With China’s cities among the most polluted in the world, the authorities are introducing financial penalties for rule breakers and forcing firms to pay more towards the cost of emissions. Currently, firms guilty of environmental breaches are currently subject to a maximum fine of just 100,000 yuan (€ 10,000). Under China’s new “green credit policy”, environmental regulators are required to pass on details of corporate offenders to the Central Bank and of 30 companies which were identified as offenders earlier this year, 12 have now been sanctioned – loans have been blocked or withdrawn.
This approach might be more difficult to engineer in open (non-centralised) economies, though fines are good incentives. In China where many firms are tied to the state in some way, restricting credit is enough to put frms out of business if compliance is not forthcoming. !2 firms is a small start but it sets a standard and puts other state owned firms on notice to clean up.
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