A review of the system of “daily continuous penalty” in China's environmental protection practice—From the perspective of law and economics

Abstract

The daily continuous penalty (DCP) in China's environmental legislation is regularly refined to improve enterprises' pollution discharge compliance rates, develop methods for assuming legal environmental responsibility, and advance the sustainable development of environmental law. Analyses of actual implementation and illegal rebound rates reveal that DCP exerts a deterrent effect, supporting pollution control and emissions reduction that is beneficial for the development of green and low-carbon industries. Notably, this measure is found to be strong and effective in the early stage but weakens over time and has not yet reached the ideal optimal deterrent effect. Maximizing utility and minimizing cost requires the development of an optimal DCP that can be adjusted to applicable circumstances, expanding the scope of deterrence to consider offenders' income capacity for individualized deterrence. Other policy recommendations include limiting the amount of daily fine unit to prevent over-deterrence, introducing a compliance model that focuses on cooperative law enforcement, and establishing a second-order daily fine mechanism based on offenders' corrective reporting and misreporting costs.