The effect of environmental centralization: An assessment of China's environmental vertical management reform below provincial level

Abstract

To strengthen the top-down supervision over local environmental management, China has gradually initiated environmental vertical management reform (EVMR) below provincial level since 2016, which empowers provincial environmental agency to replace municipal government to directly administrate municipal environmental agencies. As the largest environmental centralization reform in China since the opening and reform, the effect of EVMR below provincial level on environmental quality and the underlying mechanisms remain relatively underexplored. Taking air quality as the indicator, one of the most prominent environmental issues in China, and using panel data of 255 municipalities during 2011–2021 and staggered difference-in-differences model, this research finds that that averagely, the reform reduced municipal annual PM2.5 concentration by about 8.03 %. However, the effect was not significant until the fourth year after the reform. In addition, the reform effects were heterogeneous for cities with different levels of resource endowments, attention of high-level authority, and economic growth pressure. Further analysis shows that the reform has strengthened the working incentive of municipal environmental agency by increasing their budget and enhancing law enforcement power. However, the reform has failed to boost the environmental attention of municipal governments, which are inclined to view environmental agency as an outsider rather than collaborator. Moreover, it is found that in part of cities, the personnel management along with the EVMR is still lagged and municipal environmental agency is still subject to the intervention of municipal government, which negatively affect the working enthusiasm of the environmental officers and thus the reform effect. Finally, this paper proposes corresponding suggestions to further improve the reform effect.