Five keywords decrypting the environmental protection industry trends in 2024

　　China's environmental protection industry has experienced decades of development, leading to a surge in the number of environmental protection projects and facilities. However, during this process, the industry order has not been fully established, with a mixed market and rampant growth of enterprises.

　　As the market gradually matures, the previous disorderly development will cease to exist. The future environmental protection market will be more standardized, and this fundamental change in the industry is ushering in a new development trend.

　　At the beginning of 2024, based on the country's policies and industry development status in recent years, this article extracts five keywords to interpret the development trend of the environmental protection industry: industrial upgrading, circular economy, operation-centric, deep cultivation of the industry, and intelligent transformation.

　　1. Demand Upgrade

　　Routine Supervision Initiates Industrial Upgrading Reform

　　Reviewing the development history of China's environmental protection industry, it is not difficult to see that the first half was mainly focused on solving some acute and prominent environmental problems, such as "privately constructed pipelines, secretly discharging substandard wastewater," "a large amount of strongly alkaline smelting waste residue filling occupying approximately 600 acres of滩涂," and "illegal mining without a license, destroying large tracts of forestland, and damaging the ecosystem." These issues were exposed due to environmental inspections.

　　In other words, the focus of the first half of the environmental protection industry was on the construction of infrastructure, such as a large number of desulfurization and denitrification projects, wastewater treatment plants, and other environmental protection facilities. Currently, the environmental protection work in the first half has played a very effective role, with environmental indicators in the water, air, and solid waste sectors showing improvement.

　　In the second half of environmental protection development, coupled with the background of the dual-carbon goals, the focus of policies and industries has changed, and the requirements for environmental protection have transitioned from "quantitative change" to "qualitative change." For example, in the environmental monitoring industry, the "14th Five-Year Plan" for Ecological and Environmental Monitoring issued by the Ministry of Ecology and Environment in 2022 proposes to comprehensively promote the transition of ecological and environmental monitoring from a quantity-based model to a quality-efficiency-based model.

　　The upgrading of demand has also led to the upgrading and iteration of environmental protection technologies, moving towards lower carbon emissions and greater economic efficiency. In the past, China's environmental protection technology lagged far behind international standards. However, with the development of the environmental protection industry, a number of technological achievements in the atmospheric field have reached international standards. Examples include key technologies and equipment for ozone oxidation combined with liquid-phase absorption desulfurization and denitrification, dry high-temperature raw coal gas purification and resource utilization technology based on special metal membranes, and the preparation technology of automotive exhaust treatment catalysts that meet the National VI emission standards. In the water sector, a large number of excellent enterprises have emerged, achieving new breakthroughs in technologies such as wastewater treatment. Examples include urban sewage short-cut denitrification coupled with partial anaerobic ammonia oxidation deep denitrification technology, full-process energy-saving and consumption-reducing precise operation control technology, and nanometer plate ceramic membrane wastewater treatment technology and integrated equipment.

　　If, in the past, the environmental protection industry could survive simply by producing equipment and undertaking projects, then in the future, it must possess superior technology to secure its foundation.

　　2. Circular Economy

　　A Contested Field in the Second Half of Environmental Protection

　　As China's environmental protection industry continues to mature, the past approach of end-of-pipe treatment is no longer suitable for the current situation. Especially after the proposal of the "dual-carbon" goals, the value of China's environmental protection cause is no longer merely reflected in pollution control.

　　At the beginning of the 14th Five-Year Plan, the National Development and Reform Commission issued the "14th Five-Year Plan for the Development of a Circular Economy." The plan proposes that by 2025, a resource-circular industrial system will be basically established. Therefore, the approach adopted by the environmental protection industry should be "source reduction + resource utilization + end-of-pipe treatment." Resource utilization is a key link in achieving the value of environmental protection.

　　Since China is a water-scarce country with huge industrial and agricultural water consumption, wastewater resource reuse is the fundamental solution to this problem. In the water treatment industry, the trend of "wastewater resource utilization" is becoming increasingly apparent, and is expected to grow into a market worth hundreds of billions of yuan before 2025.

　　Resource utilization is equally important in the solid waste industry. China's solid waste production is large and diverse, with both pollution and resource attributes. Whether it is garbage incineration or hazardous waste, pollution reduction, carbon reduction, and resource utilization are the future development trends.

　　In both water treatment and solid waste industries, leading companies are actively deploying resource utilization. In the second half of environmental protection, resource utilization has become a contested field for companies.

　　3. The Era of Operation

　　Efficiency War Breaks Out

　　In the past, when we talked about pollution control, we essentially meant end-of-pipe treatment of pollutants—a strategy of first discharging and then treating. After the country's efforts to control pollution in the early stages, necessary projects and equipment were put in place, leading to a noticeable slowdown in the growth of the environmental protection industry. There's a clear sense that orders have decreased, and money is harder to earn.

　　Looking back at the performance of some leading listed companies in 2023, there have been varying degrees of decline, mainly due to the reduction in engineering projects. This shows that the incremental market in the environmental protection industry is gradually shrinking, and the future stock market will become the central battlefield for the environmental protection industry. This means that the logic of the development of the environmental protection industry has shifted from the previous engineering era to the operation era. For every company in the industry, the challenge lies in how to make the most of the operating market.

　　In the past, the requirement for environmental protection was simply that it worked. Now, it must also be economical, energy-efficient, and highly efficient. Taking water treatment as an example, improving quality and efficiency is a good illustration. Simply put, improving quality means better and more advanced technology, while increasing efficiency means more energy-efficient equipment. Additionally, operation involves more meticulous tasks, requiring more comprehensive inspection, alarm, and chemical dosing systems. While achieving these things is not a major problem, the only issue is the high cost.

　　Therefore, the difficulty lies in how to control costs while improving service quality, a question that all companies are pondering.

　　4. Intense Competition in Specific Industries

　　Deep Cultivation of Sub-sectors to Become Hidden Champions

　　The 20th National Congress of the Communist Party of China report introduced a key term—"high-quality development."

　　What is high-quality development? Over the past decade, the state and various pollution entities have invested a total of 10 trillion yuan in pollution control, leading to a surge in the number of environmental protection facilities in China. Moreover, the number of enterprises in the environmental protection industry has also grown rapidly.

　　However, more prominent environmental problems have also been exposed, such as a large number of poorly made projects in the market, and even projects that are left idle after completion. Such quantitative changes have not led to sufficient qualitative changes.

　　China's environmental protection cause started relatively late, and there is still a gap between China and international standards in various aspects such as technological innovation and technical services. Not only are we letting others make money, but we may also face "bottleneck" issues in the future. The reason why the state proposes "high-quality development" is to avoid the emergence of such "bottleneck" problems.

　　So, how can we achieve high-quality development? "Specialized, refined, distinctive, and new" is an important approach.

　　In 2021, the state issued the "Notice on Supporting the High-Quality Development of Specialized and New Small and Medium-sized Enterprises," promoting the quantity and quality of specialized and new enterprises. In 2022, the State Council issued the "Opinions on the Division of Labor for the Key Tasks of the Government Work Report," providing strong support in terms of funding, talent, and the establishment of incubation platforms. In 2023, the "Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy" pointed out the need to vigorously promote the high-quality development of the private economy, cultivating a batch of leading private technology enterprises in key industries, specialized and new small and medium-sized enterprises, and innovative small and medium-sized enterprise characteristic industrial clusters.

　　Specialized and new refers to strategic focus. It doesn't require a large scale, but it must have innovation capabilities and be able to provide strong support for a certain link in China's environmental protection cause. This requires enterprises to focus more on their own track and strive to be hidden champions in their own track. For example, in recent years, environmental monitoring, as a sub-sector, has seen its market scale continuously expand, and many environmental protection enterprises have cultivated the environmental monitoring field and obtained the title of "specialized and new."

　　In fact, after several years of policy support, a large number of hidden champions focusing on their own tracks have emerged in the industry. As environmental protection enterprises, we should not only focus on our own tracks and products, but also pay attention to the current situation of industry development and master more market information in order to know ourselves and our competitors.

　　5. Digital Empowerment

　　The Trend of Intelligent Upgrading in the Environmental Protection Industry

　　The digital wave has swept the globe. Today, the development of all industries relies on technology to move towards intelligence, and the environmental protection industry is no exception.

　　Why is intelligence the future development trend? It's like going to war. Everyone is using advanced weapons, but you are still using cold weapons. This is a dimensionality reduction strike for you. If you don't upgrade, how can you survive?

　　Many problems have arisen in the development of the environmental protection industry. Take wastewater treatment plant operation as an example: How much medicine should be added? How to control water temperature and pH? How to adjust the process route when the effluent exceeds the standard? How to repair equipment failures? How to optimize costs? In the past, it was mainly based on manual experience.

　　The problem with manual operation is that, firstly, it cannot be precisely controlled, leading to waste of costs; secondly, the personnel level is unstable, leading to unstable operation level, which poses a certain risk to whether the effluent water quality meets the standard. Thirdly, and most importantly, experience is invaluable, but the experience of the factory's old masters cannot be recorded and preserved. When people leave, this valuable experience also disappears, unable to empower the enterprise.

　　After intelligent upgrading, these problems are no longer problems. Through the intelligent system to finely control each process link and equipment, not only can safe and stable operation be achieved, but more importantly, it can minimize the consumption of energy and materials, bringing economic and social benefits to the enterprise.

　　The environmental protection industry has developed to this day, and the industry's needs are no longer just the previous single pollution control needs. Under the background of "dual carbon," more new and complex needs are emerging, and new opportunities such as resource utilization and intelligence will also emerge.

　　How to extend from end-of-pipe treatment to green transformation across the entire field and find one's own value in the industrial chain is a challenge faced by almost all environmental protection enterprises.

　　Because in the second half of the environmental protection industry, every track will face fierce competition. In this new battle, only those players who are deeply rooted in the sub-sectors can laugh to the end.