"Guidance on the Work of Environmental Pollution Liability Insurance" officially announced
In recent days, the "green insurance" system, referred to as the second environmental economic policy, was introduced. On February 18, the "Guiding Opinions on Environmental Pollution Liability Insurance," jointly issued by the State Environmental Protection Administration and the China Insurance Regulatory Commission, was officially released. The document emphasized that in the future, companies' risks of environmental accidents can be covered by insurance companies. In case of a pollution incident, the insurance firms will compensate affected parties. This approach ensures victims receive compensation, prevents insurance companies from going bankrupt, and eases the government's financial burden, creating a win-win situation for all three parties.
The pilot program initially targets three categories of enterprises: those involved in the production, operation, storage, transportation, and use of hazardous chemicals, petrochemical companies, and hazardous waste disposal companies—industries highly susceptible to pollution incidents. Pilot regions include Ningbo, Zhejiang; Henan; Chongqing; and Suzhou, Jiangsu. According to the guidelines, at this stage, the insurance covers sudden and accidental direct environmental damage. While the initial focus is on these high-risk industries, other sectors may also participate voluntarily.
The implementation of the system follows four key steps: first, establishing the legal status of environmental pollution liability insurance by incorporating it into national and provincial laws. Second, defining the scope of coverage for direct losses caused by environmental accidents. Third, clarifying the roles of environmental protection departments, insurance regulators, and insurance companies in setting policies, determining liability, and regulating the market. Fourth, developing mechanisms for accident investigation, responsibility identification, claims procedures, and information disclosure.
Pan Yue, deputy director of the State Environmental Protection Administration, noted that while similar systems are widely used globally, China’s framework remains underdeveloped. The joint release is currently just a guiding opinion, not a strict set of regulations. The China Insurance Regulatory Commission has yet to clarify which companies should be insured, what types of pollution are covered, and the extent of compensation.
It’s important to note that implementing environmental insurance does not mean companies can act recklessly. Premiums are directly tied to the level of risk, so high-risk companies face higher costs. Insurance companies also assess and manage the environmental risks of their clients, pushing them to reduce pollution.
Although green insurance increases operational costs, some large corporations like PetroChina and Sinopec support its implementation but argue that major chemical companies should not be included in mandatory coverage. They claim they have sufficient resources to handle pollution compensation independently and that existing insurance systems already cover some aspects of environmental liability. However, the government plans to gradually make the system mandatory through guidance and existing regulatory frameworks such as environmental impact assessments and discharge permits.
Overall, the introduction of environmental pollution liability insurance marks a significant shift toward using market mechanisms to address environmental challenges, promoting accountability, and ensuring sustainable development.
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