Out of the blue, into the black: A few thoughts on China’s new “e-waste” law

I started reporting on the Chinese scrap industry six years ago, and I think that I wrote my first story claiming that China’s long-awaited laws on the recycling of e-scrap (computers, monitors, etc) were imminent, shortly after SARS, in July 2003. Since then – off the top of my head – I’m fairly certain that I’ve reported the imminent approval of the laws at least five times, with the most recent instance being a May 2008 article in Scrap, in which I claimed – based upon extensive reporting! – that the approval would “come in the first half of 2008.”

Wrong again … the State Council gave its approval for the very long-awaited regulation on August 20, 2008. For those who don’t recall – that was one of the last days of the Olympics, and so – in China and abroad – the law went all but unnoticed. Xinhua covered it, but so far as I’ve been able to determine – other than the always excellent China Environmental Law Blog – no English language news source or blog (including blogs and organizations supposedly concerned with China’s e-waste problem) felt the law was worth covering.

I strongly disagree, and this post – long delayed due to my own Olympics coverage and post-Olympics travel – will attempt to explain why.

But first, let me step back. There were many reasons for the delay in the legislation (sometimes known as ‘China’s WEEE’ the Waste Electrical and Electronic Equipment Law – after the EU’s WEEE regs), but perhaps the most important is the simple fact that China already has a massive e-scrap processing industry supported by local governments throughout the country. And, like it or not, most of this industry uses various degrees of environmentally unsafe processing techniques that are highly profitable, and which employ many, many people. Despite the claims of leading environmental groups, most of the material processed in these facilities is not imported, but is instead generated within China (one of the world’s largest and leading PC and electronics markets). Unlike the US, EU, and Japan, which have developed – and are implementing – high-tech solutions to the high-tech trash problem, China’s e-waste problem has grown more quickly than home-grown technology can handle. Without proper technology, much less the administrative and financial means to deploy that mythical technology nationwide, regulators and state-owned industry participants in China’s recycling industries, were at an impasses as to how to handle this massive, environmentally damaging, industry and situation.

That’s not to say that they weren’t trying. In 1998, in a little noticed or known move, the State Council authorized and funded the China Recycling Development Corporation. The mission of the company, as outlined to me when I traveled with two representatives in January, was to seek out technologies and methods appropriate to China’s labor, technology, and waste generating circumstances. And, for the last ten years, they have done just that.

Among their most important findings was that – without a little help – environmentally sound recycling of electronic waste could never compete with the illegal, environmentally damaging – and, as a result, highly profitable – methods of recycling electronic waste typified by the notorious e-scrap processing centers in Guiyu and Taizhou. These towns – well known from international exposes – nonetheless existed with the full knowledge and tacit support of Chinese local and national governments for years. As it was explained to me by a source who knows something of this situation: “The foreigners criticize Guiyu but they never give us any suggestions or help in finding an alternative.” From the perspective of Chinese officials working on the e-waste problem, the foreign environmental groups who were so key in exposing e-scrap processing in China, were all but useless to China. What, precisely, did they suggest that China do to handle all of the e-waste it was generating on its own? And why were they only interested in the e-waste being imported into China? Why didn’t they ever focus on the e-waste being generated in Chinese daily life? “If they cared so much,” one source told me. “They would help us work out technology sharing.”

Two years ago, in one of the more notable failed attempts at setting up an e-scrap processing system, Beijing approved four sites to serve as pilot projects (including one operated by Haier) for technologically advanced e-scrap processing. The best technology was procured, and best practices were instituted. But there was a problem: the “green” e-scrap recyclers couldn’t afford to compete for e-scrap with the quasi-legal workshops in places like Guiyu and Taizhou. That is to say: you could make a whole lot more money cooking a circuit board over acid to extract gold than you could processing that same circuit board in an advanced factory designed to extract materials in the safest manner possible (operating in Europe and Japan). So, somewhat predictably, these four pilot projects failed for lack of material to recycle. At the end, in fact, the situation was so desperate that some pilot participants inquired as to whether they could obtain permission to import e-scrap in violation of China’s international treaty obligations.

And so the draft regulation was delayed again.

Despite the fact that the draft law was approved by the State Council, there’s still quite a bit of uncertainty about how it will be implemented (the law outlines principles, not specifics). We do know that the rule outlines requirements that producers either recycle their old products or make provisions for them to be recycled, much like regulations recently passed and implemented in the EU. If implemented correctly, this has the potential to change the flow of e-waste to small polluting workshops, and back toward large-scale manufacturers (and it is an absolute wonder to me that international environmental groups aren’t celebrating, much less reporting, this development) It also requires the licensing of electronic waste recyclers, though the actual provisions for that licensing are unclear at this time. But unquestionably, the most important provision – at least for those of us who’d like to see environmentally unsound e-scrap processing become a thing of the past – is the creation of what Xinhua calls a “special fund” to subsidize proper e-scrap recycling.

As outlined to me back in January by CDRC, this subsidy will be paid out to licensed recyclers on a per unit basis. So, for example, RMB 8 might be paid out for the proper recycling of a black and white television (this was a number that someone suggested to me six months ago), thus helping to narrow the gap between the price that an illegal, environmentally unsound workshop can pay, and that which can be paid by a licensed, environmentally-secure facility.

If the subsidy is paid out uniformly, then – theoretically – the illegal workshops will slowly close in favor of the legal ones, if only because they no longer can compete for domestically generated e-waste. Of course, there’s quite a bit of “theoretically” in there (theoretically: the money will be enough; there’s enough political backing to continue paying it out for years; corruption won’t seep into the distribution; local governments will finally abide, etc.). But what’s encouraging here – what’s really, truly encouraging – is that the central government is going to commit serious money to combating this very serious problem – and not just talk. Success, if it comes, will take time. But after years of debating how to do this, it’s especially gratifying to see that the central government has finally recognized that success is going to require becoming more profitable than the illegal workshops, as well as more green.

8 comments

  1. Great to see that this law has finally come out. Of course in the short term, even in the best case scenario, this means that folks with the inside track and guanxi will get those licenses first, are probably getting subsidized in various other ways ( cheap land for their factories etc.) and so a certain handful of folks will profit in the first phase…but hopefully in the longer term it will really work out.
    Any sense yet if foreign companies with the technology to handle e-waste are moving to get into the game, or are being approached by Chinese partners?

  2. Josh! Great to have your comments. Of course, I totally agree with you as to who will profit in the first phase. If it’s any consolation, one of the guys in Linyi who is already operating under what the gov’t claims are the guidelines, got his start riding around on a bicycle, picking up steel.

    There are all kinds of rumors about folks coming into China with technology, but I haven’t heard anything solid. I suspect that – when it happens – the Japanese will be the player. I might have more on that later in the fall.

  3. Thanks for this. I hope you’ll post more updates as you learn about the law. It is very interesting to me that BAN and SVTC haven’t had anything to say about this. You may be right that they haven’t heard about it, but I find that hard to believe. Perhaps they’re waiting for the details to emerge before commenting?

  4. James – Careful, there. I said that environmental groups concerned with e-waste haven’t covered the Chinese law. BAN, in particular, has a comprehensive website that covers developments worldwide in regard to e-waste. Yet, unless I’ve missed it, they haven’t touched this issue.

    Now, in fairness to BAN, their primary concern is the export of e-waste to the developing world. But one would think that the potential worldwide impact of the Chinese WEEE – especially the producer responsibility provisions – would have gotten their attention, and that of Greenpeace, SVTC, etc. At a minimum, this is – unquestionably – the most important Chinese legislation on Chinese e-waste ever. The environmental community is going to need to get a handle on this, and soon.

  5. When I went to college in the 1970s and early 1980s I worked in a Kentucky scrap yard and used to buy old televisions sometimes. I remember that we used to throw them into the railroad cars for the steel because we didn’t have anything else to do with them. The crane guy would dump more steel on them just to hide them. I used to wonder what happened to those things. I am g;ad to know that the Chinese are thinking about this stuff. Back in the old days we didn’t think at all!

  6. An amazing photo – how far back do the computer monitors go back in the photo – i.e. how far is the depth in the photo in the amount of stacked monitors
    It never ceases to amaze me that a person can go to a dollar store – see all of these goods manufactured in China , shipped to North America , buy each for less than a dollar, and yet the store in the US makes money
    To ship anything in america , if you buy or sell in ebay is many times that – for sure – if not more
    Yet even the dollar store makes money in the US
    You have to blame ourselves to a great degree to being so wasteful in our modern society. We throw things away in a snap with no thought or costs
    If anything the cost structure and taxes are set to be counterproductive to any repair
    If the Chinese are willing to do the work, and have use for the raw materials then at least it is better than a landfill
    Shame on us for being so wasteful
    Its amazing how with a lot of people – how spoiled they are
    If a computer item is “used” and ” not new” somehow its again their whole philosophy of life. Spoiled brats
    This will all end in crying

  7. Hi, I’ve worked in the nonprofit sector most of my life, but went into electronics recycling after I left Massachusetts DEP in 1999. I’ve been overseas several times, trying to figure out what the economics are behind the exporting. You have a great opportunity to see this up close, but I think you miss the point when you equate pollution to profitability. The worst environmental effects are probably the aqua-regia gold recovery (China and India consume more gold per capita than the west – probably because girls cannot inherit land, and if you love your daughter she has to be able to wear what she inherits). The distilling of gold from acid baths is actually extremely inefficient, it wastes the rhodium, palladium, and actually a good but of the gold. High tech recovery, at Dowa in Japan, Umicore in Belgium, Deutsh Affinerie, Boliden, etc. is much more profitable.

    What makes the Chinese informal sector profitable is the tremendous ingenuity around reuse. They reclaim board level components, chips, transistors, etc., and reuse them. I wrote and filmed extensively on where the reuse actually grows to a scale where the “white box” (no brand) refurbished segment competes with Original Equipment Manufacturing. http://retroworks.blogspot.com/2008_01_01_archive.html

    The Chinese CP now owns most of the CRT manufacturing capacity in the world and doesn’t like reuse. Just like manufacturers in the west dislike “market canabalization”.

    A single working component is worth 1000 times its weight as scrap material. Repair and Reuse are great in the developing world. Take a closer look before getting on the “obsolescence in hindsight” bandwagon.

    Even the recycling, which is dirty, is better than the alternative – mining and raw material refining. Google “lead and zinc” pollution in China (zinc is an indicator that it’s mined material, not recycled) and tell me whether you’d rather live next to a lead recycler or a primary lead smelter…

  8. Robin – Thanks for the very good, very informative comment. You are absolutely correct that the re-use industry plays an important role in the overall recycling economy in China. However, having looked at your website, I think your information is a bit out-of-date (looks to have been filmed in 2006), specifically in regard to CRTs. In Shandong, the Chinese gov’t is piloting a number of successful, environmentally sound CRT glass recycling facilities (with technologies and processes pioneered by Taiwan’s E&E). They are directed at the expanding domestic market, and the material is – inevitably – flowing back to the state-owned CRT manufacturers. In any event, at this point it’s quite incorrect to suggest that they don’t like re-use. Instead, from the point of view of the CP, the labor economics make recycling of the glass more profitable than re-use.

    Similiarly in regard to the aqua regia gold recovery. Whether or not there are metals being lost in this process, it is the process being used in China, and it IS highly profitable. Put it this way: why on Earth are Japanese and European countries STILL shipping e-waste to developing countries if they have more profitable alternatives at home? For various reasons, China hasn’t halted these imports yet, but it is looking for solutions so that it’s domestic stream doesn’t worsen the situation. And after many, many years of study, they realize this simple fact: unless they subsidize proper recycling, the small-scale, polluting trade will continue to thrive.

    And that’s the point of this post.

    Now, the CDRC is quite aware that there are other metals to be recovered e-waste, and they are quietly working with technology partners in Japan and Europe to begin building plants to recover such material which is generated domestically. But that will take time, the development of national collection systems that co-opt but don’t eliminate China’s 10 million scrap peddlers (very difficult) and – as the chinese government recognizes – it will require subsidies.

    Finally, if you read my other posts on this subject, and my published work, you’d understand that I’m not part of the “obsolescence in hindsight” bandwagon, nor do I equate pollution with profitability. In fact, I’ve publicly equated pollution with inefficiency. As do the Chinese gov’t officials who deal with this subject and who are trying – desperately – to create economies of scale, via subsidies, in the e-waste industry so that they can afford to “mine” the other precious metals from e-waste.

    In any event, Robin, you are certainly welcome to comment here in the future, but before doing so I hope that you’ll take the time to better inform yourself of my publicly expressed views on this complex issue before making blanket assumptions about what I think or know.

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