Compensation for Environmental Damage in China : Theory and Practice

Many have pointed at the fact that the spectacular economic growth in China has come at a high price, especially concerning the environmental costs related to this growth. There is increasing literature available now, both in and outside of China on the available governance instruments that China is increasingly using in its fight against environmental pollution. Indeed, with growing economic welfare also the demand for environmental quality is increasing in China as well. An issue which received less attention so far was the ex post compensation after environmental pollution occurred. The aim of our study is not so much to look at instruments aiming at prevention of environmental harm, but to address the question to what extent victims of environmental harm can be compensated for this harm in China. The concept of victims should obviously be interpreted broadly since victims could also be the environment at large in which case the question arises to what extent for example the government or an NGO may have the right to ask remedies on behalf of the environment. The goal of our study is not only to provide an insight into the “law in the books” by sketching which instruments and remedies are available, but also to address “law in action”, by examining to what extent the various compensation mechanisms are indeed applied in practice as well. To that end we have undertaken some interviews with stakeholders in China in order to obtain information on the way in which environmental damage is being remedied. Our focus is on remedies for environmental harm. Even though the main (traditional) remedy after damage may be (monetary) compensation, in case of environmental pollution other remedies (such as restitution) may be relevant as well. Methodologically we will therefore both address available remedies on the basis of the regulatory framework, but also examine to what extent these remedies are indeed applied. Moreover, we will normatively where appropriate, also formulate a few suggestions for reform. The question of how to compensate for environmental damage has become a hot topic in China. Almost every day one now can read about cases of environmental harm with which various Chinese communities are confronted whereby almost every time the question is asked how adequate compensation for this harm can be provided. The issue is also topical given recent legislative changes in China. In December 2009 China introduced a New Tort Liability Law in which important provisions also deal with environmental liability. Moreover, even though environmental insurance markets are not yet that well developed in China increasingly both potential victims as well as industry are demanding the development of adequate insurance products to deal with environmental harm. Strikingly the only domain in which compensation seems to work adequately, not only on paper but also in practice is the domain of marine oil pollution in which international conventions have played an important role. Our paper is set up as follows: after an introduction (1) we will first focus on the role of liability rules in compensating for environmental harm (2), then we focus on insurance (3) and discuss the specific case of marine oil pollution (4). For every topic first the theoretical possibilities to provide compensation will be sketched; next the question will be addressed what role these mechanisms lay in practice. A few concluding remarks (5) will provide a summary and some policy recommendations