Three Essays on Environmental Economics

The dissertation studies three seemly independent topics on environmental economics, but they share the same theme: the reactions of local governments and firms on promotional incentives and environmental regulations in China.The first chapter examines whether China’s Two Control Zone policy has successfully shifted the relative share of SO2 emissions from control zones to non-control zone areas. With a difference-in-differences framework, I find that although the policy failed to achieve its total emission control targets, it caused a partial shifting of SO2 emissions and industrial output from control zones to non-control zone areas and promoted economic growth in relatively less industrialized, less populated, and less developed counties at a cost of higher environmental health damage within those areas. Estimations from this paper suggest that the policy caused the firms in control zone areas to produce 23% less SO2 emission than those in non-control zone areas. My findings highlight the importance of the spillover effect from regional total emission control programs.The second chapter studies a campaign-style innovative environmental enforcement strategy, the Central Environmental Protection Inspection (CEPI), which has assumed an important role in China’s environmental enforcement since 2016. With the help of daily water pollution records from 2015 to 2018, this chapter documents the policy’s short-term and long-term impacts. Utilizing a difference-in-differences style strategy and comparing water pollution readings from stations belonging to different batches of the policy, evidence is found indicating that local polluters tend to decrease emissions as a precaution prior to inspection periods. Meanwhile, the campaign achieves consistent pollution progress in terms of increasing dissolved oxygen and reducing ammonia nitrogen and total organic carbon emissions. The rebound effects are not strong enough to override water quality improvements. The results indicate that campaign-style enforcement, though possible to be manipulated by local polluters and governments in the short-run, remains a potentially efficient tool for policymakers to pursue long-term environmental enforcement goals.In the third chapter, I examines the existence and scale of interjurisdictional spillovers in China. I apply the difference-in-differences strategy to a unique dataset of more than 100 thousand firms’ SO2 and COD emission records from 1998 through 2005. With the help of historical weather information, I identify the windward and leeward status for counties near provincial borders and find that firms located in windward counties relatively increase their SO2 emissions when local windspeed is higher. Heterogeneous analysis further finds that transboundary pollution is especially pronounced for private firms and across borders with yearly average wind speed around median level. The results suggest that a certain level of recentralization in environmental governance can be efficient for reducing transboundary pollution from windward counties in China.