To achieve the imperative goal of environmental protection, the Chinese authorities should not only press enterprises hard to save energy and cut pollution. They should also prepare to rapidly minimize the damage of environmental accidents which tend to occur more frequently nowadays.

Introduction of an environmental liability insurance is crucial to fulfillment of the later task. By requiring enterprises to insure against potential environmental disasters they may cause, such a "green insurance" will hugely help cement our hard-won progress on environmental protection.

The State Environmental Protection Administration and the China Insurance Regulatory Commission recently issued a roadmap for introduction of the long-anticipated "green insurance".

The new initiative came only half a year after implementation of a "green credit" policy based on enterprises' environmental performance. This effort to bring into place another green economic policy is a clear evidence of Chinese policymakers' resolution to step up environmental protection.

While the economy has been surging ahead at double-digit growth rates for years, the government has tried very hard to shift the growth pattern toward an energy-saving, less-polluting and sustainable one.

However, alongside the country's slow and steady progress on curbing daily pollution, there looms an increasingly bigger risk of frequent environmental accidents.

It is estimated that more than 80 percent of the country's 7,555 key heavy chemical industrial projects are located in environmentally-sensitive areas which are either densely populated or close to rivers. And 45 percent of them are major sources of environmental risks.

In the absence of a "green insurance", when an accident of serious environmental damage occurs, the enterprise usually cannot afford to compensate the affected people timely and adequately and, later, the government will also have to pay dearly for repairing the environment.

The new environmental liability insurance, an economic instrument that goes with the grain of the market system, may kill several birds with one stone. It can save enterprises from bankruptcy in case of environmental accidents, but it also goads them to continuously improve environmental performance with a punitive insurance premium for foot-draggers. It can facilitate compensation for the public while alleviating the government's fiscal burden on environmental restoration.

(China Daily, February 19, 2008)