................................................................ 30

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ACRONYMS AND ABBREVIATIONS

Acronyms and abbreviations ACAP ADB

Asia Centre for Air Pollution Research Asian Development Bank

APCA APCAP

Air on Pollution Control Act Asia Pacific Clean Air Partnership

AQSs

Air Quality Standards

BATs

Best Available Techniques

CBA

Cost Benefits Analysis

CLRTAP

Convention on Long-range Transboundary Air Pollution

CO

Carbon monoxide

EANET

Acid Deposition Monitoring Network in East Asia

EIA ELVs

Environmental Impact Assessment Emission Limit Values

EV GEF

Electric Vehicles Global Environment Facility

IRC

International Regulatory Co-operation

LTP

Joint Research Project on Long-range Transboundary Air Pollutants in North-East Asia

MoU

Memorandum of Understanding

NEACAP

North-East Asia Clean Air Partnership

NEASPEC

North-East Asian Sub-regional Programme for Environmental Cooperation

NH3

Ammonia

NO2

Nitrogen dioxide

NOx

Nitrogen oxide

PCA

Pollution Control Agreements

PM PM10

Particular Matter Particular Matter - 10 micrograms/m3

PM2.5

Particular Matter - 2.5 micrograms/m3

O3

Ozone

RIA

Regulatory Impact Analysis

SEA

Strategic Environmental Assessment

SO2

Sulphur Dioxide

SOx

Sulphur Oxide

TEMM

Tripartite Environment Ministers Meeting

UNECE

United Nations Economic Commission for Europe

UNEP

United Nations Environment Programme

UNESCAP

United Nations Economic and Social Commission for Asia and the Pacific

VOCs

Volatile Organic Compounds

WHO

World Health Organisation

WLTP

Worldwide Harmonized Light Vehicles Test Procedure

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AIR QUALITY IN CHINA, KOREA AND JAPAN

Air quality in China, Korea and Japan

China, Japan and Korea – like many other countries that underwent periods of rapid industrialization – share a common story of high economic growth and intense pollution followed by progressive efforts to improve air quality.

In the 1950-60s, Japan experienced a period of fast growth coupled with degradation of the environment that led to several pollution-related illnesses (e.g. Minamata disease, Itai-Itai disease, Yokkaichi asthma). The ambitious reforms introduced during the 1960-70s contributed to progressive reduction in pollution. Currently, the country benefits from one of the least pollution-intensive GDP across OECD countries and GDP growth has been decoupled from air pollutant emissions since around 2000.

Nevertheless, many challenges still remain: in nearly all its territory particular matter (PM2.5 ) concentration is above the level (10µg/m3) recommended by the World Health Organisation (WHO) while the domestic air quality standards for photochemical oxidants have not been met in any Prefectures in the recent years.

Similarly, China has recently started ambitious reforms to contain pollution and improve environmental performance after experiencing a period of fast growth and increasingly more frequent smog occurrences. The outcomes of these activities have been remarkable, and sulphur dioxide (SOx) and nitrogen dioxide (NOx) emissions, which were the first pollutants targeted, are currently 30% and 23% lower than the peak levels recorded respectively in 2006 and 2011. Furthermore, China has decoupled emissions of the key pollutants, such as SOx and NOx, from economic growth at an earlier stage of development (measured in GDP per capita) than most of OECD countries (DRC - OECD, 2017[1]). At the same time, emissions of other pollutants, including PM, volatile organic compounds (VOCs) and ammonia (NH3), are rising fast, especially in urban conglomerates, such as the Jing-Jin-Ji area (28 cities including Beijing), the Yangtze River Delta (surrounding Shanghai) and the Pearl River Delta (surrounding Guangzhou and Shenzhen). Furthermore, as in Japan, groundlevel ozone and photochemical pollution are also becoming a growing source of public concern.

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8 | AIR QUALITY IN CHINA, KOREA AND JAPAN Figure 1. Share of population exposed to PM2.5 concentration above 15 and 10 μg/m3 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Japan

Korea

China

G20

European Union OECD Countries

Note: Percentage of population exposed to more than 15 micrograms/m3 (blue bar); Percentage of population exposed to more than 10 micrograms/m3 (red bar).

Source: OECD (2018), "Air quality and health: Exposure to PM2.5 fine particles - countries and regions", OECD Environment Statistics (database).

Korea has been one of the fastest growing OECD economies over the past decade.

However, growth has come with high pollution and resource consumption. Air pollution is now a major health concern in Korea, especially after several high-pollution periods in the recent years. Korea has therefore invested considerable effort in improving environmental management, and fight against air pollution is among the government’s top priorities. Despite some progress, problems persist. The annual average PM2.5 concentration, for example, is about two times higher than the WHO’s guidelines or the levels of other major cities in developed countries. In addition, reported sand and dust storms in South Korea have increased substantively.

Furthermore, the three countries are characterised by strong regional discrepancy in air pollution exposure. In Japan, 10% of population is still exposed to PM concentration above the WHO interim target 3 (15 μg/m3) while urban areas, especially in the regions of Kanto and Kansai, experience higher and more frequent exposures to high concentration of photochemical oxidants. In China, none of the 338 cities achieved WHO guideline for PM2.5 annual concentration (10 μg/m3), and just above one third reached the WHO Interim Target-1 level (35 μg/m3). In Korea, residents in Jeollabuk-do Gyeongsangbuk-do, Chungcheongnam-do, and Chungcheongbuk-do are facing severe air pollution, as “bad” air quality days were reported for these provinces on average two to three times more than in others.

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AIR QUALITY IN CHINA, KOREA AND JAPAN

Figure 2. Exposure to PM2.5 in selected regions PM2.5 concentration level in most and least polluted regions.

120.0 100.0 80.0 60.0 40.0 20.0 Chollabuk-do Inchon Chungchongbuk-do Taegu Kwangju Kyongsangbuk-do Cheju-do Pusan Seoul Kyongsangnam-do

Tamanoura-cho Miiraku-cho Kishiku-cho Kasuga-shi Shime-machi Hiroo-cho Monbetsu-cho Urakawa-cho Shizunai-cho Niikappu-cho

Kashgar Shijiazhuang Hengshui Khotan Xingtai Shannan Dêqên Tibetan Sanya Altay Nyingtri

0.0

Note: China (blue); Japan (green), Korea (orange). Five most and least polluted regions per country.

Source: OECD (2018), "Air quality and health: Exposure to PM2.5 fine particles - countries and regions", OECD Environment Statistics (database), https://doi.org/10.1787/96171c76-en.

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10 | AIR QUALITY IN CHINA, KOREA AND JAPAN Figure 3. Emission decoupling

Carbon Monoxide

Nitrogen Oxides

1.00

3.00

0.80

2.50 2.00

0.60

1.50

0.40

1.00

0.20 0.00

0.50 2000 2002 2004 2006 2008 2010 2012 2014 2016 Japan

0.00

Korea

Non-methane Volatile Organic Compounds

Japan

0.60

3.00

0.40

2.00

0.20

1.00

Japan

Korea

China

5.00 4.00

2000 2002 2004 2006 2008 2010 2012 2014 2016

Korea

Sulphur Oxides

0.80

0.00

2000 2002 2004 2006 2008 2010 2012 2014 2016

0.00

2000 2002 2004 2006 2008 2010 2012 2014 2016 Japan

Korea

China

Note: Vertical axis - total emissions per unit of GDP, Kg per 1000 USD. Source: OECD green growth indicators for data on Japan and Korea. Data for China are from Reports on the State of Environment in China, varied years. Data for Chinese 2004, 2005 NOx emissions are not officially available.

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THE POLICY MIX TO ADDRES AIR POLLUTION: REGULATORY INSTRUMENTS

The policy mix to address air pollution: regulatory instruments

Air quality standards (AQSs) can be broadly defined as the objectives for air quality that a country sets. The 2005 WHO Guidelines identify concentration levels of air pollutants that should not be exceeded in order to limit health risks. In addition, the WHO Guidelines provide interim targets for several pollutants with the aim of promoting a gradual shift towards healthier air quality. Following the release of the WHO guidelines, all three countries have amended their national AQSs, although these do not still meet the recommended concentration for several pollutants, including PM and sulphur dioxide (SO2). While discrepancy in measurement methodologies complicate the comparison of the different AQSs, the Japanese and Korean standards are on average more stringent that those enforced in China that revised its standards in 2012 to meet, or exceed in certain cases, the WHO Interim Target-1. A key feature of the Chinese standards is that AQSs are more stringent for areas designated as natural reserves and scenic spots (Zone I in Table 1).

In all the three countries, most of the responsibilities for environmental policy making are retained at the central level, including the establishment of AQSs and emission limits values. However, multiple Ministries legislate on several matters that are crucial for air quality. For instance, the Chinese Ministry of Transport, the Japanese Ministry of Economy, Trade and Industry (METI) and the Japanese Ministry of Land, Infrastructure, Transport and Tourism (MLIT) retain important responsibilities in shaping eco-friendly transportation policies, while allowable air emissions of construction sites are established with the cooperation of the Ministry of Housing and Rural-Urban Development. In this context, tools such as Regulatory Impact Analysis (RIA) and Environmental Impact Assessment (EIA) can be effective instruments to ensure regulatory coherence across the government and that the air quality impact of projects and policies introduced by other Ministries are well considered. In China, given the relatively short policy-making cycle and absence of a well-developed RIA framework, Strategic Environmental Assessment (SEA) of regional and sectoral developmental plans plays an important role in addition to EIA of construction projects.

Air emissions are generally controlled through a mix of policy tools that varies according to the type of polluter. Pollution from stationary sources (e.g. industrial facilities) is mainly regulated through standards, permitting systems and taxes on emissions. Pollution from mobile sources (i.e. vehicles) is mostly controlled through emission standards measures and incentives to adopt cleaner vehicles.

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12 | THE POLICY MIX TO ADDRES AIR POLLUTION: REGULATORY INSTRUMENTS

Table 1. Domestic Air Quality Standards and WHO Guidelines

China Pollutant

Samplin g time Hourly

PM10

PM2.5

SO2

NO2

CO1

O3

24h average Annual mean 24h average Annual mean Hourly average 24h average Annual mean Hourly average 24h average Annual mean Hourly average 8 hours average 24h average Hourly average 8h max

Japan

Zone I2 n.a.

Zone II n.a.

50

150

200 100

40

70

n.a.

35

75

35

15

35

15

150

500

50

150

20

60

n.a.

200

200

n.a.

80

80

0.04-0.06 ppm (=75 -113 μg/m3)

40

40

n.a.

0.1 ppm (=262.3 μg/m3) 0.04 ppm (=104.8 μg/m3)

10

10

n.a.

n.a.

n.a.

4

4

160

200

20 ppm (= 22.9 mg/m3) 10 ppm (= 11.5 mg/m3) 0.06 ppm (=117.8 μg/m3)

100

160

n.a.

Korea

n.a.

100 50 35 15 0.15ppm (=393.4 μg/m3) 0.05ppm (=131μg/m3) 0.02ppm (=52.4 μg/m3) 0.1ppm (=187.5 μg/m3) 0.06ppm (=113 μg/m3) 0.03ppm (=56 μg/m3) 25ppm (= 28.6 mg/m3) 9ppm (= 10.3 mg/m3) n.a.

0.1ppm (=196.3 μg/m3) 0.06ppm (=117,8 μg/m3)

WHO AQGs

IT-11

n.a.

n.a.

50

150

20

70

25

75

10

35

n.a.

n.a.

20

125

n.a.

n.a.

200

n.a.

n.a.

n.a.

40

n.a.

30 n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

100

160

Notes: (1) Unit for CO concentration is mg/m3. IT-1 refers to WHO Air Quality Interim Target-1.

(2) Zone I refer to areas which require special protection (i.e. more stringent environmental standards), such as natural reserves and scenic spots; zone II refer to residential areas, commercial-traffic-residential mixed area, cultural districts, industrial areas and rural areas; (3) Differences in sampling and measurement techniques are not considered in the table.

Source: MEE, (MOE, 2018[2]), (MOEK, 2015[3]), (OECD, 2017[4]), (WHO, 2005[5])

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THE POLICY MIX TO ADDRES AIR POLLUTION: REGULATORY INSTRUMENTS

China and Korea have undertaken important reforms of their permitting systems.

China started rolling out a new integrated permitting 1 procedure in 2016 with the ambitious objective of issuing permits for all stationary sources by 2020. The new system sets different requirements according to the size, location and potential environmental impact. Small installations benefit from a simplified procedure consisting only of submitting a “notice of commencement”. Large installations need to apply for a customised permit that sets a number of conditions for operating, including: emission limits on concentration and rate, limits on facility’s total load and, when applicable, stricter emission limits on concentration and during peak pollution periods. Permits issued for the first time are valid for 3 years, while renewed permits are valid for 5 years. Currently, approximately 50 000 permits have been issued covering all thermal power plants, electroplating, printing and dyeing, steel rolling, and copper smelting firms.

The new permitting system is expected to lead to several improvements in the Chinese regulatory environment. First, the system introduces a set of clear and predictable rules for firms, thus creating a level-playing field. Secondly, the integrated approach could help foster closer co-operation among departments within the newly created Ministry for Environment and Ecology. Nevertheless, important challenges remain to make the permitting system effective.

A Best Available Techniques (BATs) system has been recently rolled out in Korea. Korea is undertaking a major environmental permitting reform, moving from issue-specific to integrated permitting for large industrial installations. The new integrated permitting system, inspired by the EU system of integrated pollution prevention and control (IPPC), entered into force in January 2017, starting with power generation, steam supply, and waste management sectors. The new system will be applied to 19 industry sectors once the regulatory framework is complete. BAT will be identified for each sector by technical working groups and specified in BAT reference documents (K-BREFs), taking into account potential compliance costs and economic feasibility. Industries participate directly in technical working groups to select and periodically review K-BREFs. K-BREFs with emission limit values (or ELVs) for the power generation, steam, and waste management sectors were completed in 2014 and distributed in December 2016; the ones for steel manufacturing, non-ferrous metals manufacturing and organic chemicals industries were developed in 2015 and distributed in December 2017. Seventeen K-BREFs are expected to be developed by 2021. Existing industrial facilities will be given a four-year grace period. To avoid duplications, mechanisms to link integrated permitting and environmental impact assessment are being considered. The reform is expected to reduce the administrative burden by combining medium specific permits into one through a single procedure involving online applications.

BATs based - emission standards have been recently adopted in Japan but only for mercury emissions in selected sectors. These have been introduced due to the 1 Integrated permitting means that emissions to air, water (including discharges to sewer) and land, as well as a range of other environmental effects (the use of energy, water and raw materials) must all be considered together.

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14 | THE POLICY MIX TO ADDRES AIR POLLUTION: REGULATORY INSTRUMENTS entry into force of the Minamata Convention on Mercury and create an obligations to consider BATs when emission standards for specific installations are established, including coal-fired power plants, coal-fired industrial boilers smelting and roasting processes used in the production of non-ferrous metals, waste incineration facilities, and cement clinker production facilities.

All three countries have been working to improve the procedures for ex-ante assessment of projects and regulations including from air quality perspectives but further improvements are needed.

Environmental impacts assessment (EIA) and regulatory impacts assessment (RIA) can be considered as planning and administrative procedures that allows to identifying and evaluating the environmental consequences of projects and regulations. EIAs are used to identify the environmental impacts, including on air pollution, of both private (e.g. coal power plants) and public projects (e.g. new infrastructure). For this reason, such practises are particularly relevant for areas undergoing period of rapid development, such as several regions in China. RIAs are not limited to environmental impacts and should encompass a wide range of possible impacts (e.g. impacts on businesses, social impacts). Given the obligation to consider the consequences of regulation beyond the policy domain of the legislating Ministry (e.g. housing policy for the Ministry of Infrastructure), RIAs can help to ensure that environmental implications of laws and regulations are considered, thus leading to higher policy coherence (e.g. ensuring better insulation of houses to reduce use of polluting fuels for heating). Since several Ministries retain competencies on domains that are particularly relevant for air quality in all of the three countries, RIAs could be an important tool to improve policy coherence.

China has recently revised its environmental impact assessment procedure (EIA) with the aim of striking a balance between ease of doing business and environmental protection. The new law removes the obligation to request the construction permits only once the EIA procedure is completed. On the one hand, this reduces the time required to build new projects, thus improving the business environment. On the other hand, such a change could make it harder for the Ministry of Ecology and Environment to alter the original project design in order to improve its environmental performance if other time-consuming and expensive approvals have already been granted by other Ministries. At the same time, the previous penalty for unauthorised construction projects was relatively low (i.e. 200,000 CNY), especially considering the total costs of the large infrastructural projects often built in China. The new law tackles this issue by increasing the penalty to 1 - 5% of total project costs and introducing the obligation to restore the site to the original state. While these are all positive developments, it should be noted that China lacks a mechanism to evaluate the environmental impact of laws and regulations (i.e. regulatory impact assessment procedure). Furthermore, there should also be fuller disclosure of the EIA results to the public, and those conclusions should only be used for administrative approval of projects, not for routine operations that should take evidence from the implementation of the permit system.

Japan has released new guidelines for RIAs to address the current limited recourse to quantitative evaluation methods in 2017. Given their recent release, it is too early to evaluate whether the new guidelines have led to a higher uptake of

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THE POLICY MIX TO ADDRES AIR POLLUTION: REGULATORY INSTRUMENTS

quantitative appraisals of the impact of regulations on air quality. Further revisions should target the ministerial manuals for Cost Benefits Analysis (CBA) that do not always provide clear guidance on how to evaluate the effects of projects on air quality.

This is particularly problematic given the increasing evidence linking air pollution to human health and the importance of health impacts for the outcome of a CBA. In Korea, regulators are required to conduct RIA that examines the objective, feasibility and fitness of any new or revised regulation. RIA also requires regulators to extensively compare and review multiple alternatives (both regulatory and nonregulatory) to the regulation under review. RIA is also a key part of the Korean government’s “cost-in cost-out” initiative for offsetting costs stemming from new regulations. EIA, in use since the early 1980s, is the cornerstone of Korea’s environmental regulation.

Furthermore, none of the three countries is a signatory part of the Espoo (EIA) Convention that establishes an obligation for States to notify and consult each other on all projects likely to have a significant adverse environmental impact across national boundaries.

A unique feature of the Japanese policy mix is the wide application of voluntary approaches The very wide use of voluntary approaches is a unique feature of the Japanese regulatory environment. Two different types of voluntary approaches are common in Japan. The first is an approach where local governments negotiate “pollution control agreements” (PCAs) with firms. Historically, PCAs emerged as a response to the legal setting preventing local governments from issuing their own environmental regulations to address growing industrial pollution in the 1960-70s, and have proliferated over time. PCAs are widespread in Japan and their use is met with both criticisms and praises by researchers. On the one hand, several scholars highlight that PCAs can provide higher flexibility to firms, allowing to quickly address local concerns. On the other hand, their legal ground is often unclear, thus their enforceability can be questioned. Other researchers have questioned the limited transparency that characterise the negotiations between public authorities and firms, and the risk of redundancy between the laws and the PCA. The second type of voluntary approaches commonly used in Japan are unilateral commitments by industrial organisations (or “voluntary action plans”), which are more recent and became more common in the mid 1990s (Börkey et al., 1999[6]). Although they are unilateral commitments by industries, their formulation is often shaped by intense interactions with public authorities. This interactive process is visible in the recent efforts to control VOCs emissions and, for instance, the Air on Pollution Control Act (APCA) underlines that VOCs pollution needs to be controlled through an optimal combination of regulatory and voluntary approaches.

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THE USE OF EMISSION PRICING INSTRUMENTS

The use of emission pricing instruments

Countries around the world regulate emissions mainly using two key policy approaches: standards and pricing instruments, such as tax and emission trading mechanisms. Pricing instruments are considered the most efficient since regulated entities face an ongoing incentive to identify new solutions to decrease emissions in order to reduce payments. Instead, standards create an obligation to reduce emissions up to a determined level. As such, compliant regulated entities have no further incentive to improve environmental performance.

Both China and Korea tax emissions of selected pollutants but levels are too low to have a significant impact In Korea, air emission standards are complemented by an air pollution tax introduced in 1983. It has two components. The “basic” rate, imposed on SO2 and total suspended particles, is applied to emissions within permitted levels, while the “excess” rate, imposed on nine pollutants including SO2 and NH3, applies to emissions exceeding permitted levels. The government uses data from the wellestablished smokestack tele-monitoring system to apply the taxes. However, their level would need to be raised to have an environmental impact. Furthermore, the growing NOx emissions from industry are not yet subject to either component of the tax. Finally, small companies are exempt from paying the tax for emission within permitted levels, and facilities using low-sulphur fuels are entirely exempt from the SOx tax.

China adopted an environmental tax system for stationary sources in 2018. This builds on the existing pollution fees that were imposed on a number of pollutants (sulphur dioxide, nitrogen oxide, chemical oxygen demand and ammoniac nitrogen) since 2003. The reform widens the number of air (and water) pollutants taxed and allows Provincial authorities to widen the list of taxed pollutants. Companies discharging pollutants below concentration emission limits are eligible to various tax discounts. Nevertheless, the effectiveness of the tax system is still debated since the tax rates have been set at the level of pollution fees that have proven to be too low in the past. It will also rely on the accuracy of source-level emission monitoring, which needs to be strengthened with better guidelines as the implementation of the permit system further unfolds.

The policy mix adopted in Japan does not include taxes on emissions of air pollutants for stationary sources.

A levy on SO x emission has been introduced in the mid-1970s but this is mainly an “environmental liability instrument” to secure funding to compensate the sufferers – certified by 1987 – of diseases due to air pollution. Following this objective, the levy rate is computed annually considering the estimated costs for health expenditures for certified patients and then apportioned to emitters

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18 | THE USE OF EMISSION PRICING INSTRUMENTS proportionally to their 1982-86 emissions and current annual emissions. Given this, emissions of new firms are not priced.

There remains considerable scope to improve the use of taxation of energy use to reduce pollution and combat climate change in all the three countries.

In China, effective carbon rates 2 consist primarily of specific taxes on energy use.

However, only 18% of carbon emissions from energy use are currently covered by a price, the majority of which stem from the road sector (gasoline and diesel used in off road transport), whereas emissions from the industry, residential and commercial, and the electricity sectors remain largely untaxed (OECD, 2018[7]). The untaxed consumption of coal and coke, which are the main energy source for the industry and electricity sector, is particularly problematic given their polluting and carbon-intensive nature.

Furthermore, gasoline is taxed more heavily than diesel in all the three countries.

Such differential should be removed since there is no environmental reason to attach a tax preference to diesel. Nevertheless, appropriate measures need to be introduced to mitigate the potential distributive implications of such changes (Figure 4).

2

The effective tax rate are the sum of carbon taxes and other specific taxes on energy use.

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THE USE OF EMISSION PRICING INSTRUMENTS

Figure 4. China, Japan and Korea: Effective tax rates on energy use in national currency and EUR/GJ, 2015.

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20 | THE USE OF EMISSION PRICING INSTRUMENTS

Notes: The horizontal axis shows the final energy use by fuel for each sector (on road and off-road transport, industry, residential & commercial use, electricity generation). The vertical axis shows the rate of specific taxes and related tax expenditures that apply.

Source: (OECD, 2018[7])

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ADDRESSING MOBILE SOURCES OF AIR POLLUTION

Addressing mobile sources of air pollution

The Chinese push to renew the domestic vehicles fleet The Chinese government has introduced a number of measures to promote the adoption of cleaner vehicles to reduce air pollution. Vehicle emission standards have been frequently tightened during the past years and are currently set to a level (National V) considered similar to the Euro V. They are expected be further tightened in mid-2020 (National VI-a) and mid-2023 (National VI-b). In addition, several incentives have been introduced to scrap old polluting “yellow label” vehicles, generally defined as cars that fail to meet the minimum emission standards National I for gasoline vehicles or National III for diesel vehicles. These include three main measures: subsidies for scrapping vehicles, limiting the circulation hours and zones, and requiring yellow label cars to retrofit engines or install end-of-pipe treatment equipment. Between 2014 and 2017, more than 20 million used and yellow label cars were scrapped, exceeding the original target. However, some authors underline that many cars were not scrapped but sold to residents of rural areas or small towns where the restrictions are less stringent.

Furthermore, a number of large cities concerned by the impact of vehicles emissions on air quality have introduced a number of additional policies. These include lottery or auctions systems to restrict vehicle purchase (eight cities by end of 2017) and the adoption of more stringent regulations on an accelerated schedule (e.g. the Jing-Jin-Ji and the Yangtze and Pearl Rivers Deltas areas).

Ambitious plans for electric vehicles in China and Japan China and Japan have introduced generous incentives to promote the electrification of the fleets and currently have respectively the first and third largest stocks of Electric Vehicles (EV) in the world. Generous tax-incentives and subsidies for the installation of chargers at private facilities have driven the sales of ‘eco-friendly’ vehicles in Japan, including electric passenger cars. In China, vast amount of government funds were channelled to incentivise the purchase of ‘new energy’ vehicles through direct credit line, grant, subsidies or other tax reliefs, totalling 33.4 billion CNY between 2009 and 2015. In addition, local governments often introduce additional measures, such as total or partial waivers from licence plate availability restrictions.

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22 | ADDRESSING MOBILE SOURCES OF AIR POLLUTION Figure 5. Global passenger electric car stock.

Notes: BEV = battery electric vehicle; PHEV = plug-in hybrid electric vehicle. Stock shares are calculated based on country submissions and estimates of the rolling vehicle stocks developed for the IEA Mobility Model. The vehicle stocks are estimated based on new vehicle registration data, lifetime range of 13-18 years, and vehicle scrappage using a survival curve that declines linearly in the last five years of the active vehicle life. Lifetimes at the low end of the range are used for countries with higher income levels (and vice versa).

Source: IEA (2018), Global Electric Vehicle Outlook, Paris.

However, the structure of incentives raises several concerns. In China, the government has recently announced plans to reduce the scale of financial support and to introduce more stringent technical qualification thresholds for subsidy eligibility due to issues like frauds and inconsistent product quality (including safety features).

In Japan, the sale of diesel passenger vehicles have also surged in past years since these benefit from the ‘eco-incentives’ as well. This is particularly concerning given the improved understanding of the link between air pollution and lung cancer that paved the way for the classification of diesel as a definite carcinogenic by the International Agency for Research on Cancer. While the penetration rates of dieselengine passenger vehicles in Japan is almost nil, the eco-incentive policy applies also to diesel passenger cars with low emissions. The rapid growth rate of sales of such vehicles promoted by the incentives suggest that potential issues may emerge in the short-medium term.

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ADDRESSING MOBILE SOURCES OF AIR POLLUTION

Korea, China and Japan have moved to the UN Worldwide Harmonized Light Vehicles Test Procedure All the three countries have adopted the UNECE Worldwide Harmonized Light Vehicles Test Procedure (WLTP). Historically, vehicles emissions have been tested in controlled laboratory environments in order to control for important influencing factors, such as ambient temperature and speed trace, and to ensure comparability of results. However, recent emissions scandals highlighted the presence of growing gap between official laboratory and real-world on-road emission values. The adoption of WLTP, which was developed based on real-driving data gathered from around the world, should help to close this gap. However, the WLTP remains a laboratory test, and discrepancy between laboratory test results and real-world emissions may still exist. For this reason, several countries are planning to progressively introduce “Real Driving Conditions testing procedures” where emissions are measured while vehicles are driven on the road.

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Policy implementation

Policies will remain ineffective if not properly implemented. Systematic approach to environmental policy implementation involves an appropriate mix of activities in three areas: compliance promotion, compliance monitoring and enforcement (including inspections and imposing sanctions). None of these three activities can work in isolation. While checking compliance through proactive and reactive inspections is important, supporting compliance through provision of information and creating enabling environment for citizens and business to comply with regulations is nonetheless important. Enforcement and monitoring activities should be based on risk analysis and management to make them better targeted and therefore more effective and efficient. The three countries differ in their approach to regulatory delivery, especially in their focus on compliance promotion and the use of risk management.

The compliance monitoring and enforcement activities in Japan are geared towards compliance promotion ...

Based on inspection results of industrial installations, authorities can issue either administrative guidance or administrative orders. The former are non-legally binding acts that provide advice on how to improve pollution control. The latter, which are issued if a major corrective action is needed, require firms to improve or to suspend operations. The available data point to a monitoring and enforcement framework that strongly builds on compliance promotion activities in Japan (i.e. the issuance of guidance to firms). For instance, 8 087 guidance and only 5 administrative orders were issued on average during the past three years. Several authors point out that the success of this approach owes to very specific features of the Japanese system where regulations are devised and introduced following intense consultation with various stakeholders and where the reputational consequences of noncompliance can be large.

There is limited horizontal information sharing on compliance issues across jurisdictions. In fact, no specific mechanism has been established to ensure that Prefectures share with each other data on violation and inspections results. This information is first reported to the National government that can then decide whether to initiate further investigations and/or inform other Prefectures. Within this context, the creation of stronger horizontal coordination mechanisms that would allow Prefectures to directly share information on non-compliance issues may reduce the time to identify similar violations in other regions.

…while recent reforms in China aimed at enhancing effectiveness of policy implementation and local government accountability…

Despite the efforts of the central government, the enforcement of environmental laws remained inadequate for a long time. This was due to the conflicting priorities

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26 | INTERNATIONAL REGULATORY CO-OPERATION FOR AIR POLLUTION IN NORHTEAST ASIA for Provincial and local authorities of ensuring enforcement protection and, at the same time, pursuing economic growths. In this context, economic objectives were often prioritised and local authorities used their oversight of local environmental protection bureaus to protect local enterprises from the consequences of lack of compliance with environmental laws. This was possible because local environmental bureaus, which were responsible for inspection and enforcement, reported to both the government entity at the same level (for administrative issues as personal appointment, budget and material supply) and at the higher level of government (for technical matters of environmental management).

The “vertical reforms” have introduced three major changes to enhance environmental monitoring and enforcement activities, and insulate environmental bureaus from local political interference. First, environmental quality targets have been integrated into the performance assessment of local leaders. Second, Provincial environmental bureaus will be in charge of monitoring environmental quality while Prefectural and County – level bureaus will retain only responsibility for inspections and monitoring activities. This change would allow the national government to grasp a more accurate and reliable picture of quality of the environment while freeing more resources at the local level for monitoring and enforcement. Third, budgeting and staffing decisions of the Prefectural environmental bureaus will be placed under the sole discretion of higher level of government (i.e. Provincial environmental bureaus) while any links between County environmental bureaus and same-level governments will be removed (i.e. they will become a dispatched agency from the municipal environmental bureau). The reform, which was launched in September 2016 in two provinces (Chongqing and Hebei), started to be rolled out nationwide in June 2018 and is expected to be completed by 2020.

Furthermore, the existing Regional Environmental Centres were upgraded to Regional Environmental Inspectorates in November 2017. These can be considered dispatched enforcement agencies from the central authorities (i.e.

Ministry of Ecology and Environment). They are charged with supervising implementation by sub-national authorities of national regulations and standards, and with performing regulatory oversight duties (e.g. daily supervision of major pollution sources, on-site inspection of construction projects approved by the central government); and settling disputes related to co-operation across provinces, river basins and sea areas.

…and introduced a “zero tolerance” policy for violation The frequency of inspections and the severity of penalties for violations has considerably increased following the amendments of the 2014 Environmental Protection Law and additional “zero tolerance” directives issued by the MEP. The number of enforcement actions has almost quadrupled between January 2015 and August 2018. Among the penalties established by the law, seizure of facilities and equipment and detentions are the most commonly applied. Fines, which can be imposed for each day of non-compliance, are instead the least used measure due to the potentially high administrative costs of constantly monitoring facilities to prove that the polluter has committed serious infringements and refused to take actions to rectify. In certain cases, violators could be restricted in access to credit and tax breaks.

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Figure 6. China – use of environmental administrative penalties, 2015-18 Daily-based fines Restrict or suspend production Transfer to public security

Seize or impound facilities Transfer to administrative detention

40,000 30,000 20,000 10,000 0

2015

2016

2017

2018

Notes: Figures for 2018 refer to January-August.

Source: MEE, China

The improvements of enforcement activities is an important step forward for the Chinese regulatory environment. Future efforts could aim at strengthening the other pillar of monitoring and enforcement activities, namely compliance promotion. These generally include programs to improve understanding of policies and regulations, technical assistance, regulatory and financial incentives, and aim at facilitating compliance rather than sanctioning non-compliance.

Korea has strengthened local inspections…

Korea has made significant progress in increasing local inspection and enforcement capacity and strengthening related national supervision and evaluation mechanisms.

The central and local governments have been reinforcing their compliance assurance programmes to better detect and deter non-compliance.

Compliance monitoring responsibilities for facilities that emit air pollutants and discharge water pollutants were transferred from the Ministry of Environment to local governments. Local environmental officers are appointed by the head of the jurisdiction (e.g. mayor) and given responsibilities for issuing permits for local environmental pollutants-emitting facilities, guidance and inspection, and administrative measures.

… and is using new technologies, risk-based targeting and distributing information to better target enforcement and support compliance Recently, new technologies like drones have been used to inspect emissions from polluting facilities. These technologies have increased significantly the number of facilities being inspected. A tele-monitoring system for air and water pollution from large facilities was introduced and inspections were focused on recidivist violators.

This led to a fall in the frequency of on-site inspections, also due to resource constraints. Yet, the detection rate (the ratio between the number of detected offences and the number of inspections) grew steadily from 4.7% in 2006 to 8.4% in 2014. This proves that focusing inspections on those installations and firms

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28 | INTERNATIONAL REGULATORY CO-OPERATION FOR AIR POLLUTION IN NORHTEAST ASIA presenting higher risks (either because of the overall level of emissions or because of the bad record of non-compliance) makes inspections more efficient.

On top of better targeting inspections, both Ministries and local governments focus on supporting compliance through provision of information and guidance using their websites.

High sanctions do not lead to higher deterrence Interestingly, very significant criminal sanctions for non-compliance are set in issuespecific environmental laws in Korea. In practice, however, sanctions of this degree are rarely applied. For criminal proceedings to take place, the Ministry or the local authority that identifies a violation must refer the case for investigation to the special environmental police and then to the public prosecutor, who decides whether to pursue it in court. In 2013, such referrals occurred in only 1.8% of local authorities’ enforcement cases related to air pollution and 1.5% of water pollution cases. There is no evidence in the academic literature that higher sanctions lead to higher deterrence. Effective inspections that lead to swift and certain (but not necessarily severe) sanctions is a better deterrent than the threat of high fines. Publishing information on frequent violators of environmental regulations might be more useful for that purpose.

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International regulatory co-operation for air pollution in Northeast Asia

Air pollution is a classic example of a transnational policy problem that offers opportunities for international regulatory co-operation (IRC). Certain air pollutants have a lifetime of weeks or even years, which allows them to be transported across regional, national and hemispheric borders. Countries facing transboundary air pollution are less able to effectively deal with air quality solely through domestic regulation. Their domestic intervention needs to be complemented by a range of IRC mechanisms to achieve their objectives (Figure 7).

Evidence shows that transboundary air pollutions affects large regions of the globe, including Europe, North America and North East Asia. Although the understanding of mechanisms of long-range transportation of pollutants in North East Asia remains limited and should be extended (OECD, 2002[8]), available evidence suggests that Korea and Japan’s downwind locations increases their susceptibility to foreign emissions of PM and dust and sand storms mainly originating in China (Jung, 2016[9]).

Figure 7. The variety of IRC mechanisms

Source: Based on OECD (2013), International Regulatory Co-operation: Addressing Global Challenges, OECD Publishing

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1.1. The status of international regulatory co-operation to address transboundary air pollution in the North East Asia region

Since the 1990s, China, Japan and Korea have deployed a multiplicity of co-operation efforts to address air quality and transboundary pollution at different levels of government.

At the multilateral level, there are four key regional co-operation arrangements addressing air quality involving China, Japan and Korea (Figure 8): the North-East Asian Sub-regional Programme for Environmental Cooperation (NEASPEC); the Acid Deposition Monitoring Network in East Asia (EANET); the Tripartite Environment Ministers Meeting (TEMM) and the Joint Research Project on Long-range Transboundary Air Pollutants in North-East Asia (LTP). These mechanisms have certain overlaps in features including membership, participants, purpose, nature, and instruments of co-operation. While some of these programmes address air quality as part of a broader focus on environmental challenges, others are specifically targeted to transboundary air pollution.

Figure 8. Overlaps in constituencies and topics of IRC arrangements for air quality in North-East Asia

Source: Authors’ elaboration.

In addition, these countries have also used bilateral mechanisms at national and local levels, such as memorandum of understanding (MoU), to promote co-operation for air quality management between cities. For example, in 2018 Seoul and Beijing signed a MoU for cooperation on air quality improvement including through capacity building and technological transfer. The Sino-Japan Friendship Centre for Environmental Protection also promotes inter-city cooperation on air management

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policies. Countries have also unilaterally incorporated elements of international standards in sensitive areas for air quality, notably air quality standards and domestic emission standards for motor vehicles.

Overall, regional co-operation initiatives for air quality have remained limited to data collection and exchange of information. These efforts are yet to produce a coherent regional approach to address transboundary air pollution. The existing

IRC arrangements for air quality in North East Asia remain fragmented. The multiplicity of arrangements responds to certain political economy factors, including the varying degree to which countries in the region are sources or receptors of transboundary air pollution and their competing interest in leading some mechanisms. A number of efforts focusing on joint scientific and research projects have allowed to build links between national experts working in the field of air quality, notably the LTP, EANET and the expert dialogues under the TEMM. This is a significant development.

Evidence-based environmental policy to address transboundary air pollution requires a broad scientific agreement on key issues including the effects of air pollution, monitoring and modelling methodologies, development of emission inventories and source-receptor relationship between countries. However, these arrangements are yet to deliver a consensus on key scientific issues regarding air pollution and are yet to deliver a coherent framework and holistic strategy for transboundary air pollution in the region.

A host of actors are involved in efforts to improve air quality in North East Asia and the broader region. At domestic level, these actors include Ministries of

Environment and Ministries of Foreign Affairs, national research centres, national cooperation agencies, local governments and universities. At international level, a number of international organisations, including UN-bodies such as the United Nations Environment Programme (UNEP) and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), play a key role, including by serving as permanent secretariat for some regional programmes. From a technical assistance perspective, the Asian Development Bank (ADB) and the Global Environment Facility (GEF) provide financial and technical support to relevant regional bilateral and multilateral projects dealing with air quality, with a strong focus on capacity building and technology transfer. This diversity of actors is necessary to properly address the multi-level challenge of air quality. Yet, in the absence of a coherent regional strategy for transboundary air pollution, this fragmentation can create overlaps in functions and difficulties in co-ordination efforts both at domestic and regional levels.

There is nevertheless some momentum for regional co-operation on air quality including through stronger agreements. In recent years, countries in the region have made air pollution a top political priority with a special focus on particulate matter (PM). China has steadily strengthened its air quality regulation framework and shown increased willingness to engage in IRC efforts for air quality. Korea’s 2017 Comprehensive Plan on Fine Dust Management includes international co-operation efforts as one of four key pillars of action. Together with domestic regulatory action, there has been increased interest in advancing towards a stronger agreement on regional transboundary air pollution, as illustrated by the launch of the North-East Asia Clean Air Partnership (NEACAP) under the North-East Asian Sub-regional Programme for Environmental Cooperation (NEASPEC). Recent initiatives such as

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32 | INTERNATIONAL REGULATORY CO-OPERATION FOR AIR POLLUTION IN NORHTEAST ASIA the UNEP-led Asia Pacific Clean Air Partnership (APCAP) Joint Forums held in 2015 and 2018, aim to strengthen coordination and cooperation between national officials and experts from 16 countries, international organisations and initiatives, academics and other stakeholders involved in efforts to manage air pollution.

1.2. Key lessons from other regions The existing co-operation arrangements in the region together with other successful international experiences provide a critical basis upon which a more systematic regional IRC strategy could build to address transboundary air pollution. The 1979 Convention on Long-range Transboundary Air Pollution (CLRTAP) and the 1991 Canada – United States Air Quality Agreement (Air Quality Agreement) offer two successful examples of long standing cooperative agreements for curbing transboundary air pollution. They show that countries can effectively agree on this complex issue and collectively achieve results.

The Convention on Long-range Transboundary Air Pollution (CLRTAP) The CLRTAP was a pioneer instrument for international co-operation to address transboundary air pollution. The Convention currently has 51 Parties and covers most of the Northern Hemisphere including countries in Europe, Eastern Europe, Caucasus and Central Asia, and North America. It is the only international agreement on air pollution that addresses multiple effects and multiple pollutants. The CLRTAP includes eight protocols that set national emission ceilings and regulatory commitments in key areas.

In 40 years of co-operation, the Convention has delivered significant progress to curb air pollution at different levels. Specifically, the region has seen declines in SO2 emissions and soil and lakes acidification, among other pollutants.

The Convention has established a successful framework for science-policy interaction. It creates a complex organisational infrastructure for environmental cooperation among Parties, building bridges between science and policy in the field of air pollution. A number of scientific tools delivered by the CLRTAP have allowed the agreement to advance into a cost-effective and effects-based approach to air pollution abatement. These tools have been instrumental in the development of air pollution policies in other international settings, including the EU. Since its adoption, the Convention has adapted to new scientific development and emerging pollution challenges. This has occurred through seven protocols that deal with specific air pollutants. Over the years, the Convention has increased in complexity establishing a mix of tools to facilitate implementation by Parties. These include country-specific emission ceilings, guidelines to promote abatement technologies and the designation of specific sensitive areas.

Work on specific air pollutants under the CLRTAP has served as a precedent for two other multilateral instruments dealing with air pollution: the 2001 Stockholm Convention on persistent organic pollutants (POPs) and the 2013 Minamata Convention on Mercury. The CLRTAP has also been successfully inserted into domestic regulations in Europe through a series of EU Directives, notably the 2016 Directive on National Emission Ceilings (NECs) addressing five main pollutants and their groups.

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The Canada – United States Air Quality Agreement The Air Quality Agreement is a bilateral instrument developed to reduce the impact of cross-border pollution from acid deposition and ground-level ozone. The agreement builds on the long-standing tradition of environmental co-operation between Canada and the United States. It is designed as a flexible framework that includes emission reduction goals for specific air pollutants and sets commitments to align regulations in key areas.

The Agreement has allowed both countries to make progress in addressing shared concerns on transboundary air pollution on a number of areas. In particular, it has helped build scientific consensus over key air pollution issues. It provides a platform for scientists and officials in both countries to develop a common view on the challenge of transboundary air pollution.

Most significantly, the instrument has contributed to achieving national emission reduction goals. Although the Agreement essentially follows the targets set in each country’ domestic regulation, it has allowed Canada and the United States to strengthen their national goals by turning them into bilateral commitments. Since 1991, both countries have significantly reduced their SOX, NOX and VOCs emissions and exceeded their goals under the Agreement.

The Agreement has also provided an adaptable framework to address emerging bilateral air pollution challenges. It functions as a platform for officials in both countries to jointly address emerging challenges in transboundary air pollution. The 2002 Ozone Annex is an illustration of such adaptability.

Furthermore, commitments under the Agreement have resulted in greater regulatory alignment between Canada and the United States towards more stringent vehicle emission and fuel standards. Overall, this has resulted in a more coherent regulatory framework to address air pollution in certain sectors. The Agreement has also allowed both countries to have some influence on each other’s air pollution policies though a set of assessment, notifications and mitigation mechanisms.

Finally, the Agreement has an embedded consultation mechanism that promotes stakeholder engagement allowing the public to participate in the periodic implementation reviews of the Agreement.

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RECOMMENDATIONS

Recommendations

Sustained air quality improvement in North East Asia will require that the countries in the region continue making it a priority and focus their efforts on a number of complementary areas. These include: strengthening the knowledge base on the sources and incidence of air pollution, improving the mix of policies and their implementation at national and local levels, and engaging in cooperation that provides for mutual gains.

The knowledge base Knowledge of air pollution sources and of the impact of air pollution on health of citizens should be improved.

Japan: •

Need to improve understanding of the generation mechanism of ozone pollution. Notwithstanding decrease in the emissions of its main precursors, the concentration of Photochemical Oxidants remain well above the domestic AQSs. Its generation mechanisms need to be better understood in order to design appropriate policy intervention.

Policy mix All countries would benefit from a broader application of economic instruments to control emissions. Pricing instruments, such as taxes or trading scheme, are generally considered as the most efficient tool to promote green growth. A wider use of these instruments may allow to lower the social costs of meeting environmental quality objectives.

Policies should systematically rely on solid cost-effectiveness analysis and a strong evidence base. In particular, establishing a solid framework for RIA along with continued implementation of EIAs can help improve the effectiveness and efficiency of laws and regulations, and ensure that the effects of projects and regulations on air quality is taken into account and carefully considered beyond the environmental ministry. Similarly, it would allow to correctly evaluate the social and economic consequences of air pollution control policies and, where necessary, mitigate their distributional implications.

China: •

Continue to shift focus from emissions reduction targets to broader environmental quality objectives. Expand the coverage of pollutants subject to binding targets in the evaluation of local environmental performance.

Consider tackling primary and secondary pollutants, notably precursors of PM2.5 (NOx, VOCs), in a more coherent and integrated manner. Set up timetable to bring PM2.5 concentration levels closer to the WHO Air Quality Guidelines.

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36 | RECOMMENDATIONS •

Progressively increase the pricing of pollution (e.g. environmental tax rate) with continued use of incentive measures to encourage more abatement efforts; and conduct more empirical research to determine the possibility of realising first-best abatement levels when both price and quantity type instruments co-exist. Strengthen the role of the permit system and ensure seamless integration with environmental taxation and law enforcement

•

Aggressively adopt measures aiming at reducing air pollutant and GHG emissions. Given that the large use of fossil fuels in the energy sector is at the origin of much of China’s air pollution problem, more ambitious actions shall be taken. Key measures include: speed up the adoption of post-combustion control technologies and improve energy efficiency in the industry and transformation sector; contain transport-related emissions in urban areas, focusing on tightening emissions standards for heavy-duty vehicles; and accelerate the merging of climate change and environmental responsibilities at the subnational levels to better coordinate local implementation of mitigation policies.

Japan: •

Establish progressively more ambitious targets for the concentration of PM2.5 and photochemical oxidants. If these are carefully set, with the ultimate goal of meeting the national air quality standards within a realistic timeline, they can help to create momentum for further reforms. As an example, some Prefectures have already identified interim targets for the improvement of air quality (e.g., Tokyo Metropolitan Government set the goal of zero days with photochemical smog advisory alerts by FY2020).

•

Monitor the impact of the recently updated guidelines for the RIAs and update CBA manuals. The organisation of “hands-on” seminars and the inclusion of more precise details on how to monetise the cost of air pollution may contribute to a faster diffusion of quantitative methodologies. Ministerial CBA manuals should also be reviewed to ensure they provide clear guidance on how the evaluate the effects of projects on air quality.

Korea: •

Continue implementing measures included in the Comprehensive Plan on Fine Dust Management. It is too early to evaluate the actual impact of the measures adopted in 2017. Some of them, such as the alternate-day driving limitations have to be broadened to include the private sector and other areas than Seoul Metropolitan Area

•

Reinforce ex ante assessment of environmental policies and regulations through wider application of quantitative cost-benefit analysis, and expand ex post evaluation of their implementation. There is, so far, no evidence for effects of the “cost-in cost-out” policy on environmental protection in Korea, however, in the future, it is necessary to adopt regulations based on their necessity supported by evidence, rather than on simple accounting and offsetting of costs. A methodology for evaluating costs on environment should be included in the official RIA guidance.

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RECOMMENDATIONS

•

Improve public participation in environmental decision making by introducing mechanisms for public involvement in the development of environmental permitting decisions, and by opening the EIA process to input from the general public (beyond local residents) and NGOs. Better information both on goals of government policies and regulations and on the regulation-making process, as well as possibilities for stakeholders to participate in the latter process might lead to an increased trust in government and better perception of the quality of the regulatory framework among stakeholders.

Enforcement and Inspections: Generally speaking, countries should better target inspections based on risk-analysis and management. Focusing efforts and resources on those facilities presenting higher risks (due to their size, level of pollution, potential harm but also previous compliance records) helps to save resources and make enforcement efforts more effective and efficient.

Countries should support compliance with providing more information, guidance and training directly to businesses and citizens. The information should combine data on harmful effects of air pollution with guidance on how to better comply with government regulations in this area. Behavioural insights techniques can be explored to increase compliance. Consider the use of innovative approaches and technologies (e.g. drones, big data) in support of monitoring and enforcement; countries could also exchange information on experience with new technologies.

China: •

Develop a more systematic, effective and consistent approach for securing compliance with environmental requirements, including by: developing an appropriate mix of activities involving compliance promotion, monitoring and enforcement, with greater use of soft measures that incentivise compliance (e.g. information and training on environmental laws and regulations for corporate sector professionals); strengthening the role of the permit system as a way to strengthen law enforcement; adopting a risk-based approach to compliance monitoring so as to more efficiently use scarce inspection resources; and improving mechanisms for law enforcement, with emphasis on encouraging voluntary reporting by companies on their compliance record.

•

Given the vast regional disparities, ensure the principles of equity and balanced development are respected in determining local environmental objectives and targets. In exceptional times of economic downturn, consider appropriate support (e.g. compensation) for regions most affected by developmental and environmental challenges (e.g. industrial rustbelts and less developed areas along the Fen-Wei Plains). For communities that rely on highly polluting industry, policies to support economic diversification and socially inclusive development are needed to accompany measures that tackle regulation or phasing out of the polluting industry.

•

Expand opportunities for, and reduce financial obstacles to, citizens and NGOs challenging non-compliance with environmental laws in courts. Further strengthen the ability of citizens to meaningfully participate in environmental

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38 | RECOMMENDATIONS decision-making, including by letting grassroots NGOs play a greater role in promoting environmental education.

Japan: •

Strengthen horizontal cooperation to ensure a swifter response to violations and a better sharing of best practises. A system that would allow prefectures to share data on malpractices may speed-up the identification of similar violations in other regions. Furthermore, given the autonomy granted to Prefectures in designing monitoring and enforcement procedures, a process of identification and collection of best-practices could promote their diffusion across regions. The seven regional coordination offices established by the Ministry of Environment may play an important role to this end.

Korea: •

Build provincial and local governments’ capacity to carry out their statutory environmental responsibilities and tasks delegated to them by the central government; provide the necessary financial resources to ensure effective enforcement of national environmental regulations; strengthen the system of environmental performance indicators for all levels of government.

•

Increase the efficiency of compliance monitoring through better targeting of inspections based on the level of environmental risk of individual facilities; strengthen administrative enforcement tools and build the capacity of public prosecutors and the courts in applying penalties for criminal offences.

Regulatory co-operation Regional co-operation needs to complement and not replace strong domestic policies aimed at addressing local sources of air emissions. International regulatory co-operation efforts require strong and effective domestic regulatory frameworks.

Notwithstanding the transboundary angle, air pollution takes its sources in national emissions. Countries should continue to strengthen their policies, regulatory and enforcement frameworks for air quality management and exchange domestic policy experience within the region.

China, Japan and Korea have deployed a multiplicity of co-operation efforts to address air quality and transboundary pollution. Countries should use the full potential of these existing agreements, strengthen the links between them and build on their work to create a framework that gradually advances into specific measures to reduce air pollution.

Evidence-based environmental policy to address transboundary air pollution requires a broad scientific agreement on key issues. Existing programmes such as NEACAP, LTP, EANET and the expert dialogues under TEMM as well as the bilateral cooperation efforts among national research centres have produced links between experts working in the field of air quality. Countries should build on these scientific arrangements and leverage on the air pollution scientific mechanisms developed under the CLRTAP to develop a common understanding of regional transboundary air pollution, including the effects of air pollution, monitoring and modelling methodologies, and development of emission inventories.

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RECOMMENDATIONS

Countries should recognise their diverging drivers and incentives to co-operate and their respective needs and policy frameworks when shaping up their IRC arrangements. Geographic proximity and mutual economic interdependence between countries in the region are strong drivers for co-operation. At the same time, the varying degree to which countries are sources or receptors of transboundary air pollution creates an uneven interest in cooperating in this area. China, Japan and Korea should recognise their respective incentives, needs and approaches to facilitate implementation of commitments to enhance air quality. Their regional approach should be flexible enough to meet their different needs and circumstances.

For now, cooperation in the region has focused on relatively soft mechanisms. There are nevertheless opportunities and momentum to advance towards stronger forms of IRC (as pointed for instance by the recent agreement of NEACAP). These mechanisms can operate simultaneously and take different forms, including legally binding arrangements and softer forms of co-operation with weaker legal or coordination strength that are also effective to promote collaboration and can support or anticipate on more binding processes. The precise IRC framework could build on the extensive existing experience of regulatory cooperation in a variety of sectors worldwide as documented by the OECD and could be the object of further OECD work.

The regional strategy to address transboundary air pollution needs to progress gradually and build on the lessons learnt from other successful cooperation examples and their key features. These include adaptability to ensure that the framework allows to progressively advance into new areas; embedding stakeholder consultation mechanisms to secure the participation of interested parties in regional transboundary air pollution issues; and developing air quality commitments that target specific goals for defined geographical areas.

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REFERENCES

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ENHANCING AIR QUALITY IN NORTH EAST ASIA: REGULATORY FRAMEWORKS, ENFORCEMENTS AND CO-OPERATION © OECD 2019

42 | REFERENCES (OECD,2019) Policies, regulatory framework and enforcement for air quality management: The case of China COM/ENV/EPOC/GOV/RPC(2018)3 (OECD,2019) Policies, regulatory framework and enforcement for air quality management: The case of Japan COM/ENV/EPOC/GOV/RPC(2018)2 (OECD,2019) Study of International Regulatory Co-operation (IRC) arrangements for air quality (the cases of the Convention on Long-Range Transboundary Air Pollution, the Canada – United States Air Quality Agreement, and cooperation in North East Asia) COM/ENV/EPOC/GOV/RPC(2018)1

ENHANCING AIR QUALITY IN NORTH EAST ASIA: REGULATORY FRAMEWORKS, ENFORCEMENTS AND CO-OPERATION © OECD 2019

Enhancing air quality in North East Asia: Regulatory frameworks, enforcement and co-operation

China, Japan and Korea – like many other countries that underwent periods of rapid industrialisation – share a common story of high economic growth and intense pollution followed by progressive efforts to improve air quality.

The critical impact of air pollution on human health in both developed and developing countries is well-known.

The OECD projects that outdoor air pollution could cause between 6 and 9 million premature deaths a year by 2060 and cost 1% of global GDP – around USD 2.6 trillion annually.

This policy brief summarises key findings from a joint project of the OECD Environment Policy Committee and the Regulatory Policy Committee focused on regulatory frameworks, enforcement and co-operation to address air pollution. The project involved case studies of China, Japan and Korea; as well as overviews of international regulatory co-operation initiatives to address trans-boundary air pollution, focusing on North-East Asia, the Canada-US Air Quality Agreement and UNECE’s Convention on LongRange Transboundary Air Pollution. This Policy Brief is based on information available to the OECD study team as of end of June 2019.

This project benefited from financial support by the Ministry of Environment of Korea.

Visit our websites and dataset: • www.oecd.org/gov/regulatory-policy/irc.htm • www.oecd.org/gov/regulatory-policy/enforcement-inspections.htm • www.oecd.org/env/tools-evaluation/thecostofairpollution.htm • https://stats.oecd.org/Index.aspx?DataSetCode=AIR_EMISSIONS Join the discussion on Twitter @OECD_ENV @OECDgov

Photo credits

Front & back cover: Woman with a mask coughing© graphbottles/ shutterstock.com

OECD Environment Directorate, March 2019

© OECD November 2019