Is the environmental protection industry still a favorable investment?
Release Date:
2023-01-07 14:39
Source:
The sub-sectors of the environmental protection industry have experienced solid growth in recent years. Before discussing the broader scope of the environmental protection industry, it is essential to first understand what exactly is being protected—namely, the atmospheric environment, the aquatic environment, and the land environment, which are the very foundations upon which human life depends. Accordingly, the environmental protection industry can be broadly categorized into three major areas: air pollution control, water pollution control, and solid-waste pollution control.
The sub-sectors of the environmental protection industry have experienced solid growth in recent years. Before discussing the broader scope of the environmental protection industry, it is essential to first understand what exactly is being protected—namely, the atmospheric environment, the aquatic environment, and the land environment, which are the very foundations upon which human life depends. Accordingly, the environmental protection industry can be broadly categorized into three major areas: air pollution control, water pollution control, and solid-waste pollution control.
I. Atmospheric Pollution Control
Atmospheric pollution control primarily involves treating exhaust gases generated by industrial processes, which necessitates flue-gas treatment. This business encompasses the sale of equipment and systems for flue-gas treatment, such as desulfurization, denitrification, and dust removal, and is mainly carried out by companies specializing in air-quality-control equipment.
However, this sector is characterized as a policy-driven industry: meeting national emissions-reduction requirements and air-quality protection goals inherently leads to passive demand creation. China’s energy endowment is marked by abundant coal resources, limited oil reserves, and scarce natural gas; consequently, coal dominates both primary energy production and consumption. This coal-centric energy consumption structure has resulted in typical coal-smoke–type air pollution in China, exemplified by high sulfur dioxide emissions.
However, for a long period in the past, the government vigorously promoted energy-saving and emission-reduction policies, resulting in a year-on-year decline in air pollution. Moreover, flue-gas treatment has inherently been characterized by small scale, fragmentation, and disorder, making it difficult to achieve large-scale expansion. As a result, the explosive growth of companies specializing in such air-pollution-control equipment has largely come to an end, and the future market growth potential appears limited at present.
II. Water Pollution Treatment
Urbanization is becoming increasingly concentrated, leading to a growing volume of domestic wastewater discharge; as a result, more than 70% of water pollution treatment now involves urban domestic wastewater, while less than 30% pertains to industrial wastewater.
The primary methods for wastewater treatment are activated sludge and membrane processes; however, membrane processes tend to be more costly, which is why activated sludge remains the predominant approach today. What characterizes this field? It is largely dominated by public utilities and driven by industrial policy.
As early as the 2006–2010 national plan for wastewater treatment, the penetration rate of municipal domestic wastewater treatment in major cities was already very high. In contrast, the situation in the industrial sector is somewhat similar to that of air pollution control: industrial enterprises are widely dispersed, regulatory oversight remains imperfect, and the industrial wastewater treatment rate is still relatively low, leaving considerable room for improvement.
Another point that may not be widely known is that China’s effluent discharge standards remain significantly too lenient—roughly equivalent to Class V water quality. Consequently, existing wastewater treatment plants still have substantial room for upgrading and retrofitting to meet higher standards, suggesting considerable growth potential in the years ahead.
In summary, the water utilities sector accounts for a relatively large share of the environmental protection industry and is one of its two core markets. Moreover, it has been developing for a long time, with a relatively mature and stable business model.
Another core market—and the largest and most important one—is solid-waste pollution remediation.
III. Treatment of Solid Waste Pollution
In general, the treatment of solid waste pollution primarily involves the management of municipal solid waste, industrial waste, and hazardous waste. Current treatment approaches mainly include comprehensive utilization—extracting useful and valuable components to convert them into secondary raw materials—and disposal methods such as landfilling and incineration for municipal solid waste.
When it comes to solid-waste management, it is also worth exploring collaborative operating models such as TOT, BOT, and PPP, which are primarily designed to alleviate fiscal pressures on governments. During the 12th Five-Year Plan period (2011–2015), the Chinese government began to place greater emphasis on solid-waste treatment. At present, with the exception of large first- and second-tier cities, the penetration rate of waste-incineration facilities in other regions urgently needs to be increased.
Like air and water pollution in the industrial sector, solid waste management is highly dispersed, and there is an urgent need to strengthen national regulatory oversight. Currently, the treatment rates for hazardous waste and dangerous waste remain very low, making solid-waste management a blue-ocean niche within the environmental protection industry. Consequently, there is substantial room for improvement in the treatment rates of municipal solid waste, industrial waste, and hazardous waste, as well as in their growth potential; moreover, the market has been expanding at a rapid pace in recent years.
Finally, a brief summary of the environmental protection industry: water pollution treatment and solid waste pollution treatment are its two core segments, with solid waste accounting for the largest share of the market in terms of scale and exhibiting robust growth in recent years. By contrast, air pollution treatment has largely moved past its rapid-growth phase, leaving limited room for future market expansion.
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