The Protected Polluters: Empirical Evidence from the National Environmental Information Disclosure Program in China

Abstract

Mandatory Environmental Information Disclosure (EID) programs are touted as effective supplements to traditional policy instruments in most OECD countries. However, the Chinese national EID program, which was launched in 2008, is found to be ineffective for the urban environment. Though former studies attribute the failure to a lack of accountability for polluters, no direct evidence was found. In this study, we investigate the relationship between corporate environmental governance and the extent of EID at the city level by using the 2011 Chinese Private Firms Survey. Employing a Tobit-IV approach in order to deal with possible endogeneity, we provide robust evidence that corporate environmental investments have no significant correlation with the level of urban EID enforcements, a finding consistent with previous research. Further investigations show that EID only exerts a significant influence on non-politically connected polluters, and, by contrast, politically connected firms are less susceptible to the EID policies. Therefore, our research suggests that Chinese EDI policy fails mainly due to the shelter effects of local protectionism for connected polluters.