Winter Air Pollution Control Resumed with a Milder Policy Approach

• In September 2023, the Ministry of Ecology and Environment (MEE) issued the Action Plan for Air Pollution Control in Autumn & Winter of 2023-2024 in Beijing-Tianjin-Hebei and Surrounding Areas, Fenwei Plain (Draft for Comment) (hereinafter referred to as the "Action Plan"), which will be implemented from October 1, 2023, to March 31, 2024. This is a resumed release since the absence in the autumn and winter of 2022, following the consecutive annual releases from 2017 to 2021.
• In comparison with the previous years' "Action Plan", analysis from the steel and petrochemical industries perceived it as a milder policy direction, estimating that the production restriction this winter is not as tight as in 2021. Not like previous "Action Plans", the control targets of each city's PM2.5 concentration and heavily polluted days are not attached, only mentioning that each city completes the air quality improvement goals set by the higher government body. Besides, the task list is absent either.
• The region range covered in this year's plan is also smaller than that in 2021, reduced from 71 to 56 cities, excluding the Yangtze River Delta region. However, many areas not included in the plan have also voluntarily released their control measures such as Inner Mongolia, Hubei, Hunan, and Guangxi.
• The "Action Plan" enhances the flexibility of production control and emission reduction. It proposes a performance grading management for different industries and plants, formulating differentiated measures instead of indiscriminate shutdowns. For instance, during the emergency response period of heavy pollution weather, eligible enterprises (assessed as "environmental performance A-level") are subject to minor reduction measures.
• In NDRC's planning report issued during the "Two Sessions" in March 2023, it was proposed that the central ecological environment protection supervision should be further advanced. This supervision mechanism began in 2016, and the second round ended after March 2022.
• By late 2022, the MEE had not released the action plan for air pollution control during autumn and winter, which have previously been released each year from 2017 to 2021. China's economy was heavily impacted by Covid-19 by then with increasing pressure to stabilize growth; hence, the macro policy mainly focused on maintaining growth last year.
• In 2022, the State Council required that before each department drafted policies, it should assess the consistency between the policy and the macro orientation, including whether the policy may generate a contraction effect, whether it has an adverse effect on market expectations, and whether the release timing is appropriate. Any policy that involves macroeconomics and the stability of market expectations should be submitted to the NDRC for assessment before being issued, in order to strengthen the coordination and cooperation.

Cities involved in the Autumn & Winter Air Pollution Control Actions

Source: MEE, GL Consulting

Schedule of Central Environmental Protection Inspections (2nd Round, 2019-2022)

Source: MEE, GL Consulting

Key Contents in the 2023 Version "Action Plan"

Source: MEE, GL Consulting

Clean Heating Conversion Reduced in Northern China

• Before the heating season (Nov) in 2023, 787,000 households of scattered coal conversion tasks should be completed in Beijing-Tianjin-Hebei and Fenwei Plain region – which is a substantial decrease compared to the figures around 2019-2020.
• The demand for coal-to-gas conversion (scattered burning coal control) by new rural and urban residents has declined significantly with main reasons including:

                  The rise in gas prices and the phased-out local government subsidies (for new installations in 2017-2019 were expired by 2022)*;

                  The scattered burning coal control in the northern region has almost been completed, with limited additional work;

                  The policy tone for energy supply and coal control has noticeably changed amid energy security concerns.

• In the recently released draft of the new edition of "Natural Gas Utilization Policy", it is proposed to prioritize gas resources for existing rural coal-to-gas projects. Meanwhile, new rural coal-to-gas additions are only classified as the "allowed" category, not the most encouraged direction.