Environmental crackdown could raise prices

Macroeconomics

10 April 2006

Stringent new environmental laws affecting the petrochemicals sector could result in price rises for clothes, household goods and other plastic products, the South China Morning Post reported. The State Environmental Protection Agency is expected to introduce a more stringent approval process for new industrial projects after it last week outlined the results of a two-month nationwide audit of 127 chemical producers in which it rejected or suspended approval for 44 projects across a range of heavy industries, and published a "name-and-shame" list of 20 projects that fell short of environmental standards. Analysts said the crackdown has effectively frozen new petrochemical projects and would limit capacity in a sector already squeezed by record oil prices and widespread overinvestment. As a result, petrochemical firms may start charging more for the raw materials they sell to manufacturers of everything from toys to textiles, which would likely be passed on to consumers.

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