China's new environmental code puts green growth into law

China's Ecological and Environmental Code took effect on 15 August 2026, after being adopted the previous March. Rather than introducing a single new regulation, the code consolidates a broad range of existing environmental laws into one unified national framework, bringing pollution control, ecological conservation, green and low-carbon development, and legal accountability under a single legislative structure for the first time. Previously, China's environmental protections existed as a collection of separate laws and policies covering different domains, air quality, water pollution, forestry, industrial emissions, each with its own rules, enforcement mechanisms and legal standing. Consolidating them into one code is intended to give environmental governance a more coherent legal architecture, one where businesses, investors, local governments and citizens can refer to a single, comprehensive framework rather than navigating a patchwork of overlapping and sometimes inconsistent regulations.

That consolidation matters practically because green transformation, in the framing this code adopts, requires more than policy targets or aspirational goals; it requires institutions capable of enforcing rules consistently over time. Predictable rules give businesses a stable basis for long-term investment decisions. Regulatory certainty gives investors confidence that environmental commitments won't shift unpredictably. Clearly defined responsibilities give local governments, which in China's system carry substantial implementation authority, an unambiguous mandate for what they are and aren't accountable for. And citizens gain a more coherent, singular legal basis for environmental protection rather than needing to track which of several overlapping laws applies to a given grievance.

 

The Idea Behind the Code: "Two Mountains"

 

The code's timing is not incidental. It took effect on 15 August specifically to mark the anniversary of a concept known as the "Two Mountains" theory, first articulated by Xi Jinping in Zhejiang province on 15 August 2005, more than two decades before the code's implementation. The phrase captures the idea that "clear waters and green mountains are as valuable as mountains of gold and silver," a way of asserting that ecological assets carry genuine economic value in their own right, rather than functioning as a cost or constraint standing in the way of economic growth.

That theory challenges a long-standing assumption in development economics: that countries face a fundamental trade-off between protecting the natural environment and pursuing industrial growth, and that poorer or developing economies must typically choose growth first, accepting environmental degradation as an unavoidable cost, before eventually affording the luxury of environmental protection once they've grown wealthier. The "Two Mountains" theory rejects that sequencing, proposing instead that ecological protection can itself generate economic value directly, functioning as a foundation for prosperity rather than a competing priority that has to wait its turn.

 

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How That Theory Is Meant to Work in Practice

 

The clearest illustration commonly cited for how this principle operates is Anji County in Zhejiang province, the same province where Xi Jinping first articulated the theory. Anji was historically dependent on mining and other environmentally damaging industries for its economic base. Over time, the county shifted its economic model toward ecological restoration, tourism, and sustainable agriculture, industries that depend on a healthy natural environment rather than consuming or degrading it.

The mechanism behind that shift illustrates the theory's core logic clearly. Consider a forest: if the primary way to extract economic value from that forest is to cut down its trees for timber, then continuous pressure toward deforestation will persist indefinitely, since that is the forest's only recognised economic use. But if the same standing forest can instead generate income through tourism, sustainable agriculture on adjacent land, ecosystem services, participation in carbon markets, and green industries built around the forest's continued existence, then protecting the forest becomes economically competitive with, or even more valuable than, destroying it. China has experimented with formalising this logic through mechanisms including ecological-product valuation, essentially assigning explicit monetary value to natural assets like forests, water resources and carbon sinks, alongside green finance instruments and carbon markets designed to let landholders and communities monetise conservation directly. This combination is often summarised as turning "green into gold": building an economic structure where nature becomes more financially valuable in its protected state than in its exploited one.

 

Why This Extends Into Industrial and Energy Policy

 

Beyond conservation specifically, the broader philosophy underpinning the code treats environmental policy as inseparable from industrial and energy strategy. China's growing electric vehicle, battery, renewable energy, energy storage and green manufacturing sectors are framed not as environmental side effects of regulation, but as genuine economic growth engines that environmental policy actively helps cultivate, by encouraging businesses to adopt cleaner technologies and by creating market demand for new products and services built around those technologies.

There's also a national security dimension to this framing that is less immediately obvious. China remains a major importer of oil and natural gas, which leaves the country exposed to volatility in international energy markets and vulnerable to disruptions in global supply chains, particularly relevant given current geopolitical uncertainty. From this angle, expanding renewable energy, electric mobility and energy efficiency serves a purpose beyond emissions reduction: it reduces China's dependence on imported fossil fuels and strengthens the country's overall energy security. Under this logic, environmental policy, industrial policy, technological innovation policy and energy security policy increasingly overlap into a single strategic agenda, rather than functioning as separate, disconnected areas of government activity.

 

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Why This Framework Is Being Positioned as a Model for Other Countries

 

The code and the philosophy behind it are explicitly being framed as a potential reference point for developing countries, though not as a blueprint to be copied wholesale. Every country differs in its institutions, natural resource base, fiscal capacity and development priorities, meaning China's specific combination of policies would not transplant directly into a different economic or political context.

The broader argument being made is more conceptual: that developing countries facing simultaneous pressure to industrialise rapidly and to manage mounting climate and environmental risk do not need to choose between the two, and that industrialising differently, with cleaner energy, greener technology, and environmental governance built into economic planning from the outset rather than added later, offers a viable alternative path. The stated ambition is to challenge the assumption that environmental degradation is an inevitable and unavoidable cost of industrial development, positioning environmental protection instead as something that can actively generate jobs, industries, innovation and economic resilience simultaneously.

 

What This Optimistic Framing Doesn't Address

 

It's worth noting what this framing tends to leave out. China remains the world's largest total emitter of greenhouse gases, and the country has continued to approve significant new coal-fired power generation capacity in recent years even while simultaneously scaling up renewable energy deployment at a rapid pace. Critics of China's environmental trajectory have consistently pointed to this pattern, expanding both clean and carbon-intensive energy capacity at the same time, as evidence that the country's environmental transition remains incomplete, with renewable growth so far functioning as additive to total energy capacity rather than as a genuine replacement for coal.

Whether the new Ecological and Environmental Code meaningfully accelerates a shift away from that pattern toward genuine displacement of fossil fuel capacity, or whether it primarily provides legal and institutional legitimacy to a development model that continues growing both clean and carbon-intensive energy simultaneously, is something that will only become clear as the code's implementation unfolds over the coming years.

 

Source: chinadiplomacy.org.cn