Can Target-Based Environmental Regulations Effectively Improve City Air Quality? Evidence From China’s Total Emissions Control Policy

Abstract

Since the 9th Five Year Plan (FYP) period (1996-2000), the Chinese central government began to adopt the total emissions control (TEC) policy, a target-based environmental regulation which set emission reduction targets for designated pollutants. The policy became highly binding for local governments in the 11th FYP period (2006-2010) as those reduction targets were dispatched into local governments' reduction tasks and connected with local officials' job performance assessments. We use city-level variations in the reduction tasks on designated air pollutants from the 10th FYP to the 12th FYP (2001-2015) to estimate the atmospheric effects of this target-based policy. Our intensity difference-in-differences framework provides consistent evidence that while the TEC policy can effectively reduce the emissions of its targeted air pollutant, Sulfur Dioxide (SO2), it tends to worsen the overall city air quality. These results suggest that target-based environmental regulation might shift emissions from targeted air pollutants to non-targeted ones.

Keywords: environmental regulation, air quality, multitasking, difference-in-differences, China

JEL Classification: Q58, Q53, O13