After years of lax enforcement in the area of auto emission regulation, the Chinese government recently punished two local truck manufacturers for their failures in meeting pollution standards and for engaging in emission fraud.

In January 2018, the Ministry of Environmental Protection (MEP) fined the Shandong based Kaima Automobile Manufacturing Co., Ltd. and Tangjun Ouling Automobile Manufacturing Co., Ltd a total of $5.84 million (double the value of concerned goods), including $130,000 confiscated revenues.

Apparently, the emissions of 117 light-duty diesel trucks produced by the two companies exceeded national standards. The on-board diagnostic system of 318 heavy-duty diesel trucks produced by Kaima did not meet the standards and their pollution control devices were tempered with.

This represents the first time in history that the ministry levied a financial penalty for auto emission violation. It is also the first such case after the new atmospheric pollution law came into force in 2016.

For many, this is a welcome development for the world’s largest auto producer and market for new cars (including new energy vehicles). For over 10 years, while China has been lauded for establishing strict and comprehensive standards for automobile emission, oil quality, and fuel economy, it has also been criticized for loosely implementing these standards in a sporadic fashion, leading to doubts about their effectiveness on emissions reduction.

In 2013, the state broadcaster CCTV came out with a shocking story: for many truck makers, the vehicles that are labeled as conforming to emission levels of “China III” and “China IV” standards could only reach those of “China I” or “China II”. In 2016, an Innovation Center for Energy and Transportation (iCET) study supported by Energy Foundation China carried out laboratory emission tests on 61 gasoline vehicles and 33 diesel vehicles, it found that 20 percent of gasoline vehicles and 80 percent of diesel vehicles sampled did not comply with emission standards. This rate for micro trucks is even more staggering, at 100 percent.

On top of this problem, the issue of fuel quality made things even worse. In 2016, the MEP carried out a fuel quality survey on gas stations in Beijing and its surrounding areas, it found that the defective rate of diesel for vehicles was as high as 30 percent, and the sulfur content of an individual sample exceeded limit by 253 times.

Furthermore, the “2017 Annual Report of China’s Passenger Car Fuel Economy” released by iCET points out that although the fuel economy standards have been continuously tightened in recent years, actual improvement in the field is not obvious, and many companies are not meeting the standards. In 2016, the proportion of non-compliance of fuel economy by domestic car companies was 33.7 percent, while the figure for companies of imported cars was as high as 48.1 percent.

Fortunately, international development in this field is giving rise to fresh impetus for action in China. In 2015, Volkswagen’s “Dieselgate” scandal broke out in the United States. Cheating software was used to pass exhaust emission tests. The U.S. government swiftly imposed civil and criminal penalties on Volkswagen and its employees, with executives being arrested and the company fined $4.3 billion. At the same time, Volkswagen was ordered to pay $14.7 billion for compensation and repairs.

For the Chinese government, this strong response from the U.S. regulators is definitely something worth learning from and might have nudged it to become more proactive in its dealings with manufacturers.

In 2016, the Ministry of Industry and Information Technology disclosed a large number of fraud cases in which new energy vehicle makers cheated to obtain subsidy. The prevalence shocked many who were also dismayed with the relative light punishment handed out through official channels. In contrast to the Volkswagen scandal in America, it is not difficult for people in China to realize that the country still has much room for improvement in terms of transparency, punishment methods and levels, consumer compensation, and reduction of environmental damage. Without strict supervision, there would be chaos in market in which bad money drives out good and consumers end up paying for illegal activities of enterprises.

Comparatively, the MEP’s recent dealings with the two offending truck makers showed that it has taken the initiative to launch investigations and punish them accordingly within the structures laid down by the new air law. The entire process was relatively open and transparent, drawing praises from many.

For sure, there are rooms for improvements. Penalty levels for major cases should be raised further still. In view of the fact that automobile emissions are routinely exceeding national standards, consumers have unfairly carried the burdens of illegal activities of some enterprises. Therefore, the MEP should have consumer compensation in mind when penalizing offending enterprises. Environmental damage caused by illegal activities should also be taken into consideration. Last but not the least, criminal investigations against culpable individuals should be launched in order to punish and to deter.