Central Environmental Protection Research Articles

Challenges of water environment governance in China: based on a qualitative comparative analysis approach

ABSTRACT As a developing country focused on water pollution control, understanding the mechanisms behind China's water environment governance challenges is crucial. This study uses fuzzy set qualitative comparative analysis (fs/QCA) to develop a localized political-economic-social-technological (PEST) framework tailored to local governance realities, analyzing cases from the second round of Central Environmental Protection Inspection (CEPI). Two critical paths of local water governance challenges (CWEG) are identified: (1) In the 'government capacity constraints” path, stable yet limited official autonomy, combined with weak social supervision, obscures the institutional environment's empowering role and restricts local governance capacity, hindering environmental management effectiveness. (2) In the 'formalism in governance' path, a strong institutional environment, significant fiscal decentralization, robust digital infrastructure, green technology innovation, and low official turnover create a favorable governance environment. However, under the logic of avoiding accountability, formalism may emerge, posing challenges to effective water resource management.

How does Central Environmental Protection Inspection drive the green transformation of China’s heavy-polluting enterprises from an ESG perspective?

How does Central Environmental Protection Inspection drive the green transformation of China’s heavy-polluting enterprises from an ESG perspective?

The impact of vertical environmental regulation mechanism on greenwashing

China is vigorously implementing carbon reduction actions, but greenwashing is a severe obstacle to the realization of the “dual-carbon goal”. The central environmental protection inspection (CEPI) policy is a typical vertical environmental regulation (VER) system, which directly affects the environmental protection practices of firms and thus may have an impact on greenwashing. This article uses data from China's listed companies from 2012 to 2021 and the generalized difference-in-differences (DID) method to examine the impact of CEPI policy on greenwashing. The main conclusions are: first, the CEPI policy can significantly mitigate greenwashing, and this conclusion still holds after the endogeneity test and parallel trend test. Second, the CEPI policy can mitigate greenwashing by increasing media attention, improving technological innovation ability, and increasing the degree of competition in the industry. Finally, the heterogeneity analysis shows that stronger regulatory intensity mitigates greenwashing and the CEPI policy is effective in reducing the greenwashing of duality firms. Reducing corporate greenwashing is conducive to cleaner production and thus promotes sustainable economic development.

Enterprise environmental performance under China's framework for Central Environmental Protection Inspection: Quasi‐natural experimental evidence

AbstractIn 2016, China launched the Central Environmental Protection Inspection (CEPI) to address environmental pollution. Using a triple‐difference method with data from China's A‐share listed companies between 2010 and 2019, we find that CEPI significantly improves the environmental performance of firms. The improvements are driven by increased environmental awareness, stricter enforcement and greater investment in environmental protection. Fiscal and environmental decentralization positively reinforce the policy's effectiveness. Regions with high public participation, media attention, and visibility experience greater benefits. This research highlights the importance of combining policy initiatives with active public and media engagement to achieve significant environmental improvements.

Dynamic Research on the Collaborative Governance in Urban and Rural Black-Odorous Water: A Tripartite Stochastic Evolutionary Game Perspective

The issue of black-odorous water (BOW) represents a formidable challenge to the current aquatic ecosystems, and its governance exhibits characteristics of low efficiency, susceptibility to relapse, and fragmented management under the Central Environmental Protection Inspection, thereby emerging as a dynamically complex issue in the ecological governance of urban and rural settings. This study introduces Gaussian white noise to simulate environmental uncertainty and design a stochastic evolutionary game model encompassing the central government, local governments, and societal forces based on evolutionary game theory and classical governance theories and concepts. Numerical simulations are conducted to explore trajectories of the strategic evolution of various subjects influenced by numerous factors. Results indicate that under the environment of random disturbances, the strategies of the game subjects show significant fluctuations, but actively cultivating the subject’s initial willingness facilitates collaboration governance in inspection. Moreover, joint construction of a “belief system” by multi-subjects, the intensity of inspection interventions, the integration of heterogeneous resources, and effective punitive measures all influence the governance of BOW, but the efficiency of resource allocation should be considered throughout the governance process. Recommendations are made finally for collaborative governance of urban and rural BOW, promoting the sustainable development of the ecological environment.

The occurrence mechanism for local governments’ overregulation: evidence from central environmental protection inspection

Excessive environmental regulation can achieve environmental improvement, but it is not conducive to sustainable environmental improvement. This paper takes the “one-size-fits-all” (OFA) in the process of China’s central environmental protection inspection (CEPI) as an example to explore the occurrence mechanism from the perspective of multiple co-governance. Using the fuzzy set qualitative comparative analysis (fsQCA), we find that four distinct mechanisms can result in OFA. Based on the four distinct mechanisms, we find that even if the pollution behavior of enterprises is not serious, local governments may still adopt OFA under a combination of other conditions; non-key cities of environmental protection are more prone to OFA; giving full play to the role of public inspection is a key step to avoiding local government violations. However, the effectiveness of public environmental attention is insufficient under the dual driving force of pollution and the economy under the lack of vertical environmental regulatory pressure.

Central environmental protection inspection, green technology innovation and carbon intensity of industrial enterprises – Empirical research based on multi-period differences-in-differences model

As a major institutional innovation of China's environmental governance system, weather the Central Environmental Protection Inspection (CEPI) can reduce carbon intensity is still unclear. This research takes 18,728 company-year sample observations of Chinese industrial A-share listed companies from 2009 to 2020 as the research object (CSMAR and CNRDS databases are used). Multi-period Differences-in-Differences model approach is employed to investigate the mechanisms through which the CEPI affects carbon intensity governance in industrial enterprises, the heterogeneous effects of CEPI are explored at macro, meso and micro levels. CEPI reduces the carbon dioxide emissions of industrial enterprises by 0.028 tons per 10,000 yuan of output value, CEPI achieves carbon intensity governance effect by incentivizing companies to enhance the quantity and the quality of green technological innovation. High level of public environmental oversight and industry competition, as well as nature of state-owned enterprises facilitate the CEPI's role in promoting the reduction of enterprise carbon intensity. The findings provide practical insights for driving green technological innovation among enterprises. Some policy implications are proposed. CEPI should be regulated to strengthen the environmental governance responsibilities of local governments and incentivize industrial enterprises to improve the quantity and quality of green technological innovation and reduce carbon intensity.

The Influence of Central Ecological and Environmental Protection Supervision on the Performance of Environmental Protection Enterprises

Based on the semi-annual financial data of China's listed enterprises from 2017 to 2022, this paper divides the sample enterprises into environmental listed enterprises and other general listed enterprises in the industry of environmental listed enterprises, and evaluates the impact and mechanism of the "Regulations on the Supervision of Central Ecological and Environmental Protection" on the performance of environmental listed enterprises through the difference-difference method. This paper finds that the Regulation reduces the performance level of environmental listed enterprises. The strengthening of regulatory effect and the reduction of innovation input are the important mechanisms. From the perspective of heterogeneity effect, the Regulation has greater inhibitory effect on the performance of private environmental protection enterprises, but has no significant effect on the performance of state-owned environmental protection enterprises. Compared with small-scale environmental protection enterprises, the "Regulations" have less inhibitory effect on the performance of large-scale environmental protection enterprises. After a variety of robustness tests, the conclusions of this study are still valid, which can provide important reference for relevant government departments to formulate appropriate environmental policies and promote the stable and healthy development of environmental protection enterprises.

Improving enterprise environmental performance under central environmental protection inspection: An empirical study based on listed industrial enterprises

The central environmental protection inspection is an institutional innovation in China that aims to supervise enterprises by monitoring government environmental enforcement. This paper examines the effectiveness of central environmental protection inspection in improving enterprise environmental performance by using a quasi-natural experiment of the first round of central environmental protection inspection. The study reveals that the central environmental protection inspection improves enterprise environmental performance by strengthening local government environmental enforcement and environmental attention. This is evidenced by the increase in enterprise environmental capital expenditure and the decrease in pollution discharge fees. The impact of central environmental protection inspection on enterprise environmental performance is strengthened by local governments’ environmental regulation and environmental fiscal expenditure, as well as by public participation. Under the pressure of central environmental protection inspection, heavily polluting enterprises engage in production process improvement and R&D investment, which can improve their economic performance. This can ultimately lead to a competitive advantage for enterprises, promoting a win-win situation for both environmental and economic performance.

Does Chinese Environmental Policy Affect Income Inequality? Evidence from the Central Environmental Protection Inspection

AbstractThis paper investigates the effect of environmental policy on income inequality. It focuses on the central environmental protection inspection led by the central government in China. Using a difference‐in‐differences approach, it finds evidence that environmental regulation decreased the per capita income and enlarged the gap between urban and rural income while showing an insignificant effect on employment. Although the policy can reduce pollution levels and bring environmental benefits in aggregate, the findings of this study suggest that the regulations appear to have reduced the proportion of manufacturing industry and hindered general innovation and investment from entrepreneurs, which resulted in greater inequality. Rural residents suffered more from environmental regulation due to relatively high migration costs and their disadvantaged human resources on the aspects of health, education level, and skills. The local government's execution incentive can also play a key role in the effectiveness of environmental policy. Regions with lower GDP growth targets and younger government leaders were affected significantly with regard to the income growth of local residents and the urban–rural income gap.

Environmental Policy Overlays and Urban Pollution and Carbon Reduction—Evidence from China

The in-depth promotion of environmental pollution prevention and control is a must for China to move towards green development, and the effectiveness of urban environmental pollution control largely depends on the selection of these environmental policies and the synergistic application of these policies. This paper empirically tests three environmental policies’ mixed and synergistic effects using Chinese urban data from 2000 to 2017. This study found that (1) the three environmental policies significantly curb urban environmental pollution and show synergistic effects. (2) The three types of environmental policies can have a superimposing effect by strengthening financial inputs and increasing environmental concern, as well as a complementary effect by improving the efficiency of environmental protection enforcement and the institutional environment. The synergy between the central environmental protection inspection policy and the environmental information disclosure policy is more of a superposition effect than a complementary effect due to the similarity of the policy objectives. (3) The synergistic effect of environmental policies is affected by factors such as the age of the principal officials and financial pressure. The younger the age of the principal officials and the cities with less financial pressure are more capable of utilizing the synergistic effect of environmental policies to form a situation where the market, the government, the public, and the enterprises work together to govern the city. This paper provides new ideas for exploring the synergies and mechanisms of environmental policies and theoretical references for the design, implementation, and effects of environmental policy portfolios in the 14th Five-Year Plan period.

Study on the impact of central environmental protection inspection on the health of the older adult population-A quasi-natural experiment in China.

In 2015, the central government of China established the Central Environmental Protection Inspection (CEPI) system for oversight of local governments. It enhanced local government enforcement of environmental regulations, which had a considerable influence on the health of the local older adult population. This study quantifies the effects of local government regulation brought about by CEPI on the health of the older adult. It examines the impact mechanism using the DID model and panel data from the China Health and Retirement Longitudinal Study (CHARLS). The results show that (1) local governments' environmental protection regulations implemented by CEPI have a positive impact on the general health of the older adult. The results of the study passed the parallel trend test, PSM test, replacement variable test, and placebo test and remained significant; (2) in terms of the impact mechanism, CEPI has promoted local governments' environmental governance initiatives, which has reduced industrial wastewater emissions, industrial sulfur dioxide emissions, and industrial fumes emissions. This has improved air quality, thereby creating a good living environment for the older adult and improving their overall health; (3) according to heterogeneity research, the health of older adult living in the Yangtze River Basin, urban older adult, and older adult without chronic diseases is more significantly affected by the environmental protection regulations of the local governments brought about by CEPI.

Environmental information disclosure, central environmental protection supervision, and industrial green transformation—empirical evidence from listed companies

Environmental information disclosure, central environmental protection supervision, and industrial green transformation—empirical evidence from listed companies

An evolutionary game study on the collaborative governance of environmental pollution: from the perspective of regulatory capture.

Local governments have been captured by enterprises and, thus, have relaxed environmental regulations. This phenomenon has occurred repeatedly and has resulted in serious environmental pollution, posing an enormous threat to public health. To solve this problem, this study introduces central environmental protection inspection and media supervision and considers the economic preferences and environmental preferences of local governments. A four-party evolutionary game model composed of enterprises, local governments, the central government and the media is constructed, and the equilibrium solution of four-party replicator dynamics equations is obtained. The influence of relevant parameters on the choice of strategies of the four main bodies is simulated by using MATLAB software to explore the paths and measures for overcoming regulatory capture and to further improve the modern environmental governance system. The results show the following: First, local governments are easily captured by large enterprises. Second, the central government can improve the environmental behavior of local governments by reducing their economic preferences and strengthening punishment. Third, compared to the penalties imposed by the central government, those imposed by local governments have a more significant impact on the environmental behaviors of enterprises. Fourth, compared to the use of an environmental protection tax policy or a tax relief policy alone, the combination of the two has a more significant impact on the environmental behaviors of enterprises. Fifth, central environmental protection inspection and media supervision can improve the environmental behaviors of both local governments and enterprises, and the effect of media supervision is better than that of central environmental protection inspection. This study recommends improving the performance evaluation system for local governments to coordinate economic development and environmental protection, ensuring that local governments assume the main responsibility, using a combination of incentive and constraint policies for enterprises, and increasing the environmental protection inspection and media supervision of local governments and enterprises to resolve the dilemma of regulatory capture in environmental pollution through the simultaneous enhancement of the environmental behavior of local governments and enterprises.

The evolution of central environmental protection inspection policy attention in China: An investigation based on inspection reports

The central environmental protection inspection (CEPI) system in China is a significant institutional innovation in national environmental governance. The CEPI applies a joint supervision strategy to address salient environmental issues and strictly enforce the environmental responsibilities of local governments. This study collects and organizes CEPI inspection reports covering three stages that encompass the first round, the “look back”, and the second round, applying text analysis to obtain sample data and conduct statistical quantification of word frequency in inspection reports and identify notable changes. The study explores the allocation of CEPI attention between policy objectives and the intensity of policy instruments. We determine that in conjunction with public opinion feedback, the CEPI conducts targeted inspections and focuses more on pollutant governance, which has high severity and can be addressed quickly. The CEPI fills the gap of normalized governance with a campaign-style governance approach. Regarding the intensity of policy measures, the CEPI primarily uses economic incentive policy instruments, supplemented by command-and-control and public guidance approaches, advancing the sustainability of regulatory effectiveness through economic, social, and political activities. This study extends knowledge in the field of CEPI policy priorities and implementation, expanding the literature related to outcomes of environmental policy in developing countries.

Corporate earnings management strategy under environmental regulation: Evidence from China

In response to external adverse factors affecting corporate performance, managers may be motivated to engage in earnings manipulation. Environmental regulation as an institutional factor threatens normal earnings for heavy-polluting firms. This paper discusses corporate earnings management strategy under an environmental regulation policy. A multistage difference-in-differences (DID) estimation is performed, based on the central environmental protection inspection (CEPI) that is widely acknowledged as China's most stringent environmental policy. The results show that heavy-polluting firms significantly adjust their earnings management strategy after CEPI. Managers tend to adopt real activities manipulation with the effects of CEPI, while reducing their reliance on accrual-based earnings management. CEPI stimulates heavy-polluting firms to increase environmental investment, which makes their managers more likely to manage earnings through real activity manipulation, simultaneously resulting in the reduction of discretionary accruals. This earnings management strategy only appears in firms inspected in 2016 or non-state-owned enterprises or firms located in the regions with low environmental pressure. Our findings show that managers could use the chances provided by exogenous shocks to manipulate earnings.

How does central-local interaction affect local environmental governance? Insights from the transformation of central environmental protection inspection in China

In recent years, one of the most important and innovative policy initiatives introduced by the Chinese government in the field of environmental protection and ecological civilization construction is the Central Environmental Protection Inspection (CEPI). CEPI is seen as a vital tool to encourage local implementation of environmental protection responsibility. Over the course of its operation (eight years), CEPI has transformed from the “campaign” phase to the “convention” phase. It is noted that while provincial governments face a common high-pressure environment created by CEPI, governance scenarios, behaviors, and performance vary across the country significantly. To better understand local governments' environmental governance behaviors under the transformation of CEPI, an integrated analysis framework consisting of two key elements, “central dominance” and “local proactiveness”, is constructed based on the central-local interactions under the principal-agent model. Based on this framework, we conducted a multi-case comparative analysis of four classic cases, with the following findings. (1) Along with the operation of CEPI and its transformation, the interaction between the central and local governments leads to four governance scenarios: “control-active cooperation”, “control-passive cooperation”, “guidance-active promotion”, and “guidance-passive promotion”. (2) Influenced by various factors such as pressure by the central government, local governments' capabilities and governance motivations, local governments form governance behaviors with varying degrees of proactiveness and autonomy. (3) After examining the governance performance of varying behaviors, it is found that local government's “active promotion” behavior can achieve higher governance effectiveness in the “convention” phase. Therefore, it is of policy implication that local governments should be guided to transit from “passive cooperation” to “active promotion”. This paper has important guiding significance for understanding local environmental governance behaviors under strong top-down institutional pressure.

Central environmental protection inspection and carbon emission reduction: A tripartite evolutionary game model from the perspective of carbon neutrality

Since the carbon neutrality target was proposed, many countries have been facing severe challenges to carbon emission reduction sustainably. This study is conducted using a tripartite evolutionary game model to explore the impact of the central environmental protection inspection (CEPI) on driving carbon emission reduction, and to study what factors influence the strategic choices of each party and how they interact with each other. The research results suggest that local governments and manufacturing enterprises would choose strategies that are beneficial to carbon reduction when CEPI increases. When the initial willingness of all parties increases 20%, 50%–80%, the time spent for the whole system to achieve stability decreases from 100%, 60%–30%. The evolutionary result of “thorough inspection, regulation implementation, low-carbon management” is the best strategy for the tripartite evolutionary game. Moreover, the smaller the cost and the larger the benefit, the greater the likelihood of the three-party game stability strategy appears. This study has important guiding significance for other developing countries to promote carbon emission reduction by environmental policy.

The deterrent effect of central environmental protection inspection: evidence from Chinese listed companies

PurposeIn this paper, the authors take the central environmental protection inspection (CEPI) as an exogenous shock to study the reaction of the stock market in China. Using the event study method, the authors check how the first round of the first batch of CEPI supervision affects the cumulative abnormal return (CAR) of the listed firms on the Shenzhen or Shanghai stock exchange. This paper aims to discuss the aforementioned objective.Design/methodology/approachIn this paper, the authors take the first round of the first batch of CEPI supervision as a clean exogenous shock to study its effects on the capital market. The authors collect daily trading data from the China stock market and accounting research (CSMAR) database, with the sample containing 1,950 Chinese firms listed on either the Shenzhen or Shanghai stock exchanges. And detailed information on CEPI supervision is obtained from the official website of the Ministry of Ecology and Environment of the People's Republic of China. The event study method is adopted to analyze the reaction of the stock market under CEPI supervision. Specifically, the authors constructed the cumulative abnormal return of each firm around the event day of CEPI. To capture the deterrent effects of CEPI supervision, the authors examine the situation of polluting and non-polluting firms in the supervised provinces, adjacent provinces and provinces that are not supervised or close to the supervised provinces, respectively.FindingsThis paper throws light on the following: (1) the polluting firms in the supervised provinces were negatively impacted by CEPI within 20 trading days of the event day, and its effects spread to the polluting firms in the neighboring provinces; (2) CEPI had a favorable impact on the non-polluting businesses in the provinces that are neither supervised nor close to the supervised provinces. The authors contend that it is because the investment is being forced out of the polluting sector and into the non-polluting sector, which is more pronounced in the provinces not directly or indirectly targeted by CEPI; (3) by comparison, the “looking back monitoring of the first round” has had no discernible detrimental impact on the firms' CAR, indicating an important role of psychology anticipation of investors in the stock market performance; (4) although not physically located in the supervised provinces, the downstream enterprises of the polluting firms suffer significantly from CEPI shock; (5) the effectiveness of CEPI supervision in the supervised provinces depends on the level of local environmental regulation and the ownership structure of the company. Private firms in the provinces with stronger environmental regulations suffer more from the CEPI shock; (6) the multivariate analysis shows that while enterprises with high ROE and financial leverage may be at risk of CAR loss, older, larger firms are less likely to experience CEPI shock; (7) the study of persistent effect reveals that the strike of CEPI supervision can last for at least 10 months after the event day and deterrent effect can be spread within the whole polluting industry.Research limitations/implicationsIn this paper, the authors only concentrate on the market reaction within 20 trading days after the event day. An analysis of long-term effects should be valuable to get a deeper knowledge of the capital market reaction to the CEPI policy. In addition, the paper only focuses on the first round of the first batch of CEPI. Since CEPI has been built as a constant regulation of local environmental performance, further study may need to track both the reaction of listed firms and investment behavior in the capital market.Practical implicationsPolicy implications of the paper are as follows: First, for the policymakers, it is important to construct a constant environmental regulation system instead of a campaign movement. Second, for investors, as environmental issues are receiving increasing attention from both the government and the public, investment decisions should take into account firms' environmental performance, which can help reduce the risk from environmental regulations. Third, the firms in the polluting industry should take more action to reduce pollutant releases and adopt green technology, which is essential for sustainable development under environmental protection.Originality/valueThis paper contributes to the existing literature in the following aspects. First, the authors provide new evidence on the effects of environmental regulations as a shock to the stock market, which has been wildly concentrated in the literature about environmental policies evaluation and capital market reaction. Second, the authors supplement the literature on green finance and sustainability transformation, which has got increasing attention in recent years. Theoretically, by guiding investment and affecting the stock market performance, environmental regulations are considered to be an efficient way to stimulate polluting firms to transform into green development. The results of the paper support this intuition by showing that the CAR of the non-polluting firms in non-supervised provinces in fact benefit from the CEPI supervision.

Research on the Policy Effect and Mechanism of Central Environmental Protection Supervision System on Industrial Structure Upgrading – Empirical Evidence from 283 Prefecture-Level Cities in China

Research on the Policy Effect and Mechanism of Central Environmental Protection Supervision System on Industrial Structure Upgrading – Empirical Evidence from 283 Prefecture-Level Cities in China