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Abstract:
One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into "pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. Dean, Lovely, and Wang estimate the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. They derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration, and factor abundance. The authors estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC (International Standard Industrial Classification) industries. Results from 2,886 manufacturing joint venture projects from 1993-96 show that EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan (China). In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. The authors discuss the likely role of technological differences in explaining these results.

This paper - a product of the Infrastructure and Environment Team, Development Research Group - is part of a larger effort in the group to understand the impact of environmental policies in developing countries.

Abstract:
In this paper, Dasgupta, Wang and Wheeler analyze China's industrial pollution problem and the possibilities for significant improvement through policy reform. Their assessment is based on a large-scale econometric exercise, with data provided by China's National Environmental Protection Agency (NEPA). They focus particularly on two major determinants of changes in the pollution intensity (or pollution per unit of output) of industry: General economic reforms, and China's pollution charge system. Using their econometric equations for forecasting, they develop three future pollution scenarios under varying assumptions about policies during the next two decades: (1) Continuation of the economic reforms with no further tightening of regulation: They find that organic water pollution will stabilize in many areas, and actually decline in some. Emissions of airborne particulates and sulfur dioxide will continue growing, but at a much slower pace than industrial output. However, most of China's waterways will remain heavily polluted and hundreds of thousands of urban residents will continue to die or suffer serious respiratory damage from air pollution. (2) Continued reforms, plus 5% annual increases in pollution charges (maintaining the trend for water pollution charges since 1987): Organic water pollution will decline sharply enough to restore the health of many waterways; air pollution will stabilize or decline in most cities, saving many thousands of lives. (3) Continued reforms, plus 10% annual increases in pollution charges: This option will eliminate most of the organic water pollution from regulated Chinese factories, and induce major improvements in urban air quality. During the next two decades, Beijing and Chongqing alone will have about 40,000 fewer deaths from air pollution if this option is chosen instead of the pure economic reform strategy.

Dasgupta, Wang and Wheeler conclude the paper with a detailed analysis of the benefits and costs of tighter air pollution control. For a representative Chinese city, Zhengzhou, they find that the optimum charge rate for sulfur dioxide emissions is around $90/ton -- fifty times greater than the current rate. Their analysis also suggests that air pollution control is a very cost-effective lifesaving option, yielding a social rate of return in excess of 3,000% for further abatement in large cities. At the current level of pollution control, they find that continued regulatory inaction amounts to valuing a Chinese worker's life at less than $US 500, a figure which is tragically low by any standard.

Abstract:
This paper describes a new incentive-based pollution control program in China in which the environmental performance of firms is rated and reported to the public. Firms are rated from best to worst using five colors - green, blue, yellow, red, and black - and the ratings are disseminated to the public through the media. The impact has been substantial, suggesting that public disclosure provides a significant incentive for firms to improve their environmental performance.

The paper focuses on the experience of the first two disclosure programs, in Zhenjiang, Jiangsu Province and Hohhot, Inner Mongolia. Successful implementation of these programs at two very different levels of economic and institutional development suggests that public disclosure should be feasible in most of China. The Zhenjiang and Hohhot experiences have also shown that performance disclosure can significantly reduce pollution, even in settings where environmental nongovernmental organizations are not very active and there is no formal channel for public participation in environmental regulation.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to develop more cost-effective approaches to the regulation of externalities.

Abstract:
Wang and Jin explore the differences in pollution control performance of industries with different types of ownership in China - state-owned (SOE), collectively- or community-owned (COE), privately owned (POE), companies with foreign direct investment (FDI), and joint ventures. About 1,000 industrial firms in three provinces of China were surveyed, and detailed 1999 firm-level information was obtained.

The authors analyzed the differences between firms in receiving and reacting to environmental regulatory enforcement, community pressure, environmental services, as well as in the firm's internal environmental management among the different types of ownership. The authors also conducted econometric analyses on the determinants of pollution discharge performance.

The results show that foreign direct investment and collectively-owned enterprises have better environmental performances in terms of water pollution discharge intensity, while state-owned enterprises and privately owned enterprises in China are the worst performers. The results also suggest that collectively-owned enterprises in China do internalize environmental externalities.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries. The study was partially funded by the Bank's Research Support Budget under the research project "Understanding and Improving Environmental Performance of China's Township and Village Industrial Enterprises."

Abstract:
Laplante, Meisner, and Wang present a study of willingness-to-pay of the Armenian Diaspora in the United States to protect Armenia's Lake Sevan, a unique and precious symbol of the Armenian cultural heritage. Dichotomous choice contingent valuation questions were asked in mail surveys to elicit respondents' willingness to pay for the protection of Lake Sevan. The results show that on average, each household of the Armenian Diaspora in the United States would be willing to provide a one-time donation of approximately US$80 to prevent a further degradation of Lake Sevan, and approximately US$280 to restore the quality of the lake by increasing its water level by three meters.

This paper - a product of the Infrastructure and Environment Team, Development Research Group - is part of a larger effort in the group to understand environmental economics.

Willingness-to-pay, Donation, Diaspora, Armenia

Abstract:
Community pressure may be as strong an incentive for industrial firms to control pollution in China as pollution levies are.

Wang evaluates the strength of the effect that community pressure and pollution charges have on industrial pollution control in China and estimates the marginal cost of pollution abatement. He examines a well-documented set of plant-level data, combined with community-level data, to assess the impact of pollution charges and community pressure on industrial behavior in China.

He constructs and estimates an industrial organic water pollution discharge model for plants that violate standards for pollution discharge, pay pollution charges, and are constantly under community pressure to further abate pollution.

He creates a model and estimates implicit prices for pollution discharges from community pressure, which are determined jointly by the explicit price, the pollution levy. He finds that the implicit discharge price is at least as high as the explicit price. In other words, community pressure not only exists but may be as strong an incentive as the pollution charge is for industrial firms to control pollution in China. Wang`s modeling approach also provides a way to estimate the marginal cost of pollution abatement. The empirical results show that the current marginal cost of abatement is about twice the effective charge rate in China.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries. The author may be contacted at hwang1@worldbank.org.

Abstract:
Inspections have a statistically significant impact on firms' environmental performance in the Chinese city of Zhenjiang, and citizens' complaints have a significant impact on inspections. So stronger information and education campaigns may improve social welfare in the city. Little empirical research has been done on monitoring and enforcement issues in environmental economics, especially to analyze the impact of monitoring and enforcement on polluters' environmental performance. No studies have been done in developing economies.

Dasgupta, Laplante, Mamingi, and Wang explore the impact of inspections, and the potential impact of pollution charges and citizens' complaints, on the environmental performance of polluters in China. Their analysis of plant-level data from the city of Zhenjiang shows that:

Inspections have a statistically significant impact on firms' environmental performance.

Pollution charges do not have a statistically significant effect on firms' performance - although the lack of variation in pollution charges in Zhenjiang precludes effectively capturing their impact.

Complaints have a significant impact on inspections and therefore on pollution control.

Currently available data do not allow analysis of whether the cost of additional inspections is justified, but it is reasonable to speculate that additional inspections would improve social welfare in Zhenjiang and that information and education campaigns are probably a good way to encourage citizen complaints.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries. The study was funded by the Bank's Research Support Budget under the research project Pollution Control in China: The Role and Impact of Inspection and Complaints (RPO 682-44).

Abstract:
The marginal productivity of water used for industry varies among sectors in China, but there is great potential for the Chinese government to save water by raising water prices to industry, to encourage water conservation.

Using plant-level data on more than 1,000 Chinese industrial plants, Wang and Lall estimate a production function treating capital, labor, water, and raw material as inputs to industrial production. They then estimate the marginal productivity of water based on the estimated production function.

Using the marginal productivity approach to valuing water for industrial use, they also derive a model and estimates for the price elasticity of water use by Chinese industries. Previous studies used water demand functions and total cost functions to estimate firms' willingness to pay for water use.

They find that the marginal productivity of water varies among sectors in China, with an industry average of 2.5 yuan per cubic meter of water.

The average price elasticity of industrial water demand is about -1.0, suggesting a great potential for the Chinese government to use pricing policies to encourage water conservation in the industrial sector. Increasing water prices would reduce water use substantially.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to understand the economics of industrial pollution control in developing countries.

Abstract:
China's unique combination of emissions charges and pollution abatement subsidies has given China's most heavily polluting industrial firms incentive to invest in pollution abatement.

There have been extensive theoretical studies of firms' responses to environmental regulations and enforcement but few empirical analyses of firms expenditures on pollution abatement in response to different regulations and enforcement strategies.

Wang and Chen empirically analyze the pollution abatement efforts of Chinese industrial firms under a system combining pollution charges and
abatement subsidies.

Using data on China's top industrial polluters and on regional development in China, they find that the combination of charges and subsidies used in China has provided effective incentives for the most heavily polluting industrial firms to abate pollution.

Chinese industries operate under a unique pollution control system, a market-based instrument combining emissions charges and abatement subsidies. This combination of charges and subsidies has given firms incentive to invest in wastewater treatment facilities. The pollution levy, although low, has significantly improved investments in abatement.

Wang and Chen found that the more pollution a firm generates, the more likely it is to invest in pollution abatement.

This study was only of top polluters, which are closely monitored by environmental agencies, so the results may not be valid for other sources of industrial pollution.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to identify appropriate policies for environmental regulation in developing countries. Hua Wang may be contacted at hwang1@worldbank.org.

Abstract:
This paper explores the determinants of government environmental performance at the local level. Chinese township governments, the lowest level in the hierarchical government structure, were selected for this exercise. The performance indicators used in the analyses include the efforts of enforcing government environmental regulations and of providing environmental services to polluting enterprises. The performance determinants identified include environmental performance of upper-level governments, local development status, industrial employment, income of workers in polluting enterprises, local environmental quality, and public pressure for environmental quality improvement. A survey of 85 townships and interviews of 151 township government leaders were conducted in three provinces of China. The statistical results show that:

• The environmental performance of upper-level governments in China strongly and positively influences the environmental efforts of the township governments.

• Public pressure has created incentives for the township governments to improve their efforts in both enforcing environmental regulations and providing environmental services, while the environmental quality did not show significant impacts.

• Higher employment in industries tends to have a negative influence on the regulatory enforcement, but a positive influence on environmental service provision.

• A higher enforcement effort and a lower service provision are associated with higher wages the workers received from industries. This implies that the industries offering higher wages to the workers are subject to more stringent environmental enforcement but receive less environmental services.

• Richer townships tend to have less regulatory enforcement but better environmental services.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries. The study was partially funded by the Bank's Research Support Budget under the research project "Understanding and Improving Environmental Performance of China's Township and Village Industrial Enterprises."

Abstract:
In dealing with local environmental authorities, Chinese firms facing adverse financial situations have more bargaining power than other firms, while those generating more complaints from the public about their emissions have less. Only a small number of studies have empirically examined the determinants of the monitoring and enforcement performed by environmental regulators, and most of these have focused on industrial countries. In contrast, Wang, Mamingi, Laplante, and Dasgupta empirically examine the determinants of enforcement in China. More precisely, they analyze the determinants of firms' relative bargaining power with local environmental authorities with respect to the enforcement of pollution charges.

The authors show that private sector firms appear to have less bargaining power than state-owned enterprises. Contrary to earlier findings, they also show that firms facing adverse financial situations have more bargaining power than other firms and are more likely to pay smaller pollution charges than they should be paying. Finally, the authors show that the greater the social impact of a firm's emissions (as measured by complaints), the less bargaining power it has with local environmental authorities.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries.

Enforcement, bargaining power

Abstract:
People in Sofia are willing to pay 4.2 percent of their income or more for a program to improve air quality. Through a survey, Wang and Whittington study willingness to pay for improvements in air quality in Sofia, Bulgaria. Using a stochastic payment card approach - asking respondents the likelihood that they would agree to pay a series of prices - they estimate the distribution of willingness to pay various prices. They find that people in Sofia are willing to pay up to about 4.2 percent of their income for a program to improve air quality. The income elasticity of willingness to pay for air quality improvements is about 27 percent. For comparison, they also used the referendum contingent valuation approach. Results from that approach yielded a higher estimate of willingness to pay.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to understand the economics of pollution control in developing countries.

Abstract:
This paper presents a case study of willingness-to-pay (WTP) estimation using random valuation models. A contingent valuation survey was conducted in Yerevan, Armenia to estimate people's WTP for the protection of Lake Sevan. Three elicitation formats-open-ended, closed-ended, and the stochastic payment card (SPC) approach - were used with split random samples. WTP models with heterogeneous errors were constructed and estimated with the survey data. The SPC approach produces a higher estimation of the mean WTP than both the open-ended and closed-ended approaches, while results from the open-ended and closed-ended elicitation formats are similar. Furthermore, contrary to research findings obtained in the United States, this study finds higher WTP estimations with mail surveys than with personal interviews.

This paper - a product of the Infrastructure and Environment Team, Development Research Group - is part of a larger effort in the group to understand the economics of sustainable development in developing countries.

Abstract:
In determining domestic water prices, policy makers often need to use information about the demand side rather than only relying on information about the supply side. Household surveys have frequently been employed to collect demand-side information. This paper presents a multiple bounded discrete choice household survey model. It discusses how the model can be utilized to collect and analyze information about the acceptability of different water prices by different types of households, as well as households'willingness to pay for water service improvement. The results obtained from these surveys can be directly utilized in the development of water pricing and subsidy policies. The paper also presents an empirical multiple bounded discrete choice study conducted in Chongqing, China. In this case, domestic water service quality was seriously inadequate, but financial resources were insufficient to improve service quality. With a survey of about 1,500 households in five suburban districts in Chongqing Municipality, this study shows that a significant increase in the water price is feasible as long as the poorest households can be properly subsidized and certain public awareness and accountability campaigns can be conducted to make the price increase more acceptable to the public. The analysis also indicates that the order in which hypothetical prices are presented to respondents systematically affects their answers, and should be taken into account when designing survey instruments.

Town Water Supply and Sanitation, Water Supply and Sanitation Governance and Institutions, Environmental Economics & Policies, Water and Industry, Water Supply and Systems

Abstract:
Xie, Shah, Capannelli and Wang use a contingent valuation method to study the design of economic incentives to phase out polluting motorcycles in Bangkok. Like in many other cities, the government of Bangkok has been considering a series of control measures to discourage and eventually eliminate the use of heavily polluting motorcycles. Two of the possible policy instruments under consideration are charges on those polluting vehicles which are operating in the streets and compensation to those polluting vehicles which would stay off the roads. The policy research questions then include (1) what are the charges implied or compensation provided, given a policy target, and (2) what are the reactions of motorcycle owners to those charges or compensation. To answer those policy questions, the authors conducted a stochastic contingent valuation survey in Bangkok to question motorcycle owners on the likelihood they would keep or give up riding their motorcycles in the streets given certain charges or compensations. Results show that among others, about 80 percent of those motorcycles which did not pass the emission tests would be off the streets if a charge of 1,000 baht a year was levied, while under a one-time compensation of 10,000 baht, the number would be about 50 percent. The authors also estimate the average values of maximum willingness to pay (WTP) for staying on the road and minimum willingness to accept (WTA) compensation for staying off the street, and analyze the determinants of WTP and WTA. Their econometric analysis shows that, among other factors, household income, fuel costs, use of motorcycles, and/or public transit affect the value of WTP and WTA.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental policy issues in developing countries.

Abstract:
Studies comparing household surveys with on-site interceptor surveys have typically accounted for over-sampling avid users in the on-site interceptor surveys (that is, endogenous stratification). However, these studies have typically not accounted for the possibility that the household sample may contain a large presence of zero observations. If a large proportion of the population does not recreate at the site for any value of the price vector, this inflation of zero observations leads to biased welfare estimates and an inadequate comparison with the on-site survey. In this paper, the authors estimate and compare three models which correct for these measurement issues in both the household and on-site surveys. Results from an application to recreation at Lake Sevan (Armenia) indicate that household consumers' surplus is not statistically different from that of the on-site survey once the authors account for zero-inflation in the household sample and endogenous stratification in the on-site sample.