Environmental Target and Government Performance in China

Abstract

When do environmental targets improve the environmental performance of local governments? Previous studies have reached inconsistent conclusions on the effectiveness of environmental targets. Drawing on the principal-agent theory, this article identifies goal divergence and information asymmetry as challenges that impede the achievement of environmental targets. We analyze two policy instruments put in place to steer implementation, namely the mandatory target system and key cities for emission reduction, as components of the national 11th Five-Year Plan. We apply the difference-in-differences (DID) method to a longitudinal dataset of Chinese cities from 2001 to 2010 to investigate the impact of the two policy instruments on air and water pollution. Combining time variations, inter-provincial differences, and inter-prefectural differences in policy intensity, we find that mandatory pollution reduction targets have a pollution-reducing impact on two targeted pollutants, and key environmental protection cities reduce emissions only for air pollutants. However, we find no evidence of a synergy between the two types of policies. Our findings contribute to the understanding of implementation problems for government agents.