The Legal Effects of China's Environmental Laws and Regulations on Crude Oil Imports from Iran

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Public Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran

2 Prof., Department of Public Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran

3 . Ph.D. in Oil and Gas Law, Department of Public Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran

Abstract

Introduction: The People's Republic of China, with daily crude oil imports exceeding 10 million barrels, is considered one of the primary destinations for oil-producing countries worldwide. The Islamic Republic of Iran is no exception to this rule, as China is currently the destination for the vast majority of Iran's oil export shipments. Consequently, understanding the dynamics of China's crude oil market and the factors influencing it is beneficial and impactful for all oil-producing nations. The most significant factor affecting China's crude oil market and its consumption pattern is the body of laws and regulations that, while targeting polluting industries, aim to improve the country's environmental conditions.
Methods: This research employs a descriptive-analytical method to examine those environmental laws and regulations within China's legal system that impact the export of crude oil from the Islamic Republic of Iran. Therequired data for the study has been collected using a library research method.
Findings: According to the "Regulations on the Administration of Pollutant Discharge Permits," no company or producer has the right to emit pollutants without obtaining a pollutant discharge permit. This regulation stipulates that the management of pollutant discharge for units whose emissions have a significant environmental impact is classified as "key." These units are obligated to use automatic pollutant monitoring equipment, which must be connected online to the supervisory authority's network to facilitate monitoring. Another effective measure China has implemented to achieve its environmental goals is the Carbon Emission Trading Scheme (ETS), which has commenced operation at the national level. Under this mechanism, a maximum allowable limit for carbon dioxide emissions is set for each industrial unit in the form of an emission quota. Units then have the discretion to reduce their operational carbon emissions such that by the end of the compliance period, they have not exceeded their quota, or, if they exceed it, they must purchase quotas from other units at a negotiated price. According to decrees from the Ministry of Ecology and Environment, the refining and petrochemical industries will soon be included under the carbon emission trading program. Pollution Discharge Tax is another legal instrument within China's environmental system, established under the "Environmental Protection Tax Law." This law specifies the pollutants subject to taxation and the equivalent value per unit of each. The government then sets the tax rate per unit of the pollutants listed in the regulation, and the annual tax is determined by aggregating the total units of pollutants emitted by the taxpayers. It is noteworthy that the vast majority of pollutants generated by refining and petrochemical activities are subject to this tax. Based on the aforementioned laws and regulations, a set of legal restrictions has been imposed on the operations of Chinese independent refiners (teapot refineries). The first restriction is the Chinese government's gradual phasing out of the market for super-heavy crude oil and fuel oil. These types of oil, due to their lower price and the technical inability of many independent refiners to use other crude types, constitute the primary feedstock for numerous independent refineries. The implementation of stringent tax policies is another method of constraining independent refiners. Specifically, in its latest tax system reforms, China subjected the use of fuel oil and the import of "blended bitumen" to a consumption tax. This decision was explicitly taken to counter opportunistic practices by independent refiners importing super-heavy crude oil under the guise of "blended bitumen" outside the official crude oil import quota system.Conclusion: Due to the dir ect impact of independent refiners on China's environmental crises, efforts towards the merger and shutdown of private refineries have been identified as the government's main approach to consolidating the refining and petrochemical sector. This aims to eliminate small and inefficient players from the downstream oil industry. The policy of granting crude oil import quotas did not alter this previous approach of the Chinese government, as the number of independent refiners has continued to decline even after its implementation. Therefore, identifying independent refiners as long-term partners by some oil-exporting countries, such as Iran, is not advisable. It is inferred that despite the current possibility of trading crude oil with these refineries, the future downstream oil industry in China will likely be devoid of independent refiners.

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Main Subjects

References

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