China is in the throes of an environmental meltdown. Its major cities are shrouded in smog and pollution – who can forget images of Beijing leading up to the 2008 Olympics as authorities tried frantically to clear smog-filled skies before the world came calling? Meanwhile, a large portion of the country’s groundwater is contaminated. Not that these facts are lost in Beijing, it’s just that the central government is fighting a problem that is actually part of its recent economic miracle. As China’s GDP has skyrocketed at around 10 percent in the last three decades, so has the pollution that accompanies that industrial and economic growth.

In its latest effort to tackle the water pollution part of this quandary, the country announced last week that it will ban water-polluting industries, ranging from paper mills, printing plants, pesticide producers, oil refineries and various other sectors. China’s CCTV said that the Action Plan for Water Pollution Prevention and Control, released by the all-powerful State Council, calls for the closure by the end of 2016 of small plants that fail to meet pollution control standards.

Chen Yongqing, an official with China’s Ministry of Environmental Protection said that “for different companies, we will use different ways to supervise. The rule will encourage the companies to shoulder their social responsibilities. For companies that breach the law, they need to pay a heavy price.”

However, Beijing, may also have another motive in earmarking oil refineries in its new anti-pollution disclosure. Not only are China’s oil companies and its refineries a major source of environmental degradation in the country, but it’s an industry that Beijing has tried to regulate in the past, but unsuccessfully.

The problem stems from that fact that China has several hundred oil refineries, while at least 150 are independent refineries and at least half of these independents are not recognized by the government. Additionally, many of these independent refineries are known as teapots, because of their small size. Though small in size, with refining capacity ranging between 40,000 barrels per day (b/d) and 120,000 b/d, teapots make up a surprisingly large percentage of China’s over-all refining capacity, anywhere between 20 and 30 percent, though accurate percentages are difficult to obtain.

Independents have created not only economic inefficiencies in the sector, but also contribute to a glut of refined petroleum products in the country. Last year, China became a net exporter of refined oil products, including gasoline and diesel, for the first time in more than four years. According to the US Energy Information Agency (EIA), China’s installed crude refining capacity was an estimated 13 million b/d by the end of 2013. ICIS analyst Lu Xiaoxu said in November that China’s teapots will have total capacity of about 4.4 million b/d in 2015.

This over capacity supports the argument that China’s independents are a drag on the sector which is dominated by two of China’s three state-owned oil majors: Sinopec, and Petro China, CNPC’s publically listed arm. In fact, other than some independents in Shandong province, along the coast southeast of Beijing, these teapots and independents offer little threat to the monopoly enjoyed by the state-owned national oil companies (NOCs.)

In 2011, in an effort to weed out many of these smaller, illegal operations, the country’s National Development and Reform Commission (NDRC) issued guidelines to eliminate refineries with refining capacities less than 40,000 b/d by the end of 2013. However, Beijing’s plan backfired. Instead of shutting down, many of these teapots merged with other independents, some were even acquired by China’s NOCs.

Now it seems that Beijing may be able to clean up the sector after all, while also offsetting the worst polluters by going after teapots that fail its new environmental guidelines. However, China’s teapots are resilient because local and provincial governments rely on the revenue, jobs and tax base that they provide, so shutting them down may prove a difficult task once again. Whether or not China can clean up its water, by reigning in its most flagrant polluters, remains to be seen. However, the degree to which teapots can survive another affront by Beijing will be important to observe.