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Promotion Incentives and Environmental Regulation: Evidence from China’s Environmental One-Vote Veto Evaluation Regime

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Abstract

This paper applies a difference-in-differences approach to examine the effectiveness of China’s One-Vote Veto environmental regulation regime, which links pollution reduction targets with local officials’ promotion. Using a rich set of data for 286 Chinese cities, we show that the new political incentive induced significant tradeoff between economic growth and environmental protection. The regime shifts significantly reduced industrial SO2 emissions; however, the environmental improvement was limited only to the reduction of the targeted pollutants that are linked to performance evaluation. Firm-level evidence shows that emission reduction was mainly achieved by reducing new polluting production activities, increasing pollution abatement capacity and improving abatement performance. It is also found that compliance with emissions reduction targets indeed increases the promotion chances of local officials.

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Notes

  1. Comprehensive cost–benefit analyses are difficult and few in existing studies. On the one hand, the estimates of compliance costs are dropping due to ongoing innovations and technological breakthroughs in pollution abatement (Currie and Walker 2019), on the other hand, our understanding of the full benefits of improving air quality are changing rapidly with continued scientific discovery. See Currie and Walker (2019) for a review of the related literature.

  2. For a full description of the environmental protection measures under the 11th FYP and the new EOVV rule, please see: http://www.gov.cn/jrzg/2007-06/03/content_634545.htm (in Chinese).

  3. Notice of the State Environmental Protection Agency on Issuing the Measures for the Evaluation of Total Emission Reduction of Major Pollutants in the Eleventh Five-Year Plan (Trial). (No.124 (2007): http://www.gov.cn/gongbao/content/2008/content_961664.htm (in Chinese).

  4. Notice of the State Council on Issuing the Comprehensive Working Schemes on Energy Conservation and Emission Reduction (No. 15 [2007] of the State Council): http://www.gov.cn/jrzg/2007-06/03/content_634545.htm (in Chinese).

  5. Decision on Implementing the Scientific Outlook on Development and Strengthening Environmental Protection (No.39, 2005, State Council, in Chinese): http://www.gov.cn/zwgk/2005-12/13/content_125680.htm

  6. Reply of the State Council on the Plan for Controlling the Nationwide Total Discharge Volume of Major Pollutants in the 11th Five-year Plan Period (No. 70, 2006, State Council, in Chinese): http:/ www.gov.cn/gongbao/content/2006/content_394866.htm

  7. Guiding Opinions on the Allocation of Total Sulfur Dioxide (No.182, 2006, MEE, in Chinese): http://www.mee.gov.cn/gkml/zj/wj/200910/t20091022_172430.htm

  8. Reduction targets in absolute values do not reflect the difference in marginal abatement costs (MAC) in cities with different levels of emissions. However, relative reduction targets are not an ideal fix either. There has been a large literature on the estimation of MACs of pollutants but no consensus that MAC is empirically related to the size of emissions in any systematic manner. This is because MAC is essentially a reflection of production technology associated with a specific industry structure. Production technology can be heterogeneous across regions and so is industry structure. It is not uncommon that an underdeveloped region with relatively low level of emissions also has lower MAC. This complexity perhaps partly explains the fact that scholars have argued for and used both absolute (Chen et al., 2018b; Fan et al., 2019) and relative targets (Shi and Xu, 2018).

  9. In China, mayor is the executive officer of a city government by law. The division of labor is that secretary is in charge of the personnel and other political duties, while the mayor is in charge of the daily operation of government including economic growth and environmental protection (Zheng et al. 2014; Yao and Zhang 2015). Therefore, we follow Zheng et al. (2014) and use city mayors. However, we also provide results on party secretaries as supplementary materials.

  10. The party secretary is considered a higher level than the mayor because key decisions are often made in the party committee.

  11. As GDP growth is most directly related to industrial rather than residential SO2 emissions, this paper uses industrial SO2 emissions which account for most of the SO2 emissions in China.

  12. China’s national industrial classification standard GB/T 4754–2002 classifies all industrial production into 39 two-digit industries, ranging from 6 to 46 with 12 and 38 left vacant in the classification.

  13. We do not include longer data periods (e.g. 12th FYP) in the main analysis. This is to avoid possible influences from confounding policies introduced later, the Air Pollution Prevention and Control Action Plan implemented in 2013 in particular. Although this plan mainly addresses emissions of PM2.5, its impacts on SO2 emissions are also obvious. Focusing on the 10th FYP and 11th FYP thus reduces possible confounding effects and provides us a cleaner identification. We provide additional results based on longer datasets in Table A2 in the Supplementary Materials. The results are largely similar to those reported here.

  14. Cultural Relics Protection Law of the People's Republic of China (2013 Amendment) (No. 5 [2013], Standing Committee of the National People’s Congress): http://www.gov.cn/flfg/2013-06/30/content_2437158.htm (in Chinese).

  15. A city being nationally listed FHCC or historical treaty ports is likely to have a stronger economic base or a characterized industrial structure. or have a significant impact on attracting labor and investment. Jia (2014) indicated that commerce and service sector are the major support of treaty ports. As a robustness check, we included FDI, total labor and the share of tertiary industry in GDP as additional controls. The results are similar to those reported in Table 3. We provide these results in Table A5 as supplementary materials.

  16. Beijing, Tianjin, Shanghai, Qingdao, Shenyang, Qinhuangdao, Tangshan, Zhangjiakou, Baoding, Cangzhou, and Chengde.

  17. A total of 44 cities are removed from the sample. The calculated mean and standard deviation of the differences in SO2.reduction targets of bordering cities are -0.007 and 3.093 respectively.

  18. The five most SO2-polluting industries include “production and supply of electric power and heat power”, “manufacture of non-metallic mineral products”, “melting and pressing of ferrous metals”, “manufacture of raw chemical materials and chemical products” and “melting and pressing of non-ferrous metals”. These five most polluting industries comprise 85% of total industrial SO2 emissions. The five least SO2-polluting industries include “production and distribution of water”, “printing, reproduction of recording media”, “recycling and disposal of waste”, “manufacture of measuring instruments and machinery for cultural activity and office work” and “manufacture of tobacco”. These five least SO2- polluting industries account for less than 1% of total industrial SO2 emissions.

  19. We also provide the results using the most polluting and least polluting five industries in appendix Table A6. The results are similar to Table 7.

  20. We also provide the analysis and results on party secretaries in Table A8 in the Supplementary Materials. The literature on the effects on secretaries are rather mixed (Zheng et al. 2014; Yao and Zhang 2015; Wang and Lei, 2021). Zheng et al. (2014) and Wang and Lei (2021) both found that the effects are different for mayors and secretaries. Zheng et al. (2014) found the effect on party secretaries is insignificant. The results provide in Table A8 also show that the effect on party secretaries is statistically insignificant.

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Authors and Affiliations

  1. School of Economics, Institute of Resource, Environment and Sustainable Development Research, Jinan University, No.601 Huangpu West Road, Guangzhou, Guangdong Province, China

    Jianxin Wu

  2. Guangzhou Panyu Polytechnic, No. 1342 Shiliang Road, Shawan Street, Guangzhou, Guangdong Province, China

    Ziwei Feng

  3. Department of Agricultural and Resource Economics, School of Agriculture and Environment, University of Western Australia, 35 Stirling Highway, Crawley, WA, 6009, Australia

    Chunbo Ma

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  1. Jianxin Wu
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All authors have materially participated in the research and article preparation. JXW and CM designed research; JXW and XLZ collected data; CM, JXW, and XLZ performed research and analyzed data; and CM and JXW wrote the paper.

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Correspondence to Chunbo Ma.

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Wu, J., Feng, Z. & Ma, C. Promotion Incentives and Environmental Regulation: Evidence from China’s Environmental One-Vote Veto Evaluation Regime. Environ Resource Econ 87, 257–286 (2024). https://doi.org/10.1007/s10640-023-00824-z

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