How can environmental intervention work during rapid urbanization? Examining the moderating effect of environmental performance-based accountability in China

https://doi.org/10.1016/j.eiar.2020.106476Get rights and content

Highlights

  • Excessive land development has been a major culprit of air pollution.

  • Land sales revenue could be used for air pollution control as well.

  • An environmental performance-based accountability system can prevent air pollution.

  • A centralized accountability system can produce complex environmental outcomes.

Abstract

For the past three decades, ecological decline associated with rapid urbanization has been a global phenomenon, particularly in developing countries, where economic growth is often financed through off-budget earmarked revenue sources such as land sales. Under this context, governmental intervention to improve the environment may not be effective if such intervention suppresses land sales revenues, because these revenues are also used to finance environmental protection projects. What is the relationship between land revenues and environmental quality? More importantly, how does governmental intervention to improve the environment influence this relationship? Employing panel data of 31 provinces in China from 2000 to 2015, this study empirically answers these questions. We find that land financing strongly influences pollution in an inverted U-shape pattern, where local land revenues increase pollution until a turning point at which a decline in pollution is observed. More importantly, we find that environmental intervention programs can accelerate the decline in pollution. These findings establish the moderating impact of environmental intervention programs within a rapid urbanization context.

Introduction

For the past several decades, land grant premiums (i.e., revenues from land sales) have been a major revenue source for many governments such as mainland China, Hong Kong, Singapore, India, and others (Mathur, 2013; Murakami, 2018; Wu et al., 2015). Lands are often sold or used as collateral to finance infrastructure programs to boost economic growth and urbanization in these countries (Ji and Zhang, 2020; Theriault et al., 2020). For example, in Hong Kong, land sales normally take about one-fifth of the government's total revenues (Hong Kong Government Budget 2020–21). The figure is even larger in mainland China where land premiums normally comprise more than half of total local revenues (Huang and Chan, 2018). In terms of their uses, land revenues are normally earmarked in governmental revenue systems to finance urbanization projects (including environmental projects), economic growth projects, and infrastructure projects including environmental infrastructure (Tong et al., 2019; Zhu et al., 2019).

Meanwhile, rapid urbanization and growth are associated with ecological decline (Shao et al., 2020). Severe environmental issues, such as air pollution, have led to many governmental actions and interventions (Zheng and Kahn, 2017). The Chinese government has implemented a series of important environmental intervention policies and programs — such as performance responsibility systems, regional collaborations, and reforms in environmental monitoring — to tackle significant pollution problems associated with urbanization and economic growth (Niu et al., 2020; Wang et al., 2019; Zheng and Kahn, 2017). These policy initiatives were made within a centralized decision-making structure but through a decentralized network of local implementers. The central government expects these policies to have a significant strengthening effect on environmental institutions and positive policy outcomes (Wang and Lei, 2020). One of the most significant and drastic policy actions occurred in 2007, when the central government started assessing high-ranking local officials' responsibilities in pollution control outcomes in the Environmental Performance-Based Accountability (EPBA) system.

The EPBA was implemented in response to serious pollution, presumably caused by local economic growth and drastic local infrastructure development during the process of urbanization (Pang et al., 2019), which was financed through various local government financing platforms (LGFPs), most notably local land financing mechanisms. Land financing, often portrayed by local governments in China as a major form of policy innovation that boosts economic growth (Huang and Chan, 2018), allows local authorities to mortgage land for the premiums needed to carry out infrastructure development in the pursuit of GDP growth, which is a major government performance assessment criterion for local officials. While being seen as a major form of policy response in the rapid urbanization process (Wu et al., 2019), land financing has been recognized as a culprit in rapidly deteriorating environmental quality (Huang and Du, 2018).

The significance of this research lies in its description and critical assessment of this centralized policy-making process and consequential enforcement mechanisms, as part of an environmental policy governance model that differs significantly from the incremental and decentralized environmental policy-making largely seen in the Western context. Moreover, the findings should help policy-makers better understand how environmental assessments work under various local fiscal circumstances.

Section snippets

Framework

In this section we consider the impact of land financing on pollution and how environmental assessments may moderate this impact. We describe the rationale and key components of the EPBA as an environmental policy intervention within the Chinese context and highlight differences in motives, policy-making processes, the capacity invested, and the enforcement strength in comparison with Western systems.

Data and variables

We constructed a panel data-set covering 31 provinces in China from 2000 to 2015 —

the period of the most rapid growth of land financing and significant environmental deterioration in China. Meanwhile, the EPBA was formally implemented across the country in 2007 when almost all leaders of provincial government began to be held accountable for environmental performance targets with career consequences. Subsequently, the central government reinforced this system in 2011 by adding new mandated

Findings

The trends of land financing (annual land grant premiums) and the four pollutant emissions are displayed in Fig. 1. The figure shows a growing trend in land financing, along with fluctuating but generally declining trends of pollutant emissions. Three of the four pollutant emissions in this research (COD, SO2, and NHx) show an upward trend with the growth of land financing before 2007, turning downward since. Moreover, the pollution trends of COD, SO2, and NOx have declined significantly since

Discussion

In this section, the key findings of this research are discussed. First, land financing is found to influence pollution in an inverted U-shape fashion. Although the potential impact of economic growth on environmental quality has been well established through the Environmental Kuznets Curve, the more specific policy dynamics of this relationship have yet to be established (Xu, 2018). The evidence in this research shows that environmental quality may be influenced dramatically by land financing

Conclusion

For more than three decades, land financing has been a dominant institutional effort to finance economic development globally. In this research, we provide evidence that land financing in Chinese local governments leads to a growth-then-decline pattern in pollution. We also show that the central government's environmental assessment system accelerates this decline. Our findings are indicative of the efficacy of an environmental governance model that emphasizes centralized decision-making, and a

Author statement

Bo Yan: Conceptualization, Writing- Original draft preparation, Methodology.

Long Wu: Formal analysis, Data curation, Software, Formal analysis, Visualization.

XiaoHu Wang: Validation, Writing- Reviewing and Editing.

Jiannan Wu: Project administration, Validation.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgements

This study was supported by the China NFSC General Program (71473190), the Key Philosophy and Social Science Research Project of Chinese Ministry of Education (17JZD025).

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