Mandatory insurance can ensure companies pay for polluting

ON FRIDAY, the Ministry of Environmental Protection and China Insurance Regulatory Commission jointly issued a draft regulation for public opinions, which requires all polluting enterprises to buy mandatory environmental pollution responsibility insurance. An editorial in Southern Metropolis Daily comments:

The mandatory environmental pollution responsibility insurance means an enterprise pays for insurance to cover any liabilities resulting from its polluting, including compensation payouts and the cost for rehabilitating the environment.

According to the Ministry of Environmental Protection, in certain past incidents, the polluting enterprises did not have enough funds to compensate the victims and pay for the environmental recovery costs. As a result, the government had to pay for the cleanup work and the victims were often left uncompensated. With the new insurance, such a situation could be avoided. Such insurance has proved quite effective in developed countries.

Actually, the China Insurance Regulatory Commission introduced environmental pollution responsibility insurance as early as 2007, but it has not made significant progress over the past decade. In 2014, about 5,000 enterprises purchased the insurance, but the number had dropped to about 4,000 in 2015.

The main reason was that the insurance was not mandatory. Many enterprises underestimate the risks of pollution so they refrain from purchasing the insurance.

However, as some experts have pointed out the insurance concerns people’s lives and well-being and it is in the public’s interest, so it should not be the enterprises that decide on their own whether to buy it or not.

By making the environmental pollution responsibility insurance mandatory, the draft regulation solves this problem. Of course, the insurance fee should vary according to the actual needs of different enterprises.

However, that in turn leads to another problem, namely legal support. The regulation is drafted by government agencies, and its binding force is not as high as it would be if it was a law. If the mandatory insurance system proves effective in reality, the legislature might need to consider amending the Environmental Protection Law, so as to add a new article about the insurance. That will also strengthen the rule of law in environmental protection.