(Adds response from environment ministry, summary of legislative process)
By Sui-Lee Wee and David Stanway
BEIJING, April 15 (Reuters) - Smog-hit China is set to pass a new law that would give Beijing more powers to shut polluting factories and punish officials, and even place protected regions off-limits to industrial development, scholars with knowledge of the situation said.
Long-awaited amendments to China's 1989 Environmental Protection Law are expected to be finalised later this year, giving the Ministry of Environmental Protection (MEP) greater authority to take on polluters.
While some details of the fourth draft are still under discussion, it has been agreed that the principle of prioritising the environment above the economy will be enshrined in law, according to scholars who have been involved in the process. The fourth draft is due to be completed within weeks.
"(Upholding) environmental protection as the fundamental principle is a huge change, and emphasises that the environment is a priority," said Cao Mingde, a law professor at the China University of Political Science and Law, who was involved in the drafting process.
The first change to the legislation in 25 years will give legal backing to Beijing's newly declared war on pollution and formalise a pledge made last year to abandon a decades-old growth-at-all-costs economic model that has spoiled much of China's water, skies and soil.
Cao cautioned that some of the details of the measures could be removed as a result of bureaucratic horsetrading. The MEP has called for the law to spell out how new powers can be implemented in practice, but the National Development and Reform Commission (NDRC), the country's top economic planning agency, prefers broader, more flexible principles.
"There is a usual practice when everyone is unable to come to a complete agreement - we first put an idea into the law and then draw up detailed administrative rules later," Cao said.
Local authorities' dependence on the taxes and employment provided by polluting industries is reflected by the priorities set out in China's growth-focused legal code, said Wang Canfa, an environment law professor who runs the Center for Pollution Victims in China and also took part in the drafting stage.
The environment ministry did not respond to detailed questions on its role in the drafting process and the specific content of the new amendments, but said the legislation was currently in the hands of the Legal Work Committee of the National People's Congress (NPC), China's legislature.
The protracted legal process usually kicks off with a number of drafts from academic institutions, which are then examined by ministries, local governments and industry groups. A new draft then goes to the legal affairs office of the State Council, China's cabinet, before being delivered to the NPC and opened up to members of the public to have their say.
In the absence of legally enshrined powers, the environment ministry has often made do with one-off national inspection campaigns to name and shame offenders, as well as ad hoc arrangements with local courts and police authorities to make sure punishments are imposed and repeat offenders shut down. It has also stretched existing laws to its advantage.
Last year, it began to use its powers of approval over environmental impact assessments, which are mandatory for all new industrial projects, to force powerful industrial firms such as Sinopec and the China National Petroleum Corporation to cut emissions at some of their plants, threatening to veto all new approvals until the firms met their targets.
The new law would give the ministry the legal authority to take stronger punitive action.
"The environment ministry could only impose fines and management deadlines," Cao said. "Now we can close and confiscate them. It's an important right."
It will also set up a more comprehensive range of punishments, putting an end to a maximum fine system that allowed enterprises to continue polluting once they had paid a one-off fee normally much lower than the cost of compliance.
Cao said the final draft was also likely to impose an "ecological red line" that will declare certain protected regions off-limits to polluting industry, though detailed definitions are likely to come later.
The legislation also proposes to formalise a system by which local cadres are assessed according to their record on pollution issues, including meeting emissions targets.
Experts have welcomed commitments to improve transparency and compel polluters to provide comprehensive and real-time emissions data. Criminal penalties will also be imposed on those found guilty of trying to evade pollution monitoring systems.
"The provisions on transparency are probably the most positive step forward. These include the requirement that key polluters disclose real-time pollution data," said Alex Wang, expert in Chinese environmental law at UCLA. Wang said he had not seen the later, non-public drafts of the legislation.
For nearly two years, scholars, ministries, local governments, companies and environment ministry officials have been debating the changes to the environmental protection law.
One of the most fiercely contested parts of the new draft was a clause designed to prevent most environmental non-governmental organisations (NGOs) from filing lawsuits against polluters.
The first draft said lawsuits could only be filed via the government-affiliated All-China Environmental Federation, though subsequent changes allowed other government-registered organisations that have been operating for at least five years to launch legal action.
Polluting industries have lobbied government officials not to relax the restrictions on the rights of NGOs to file suits, said Cao, who has attended numerous meetings with government officials on the new legislation.
UCLA's Wang said the ultimate success of China's war on pollution would be determined not by symbolic new legislation but by specific targets and guidelines that are now being imposed on local governments.
"Many people point to China's laws as a sign of the government's concern about the environment," he said. "But changes in bureaucratic targets are a more direct indication of changing priorities and can tell us whether Beijing means business." (Additional reporting by Beijing Newsroom; Editing by Alex Richardson)