The role of bureaucratic incentives in the effectiveness of environmental regulations: Evidence from China

Abstract

The Key Cities for Air Pollution Control (KCAPC) program is one of China’s earliest and most important target-based environmental policies, launched in 2002 to address the country’s severe air pollution issue. However, the effectiveness of the program is still largely unknown. This paper examines the impact of the KCAPC program on sulfur dioxide (SO${}_2$) emissions, with an emphasis on the role of bureaucratic incentives. We find that the program reduced SO${}_2$ emissions by 12.19%–13.84% at the city level and by 11.22%–13.50% at the firm level. We also find that local governments shut down highly polluting firms, promoted greener production and enhanced environmental regulation in order to meet environmental targets set by the program. However, we find that the KCAPC program was only effective in cities where the mayor has a promotion incentive and is not incentivized to collude with polluting firms. Our findings point to the importance of bureaucratic incentives in governing the effectiveness of environmental regulations in localities.