At present, the government foots most cleanup costs.

Polluting enterprises would have to buy policies for their projects against the risk of possible environmental pollution, Mr Pan said, while insurance companies should compensate pollution victims following accidents.

Despite dazzling economic growth over the past three decades, the mainland is still prone to pollution outbreaks, with Sepa tackling 108 accidents last year, Mr Pan said on the agency's website.

The policy would target enterprises dealing with highly toxic chemicals and dangerous waste as well as petrochemical factories. Mr Pan said the lack of systems for dealing with the aftermath of pollution incidents had helped enterprises evade their responsibilities to compensate victims and clean up the environment, which had became 'a source of social instability'.

'The liability insurance system will be completed and carried out across the country in 2015.'

Li Huayou, from Sepa's policy research centre for the environment and economy, said the initiative, based on experiences in industrialised countries, had been unveiled to enlist public support.

'It is just a starting point and we just want to send a policy signal. We don't have a timetable yet as to how to make it work,' he said.

Mr Li said several mainland cities had tried to introduce similar insurance polices in the 1990s but failed to get polluting enterprises to take part voluntarily.

A pilot scheme is expected to be launched this year in several coastal cities with the mandatory involvement of selected chemical and petrochemical industries and insurance companies.

'Authorities in developed areas are usually more supportive of our bid to punish polluters,' Mr Li said.

With mounting technical challenges ahead, such as compiling insurance directories of enterprises and working out compensation standards for pollution damage, Mr Li said: 'We have no idea if the initiative, which has worked well in many other countries, can achieve its goals in China.'

It is the second time Sepa has attempted to enlist the support of the country's financial sector in its uphill battle to cut pollution and promote energy efficiency after a succession of embarrassing setbacks in earlier pollution-control efforts, which mostly relied on administrative measures to achieve enforcement.

Sepa said last week its attempt to bar banks from extending loans to polluters, dubbed the 'green credit' policy, had achieved only limited results in the past six months due to strong resistance at local administrative levels and unsupportive financial institutions.

A massive problem

The number of chemical projects crowded along major rivers and lakes in heavily populated areas 7,555