Does environment centralization prevent local governments from racing to the bottom? --Evidence from China

Abstract

While China has achieved rapid economic growth in the past several decades, such growth has also caused serious environmental problems. Local governments' tolerance and indulgence pollution is one of the key factors. Therefore, the state has established a generally centralized environmental governance system. This empirical study proposes an Objective-Conduct-Performance model to explain environmental regulation differences between developed countries and China, and attempts to analyze local governments' environment deregulation in the context of environmental centralization using data from Chinese provinces from 1997 to 2015. Our results indicate the following findings. First, newly transferred officials exert influence that is characterized by a fall-rise pattern in CO2 emissions during the few first years of the officials' new terms. Second, the centralized environmental governance and strict legal rules may provide strong restrictions on local governments' environment deregulation. Third, market forces are a driver of local governments' environment deregulation rather than a constraint. Last but not least, top officials transferred from adjacent provinces are more likely to ease environmental regulations than those from non-adjacent provinces. Thus, we can conclude that local government officials in China have a powerful motive to ease environmental regulations, leading to a failed effort to restrain local government officials’ further measures in spite of the severity of laws, regulations, and the unfamiliarity of administrative circumstances. This is perhaps due to a lack of political and economic power structures that match environmental centralization. Asymmetric incentives make local government officials tend to prioritize the goal of economic growth over environmental quality.