Companies operating in China are to face tough new green legislation after the country's top legislature passed a package of laws designed to underpin the government's climate change strategy.

Over the past year the Chinese government has set out a range of targets designed to shrug off its tag as the world's largest polluter, including goals to reduce energy consumption per unit of GDP by 20 per cent, double renewable energy capacity, and cut pollution levels by 10 per cent on 2005 levels by 2010.

To support the targets the Standing Committee of the 11th National People's Congress (NPC) approved on Friday a raft of new regulations designed to curb carbon emissions and promote adoption of clean technologies.

Speaking to the Xinhua news agency, NPC Standing Committee member Ni Yuefeng said the aim of the measures was to develop a "recycling economy" that could maximize economic efficiency while minimizing energy consumption and emissions.

Under the new laws, which were signed by President Hu Jintao and will come into force at the start of next year, the government will step up environmental monitoring of carbon intensive industries such as steel, power generation, oil refinery, construction and printing. They will also be required to introduce water saving technologies and encouraged to switch to cleaner forms of energy such as natural gas and renewables.

Meanwhile, both businesses and government departments will be required to install renewable energy technologies in new buildings, while both industrial and rural sectors will be encouraged to make wider use of waste material, ranging from coal mine waste to livestock slurry.

In addition, a raft of tax breaks will be introduced on energy efficient and clean technologies, while a number of inefficient products will be banned. Those companies and government departments that use prohibited products will face fines of 50,000 yuan to 200,000 yuan.

Government departments will also each be required to develop their own plans for promoting energy efficiency and recycling, and stimulate investment in clean technologies.

Xinhua said that there were signs the government's climate change efforts were already working, citing official figures that show energy consumption for every 10,000 yuan of GDP fell 3.66 per cent in 2007 to 1.16 tonnes of coal equivalent.

However, it also noted that the average energy use per unti of production for carbon intensive industries was still on average 20 per cent higher than in developed economies.

The new legislation is likely to have a major impact on western firms many of whom have exported their carbon intensive operations to China over the past two decades.

According to a recent study from Carnegie Mellon University in the US, a third of Chinese emissions are the direct result of the manufacture of products and services that are exported, primarily to western markets.