What legal liabilities arise from hardening the surface of leased tidal flats and constructing equipment and office buildings on them, causing significant ecological damage?

[Case Review]

A survey company leased tidal flats at the Yangtze River estuary from the Chongming District Changxing Seawall Management Office. During the lease, it hardened the surface, built hard reinforced dams, stored materials, and constructed equipment and office buildings on the flats. It also subleased part of the area to third parties for cement precast production, causing significant ecological damage.

Following regulatory oversight, the lease was terminated by mutual agreement. The survey company was required to carry out rectification measures in accordance with the comprehensive conservation of the Yangtze River and environmental inspection directives. However, it failed to restore the tidal flat to its original condition.

Remote sensing monitoring confirmed that the company had occupied approximately 16,900 square meters of tidal flat. The total ecological damage was assessed at more than RMB 73,000.

The procuratorate subsequently filed a civil public interest lawsuit against ecological damage, petitioning the court to order the survey company to dismantle the hard reinforced dams, restore the occupied tidal flats to their original state, compensate for the deprivation of ecological and environmental service functions, and cover the assessment costs.

[Case Study]

After trial, the Shanghai Third Intermediate People's Court found that the survey company had violated the Yangtze River Protection Law of the People's Republic of China (hereinafter "Yangtze River Protection Law") and other relevant regulations. Its actions caused long-term ecological degradation of the tidal flats, ultimately resulting in irreversible damage. The company was held civilly liable for both compensation and restoration. The court ruled that the company to compensate for the deprivation of ecological and environmental service functions, which amounted to over CNY 73,000, by purchasing Inclusive Carbon Reduction Credits under the Shanghai Program (hereinafter referred to as ¡°Shanghai Inclusive Credits¡±) and to cover the assessment costs.

In compliance with the judgment, the company purchased 1,024 tons of Shanghai Inclusive Credits from the Shanghai carbon market and completed their retirement. The case has been fully concluded.

I. Ecological value and accountability for environmental damage

Tidal flats are vital components of wetland ecosystems and among the most fragile ecological zones. They harbor rich biological resources and perform essential ecological functions such as oxygen release, carbon sequestration, climate regulation, and biodiversity support. The tidal flat involved in this case is located in Chongming District at the Yangtze River estuary, Shanghai. The survey company¡¯s prolonged failure to dismantle unauthorized hard reinforced dams caused irreversible ecological damage, resulting in long-term impairment of key functions including carbon sequestration and biodiversity support.

In this case, the company¡¯s actions impaired the tidal flat¡¯s climate regulation and carbon sequestration functions. Although restoration was later undertaken, the loss of these functions before remediation was irreversible, harming regional ecology and public interests. This conduct violated the Yangtze River Protection Law and related regulations, imposing on the company civil liability for ecological damage and obligations for ecological restoration.

II. Impairment of carbon sequestration function: inclusive carbon credits as a solution

Ecosystem services are irreplaceable¡ªoften taken for granted until lost, when recovery becomes difficult or impossible. In this case, the tidal flat¡¯s carbon sequestration and other ecological functions suffered irreversible damage. How should such ecological harm be compensated? According to Article 20 of the Interpretations of the Supreme People's Court on Issues concerning the Application of Law in the Trial of Environment-related Civil Public Interest Lawsuits, "Where the plaintiff requests ecological restoration, the people's court may order the defendant to restore the environment to its pre-damage state and function. If full restoration is not feasible, an alternative approach to ecological restoration may be permitted.¡±

Utilizing an alternative approach to ecological restoration facilitates maximal ecological recovery and precise compensation for lost carbon sequestration functions. This approach encourages wide societal participation in emission reduction efforts and serves the public interest. Given the survey company¡¯s consent to this compensation method, the court granted approval accordingly.

III. Inclusive carbon credits: universal participation and shared benefits

This case marks the first application of Shanghai Inclusive Credits as an alternative approach to ecological restoration to compensate for ecological damage in Shanghai. Shanghai Inclusive Credits are standardized carbon offset products within the national unified carbon market. These credits quantify carbon emission reductions derived from low-carbon activities of individuals, households, and organizations, calculated in accordance with established technical protocols. By targeting emission sources directly, it achieves carbon reduction effects equivalent to those of absorbing or removing carbon dioxide and other greenhouse gases. The entire society is encouraged to engage in emission reduction through diverse low-carbon practices, such as using public transportation or engaging in other carbon-reducing activities. This collective effort fosters a city-wide transition toward green and low-carbon lifestyles and production patterns in Shanghai.

In this case, the measurement company purchased 1 ton of Shanghai Inclusive Credits accumulated through green travel activities, such as rail transit and bike-sharing, and an additional 1,023 tons generated from distributed photovoltaic power generation projects. The company then completed the retirement of these credits through its corporate carbon account.

[Committee Member Comments]

Zhang Ning, member of the Shanghai Municipal Committee of the Chinese People's Political Consultative Conference (CPPCC), Vice President and Trade Union Chair of Shanghai Bestone Information &Technology Co., Ltd.

As Shanghai¡¯s first civil public interest litigation case involving tidal flat protection and alternative approach to ecological restoration through Inclusive Carbon Reduction Credits, this case highlights the judicial system¡¯s pioneering role in ecological governance through market-based innovation. The People¡¯s Court, in line with the Yangtze River Protection Law, accurately confirmed the company¡¯s ecological damage¡ªsuch as impaired carbon sequestration and biodiversity¡ªcaused by its delayed removal of hard reinforced dams. The court innovatively ordered compensation via purchase of 1,024 tons of Inclusive Carbon Reduction Credits, upholding the legal principle that ¡°the environment has value, and damage must be compensated.¡± This approach transcends traditional physical restoration by converting ecological repair into measurable, tradable environmental assets, providing a new path for market-driven ecological value realization. This mechanism for an alternative approach to ecological restoration offers a replicable judicial model for ecological protection in the Yangtze River Delta. By integrating the inclusive carbon platform with judicial enforcement, it effectively mobilizes public participation and demonstrates Shanghai¡¯s contribution to the national effort to modernize ecological governance.

[Relevant Laws]

I. Civil Code of the People's Republic of China

Article 1229 Where environmental pollution or ecological damage causes harm to another person, the infringer shall bear tort liability.

Article 1234 If ecological harm occurs due to the violation of national regulations and the ecological environment can be restored, the state-designated authorities or legally prescribed organizations have the right to demand that the perpetrator bear the responsibility for restoration within a reasonable period. If the infringer fails to restore within the prescribed period, the state-designated authorities or legally prescribed organizations may undertake the restoration themselves or entrust others to do so, and the infringer shall bear the incurred expenses.

Article 1235: Where any entity or individual causes ecological or environmental damage in breach of applicable state laws or regulations, the state-designated authorities or legally constituted organizations shall be entitled to demand compensation from the tortfeasor for the following losses and expenses:

(1) Losses due to the deprivation of ecological and environmental service functions from the time of damage to the completion of restoration;

(2) Losses caused by permanent impairment of ecological functions;

(3) Costs for investigation, appraisal, and assessment of ecological damage;

(4) Expenses for pollution removal and ecological restoration;

(5) Reasonable expenses incurred to prevent the occurrence or expansion of damage.

II. The Yangtze River Protection Law of the People's Republic of China

Article 3: Economic and social development within the Yangtze River Basin shall strictly adhere to the principles of ecological priority and green development, jointly advancing comprehensive conservation while prohibiting large-scale exploitation. The protection of the Yangtze River shall be implemented in accordance with the principles of integrated coordination, scientific planning, innovation-driven development, and systematic governance.

Article 55:...The unlawful use or occupation of river and lake shorelines within the Yangtze River Basin is strictly prohibited.

III. Interpretations of the Supreme People¡¯s Court on Issues concerning the Application of Law in the Trial of Environment-related Civil Public Interest Lawsuits

Article 18 For actions that pollute the environment, damage the ecology, have already harmed social public interests, or posed significant risks of harming social public interests, the plaintiff may request the defendant to bear civil liabilities such as stopping the infringement, removing obstacles, eliminating dangers, restoring the ecological environment, compensating for losses, and apologizing.

Article 20: Where the plaintiff petitions for ecological restoration, the people's court may, in accordance with the law, adjudicate that the defendant restore the ecological environment to the condition and functional capacity it had prior to the occurrence of damage. If full restoration is unattainable, the court may permit an alternative approach to ecological restoration.

The people's court may, when ordering restoration, also determine the restoration costs the defendant must bear if they fail to comply; alternatively, the court may directly order the defendant to bear such costs.

Restoration costs include expenses for developing and implementing restoration plans, monitoring and supervision during the restoration process, as well as acceptance inspections and post-restoration effectiveness evaluations.

Article 21: Where the plaintiff claims compensation from the defendant for losses arising from the deprivation of ecological and environmental service functions during the period from the occurrence of ecological damage to the completion of restoration, as well as for losses caused by the permanent impairment of ecological functions, the people's court may, in accordance with the law, grant such claims.

(Case prepared by Zhang Han and Xi Xiaoshi of the Shanghai Third Intermediate People's Court)