The impact of major pollution incidents on environmental performance

Abstract

Recent work has shown that serious environmental incidents may act as trigger events to produce stronger regulatory enforcement in China. After a major pollution incident, Chinese authorities often impose severe penalties on polluters as a means to prevent future incidents and appease the public. In this paper, we examine how this increased regulatory stringency might affect firms’ environmental performance. We select Level I (extremely serious) and Level II (serious) environmental incidents from 2009 to 2019 as trigger events. Using city-level panel data on environmental violations, we find a significant deterrent effect of the incidents on violations: in the period following an incident, the number of violations falls roughly by 8%–11%. The effect is primarily driven by the incidents caused by illegal discharge of toxic pollutants. Other incidents, such as production safety accidents or traffic accidents, do not exert significant effects on environmental performance.