Air pollution mitigation: Evidence from China's central environmental inspection

Abstract

Central environmental inspection (CEI), an innovative incentive mechanism to position the central authority to complement local regulators of pollution mitigation in China, may play a vital role in air pollution control. This paper describes an investigation that drew upon daily air quality data from 282 prefecture-level and above cities and employed an event-study design to scrutinize the impact of policy shock on air pollution mitigation. Our main finding is that CEI significantly reduced the Air Quality Index (AQI) and concentrations of PM2.5, PM10, SO2, NO2, and CO. Only O3 increased during the on-site inspection probably due to the opposite effect with high NOX concentrations relative to VOCs. When NOX is reduced, ozone therefore increases. However, according to dynamic evidence, CEI failed to bring about long-term enduring sustained reductions. A probable explanation is that local officials has informed the pollution-contributing firms in advance, which consequently decreased their emissions by a small amount in the month prior to the inspection and then allowed emissions to return to historic levels after the inspectors departed. Notably, while PM2.5, NO2, and CO increased above their normal levels, this pattern did not apply to SO2, suggesting that some firms, with the exception of the power sector, recovered from previously lost production by subsequently increasing production. We also found evidence from the analysis of the VIIRS Night-Time Light data that the unsustainable improvement in environmental performance was indeed achieved by the firms' restrictions on production. Moreover, the data also provide strong evidence that more heavily polluted cities and inland areas of China were more responsive to the enforcement of CEI, perhaps as the result of an emphasis on heavy industry in those locations. This report concludes by proposing further policy implementations for the future optimization of China's environmental governance and sustained environmental performance.