Research On The Environmental Governance And Industrial Upgrading Effect Of The Central Environmental Inspection

With the deepening of China’s industrialization and urbanization,the prominent environmental crisis has attracted the attention of scholars and policy makers on the effectiveness of environmental enforcement in mitigating pollution emissions and improving environmental performance.Environmental pollution,especially represented by air pollution,not only threatens the health of residents,but also seriously hinders the sustainable development of economy and society.As far,Chinese government has issued a series of environmental laws and policies for pollution control.However,the effects of the environmental enforcement are not evident.The pivotal and fundamental reason lies in the conflict between the missions of economic growth and environmental governance,which leads to an ambiguous realization at environmental responsibility and misconducts in the process of pollution control for local government officials.To this end,the Central Committee of the Communist Party of China(CCCPC)continues to promote the reform of the ecological and environmental supervision system and launches the first round of Central Environmental Inspection(Hereinafter referred to as “CEI”)and the “looking-back review”campaign in 2016.CEI aims to ensure the consistent actions between central and local governments,for clarifying the “correction” of environmental responsibilities of local governments,party and government ministries.CEI has become an important institutional arrangement for the state to effectively monitor the misconducts of local government officials.Existing researches focus on the institutional significance and effectiveness of CEI,ignoring the strategic response behaviors of local government’s environmental governance behaviors at specific time or under special policy conditions,which makes a poor understanding of the environmental governance mechanism.Meanwhile,prior studies did not notice the potential of CEI in promoting the industrial upgrading effect.Different from the prior researches,this dissertation establishes the theoretical framework and conduct empirical analyses on environmental governance and industrial upgrading effect at the city and firm level,from the new perspective of government-firm collusion,and provides new insights and evidence for the existing studies.Based on the characteristics of political centralization and environmental decentralization in China,this dissertation considers the motivation and choice of local government officials who are strongly motivated by political promotion,as well as are inclined to collude with polluted firms to strategically control pollution towards the missions of economic growth and environmental governance in the promotion tournament.By making a breakthrough at investigating the mechanism effect of CEI based on the perspective of government-firm collusion,this dissertation proposes that polluting firms will conduct temporary emissions reduction strategy or a long-lasting environmental pollution mitigation.According to the problems of information asymmetry and regulation capture of the environmental decentralization management system,a principal-agent model of collusion theory is constructed.The intensity of CEI is incorporated into the model,and the influence mechanism of the degree of government-firm collusion on the decision-making of government departments and local polluting firms is discussed.Theoretical results find that CEI is conducive to reducing environmental pollution.When the intensity of inspection is small,it can only bring falsely controlled governance under the jurisdiction of “on-sited production reduction-restoration afterwards”.The higher the degree of collusion between government and enterprises,the more obvious the strategic emissions reduction.Only when the intensity of inspection reaches a certain level can the collusion between local governments and enterprises be reduced,and the collusion behavior be broken.Polluting enterprises will be forced to choose cleaner production to achieve industrial upgrading and green development.In terms of the empirical research,this dissertation first examines the impact of CEI on environmental governance at the region and enterprise levels,and then further examines the internal mechanism of strategic pollutant emissions caused by government and enterprise collusion.Using the air index data of the prefecture-level cities and concentrations of emissions of mainly controlled enterprises in China,this dissertation examines the environmental governance effect of CEI.The results show that during the first round and“looking-back review” period,air quality is significantly improved,but the "looking review" is with stronger inspected effect on air quality improvement.At the same time,the test results of different possible interference factors are considered to ensure the robustness of the empirical conclusion.The heterogeneity test results of regional dividing groups show that the promotion effect of CEI on urban air pollution improvement has different performances under the influence of different external environments.Furthermore,through the influencing mechanism of conspiring to government and enterprises,the inspection found that air pollution rapidly rebound after the first round of environmental inspection.There is evidence that enterprise apply a strategic behavior of restricting on production activities under the inspection period and produce more after the end of the inspection.The dissertation also finds that the improvement of environmental quality of the first round of environmental supervision was due to the strategic emission reduction of “reducing production during supervision period and recovering after supervision”,and the environmental pollution showed obvious rebound effect after the departure of the supervision group.The higher the degree of collusion between government and enterprise,the more obvious the trend of retaliatory rebound.The“looking-back review” has a stronger deterrent to local governments and polluters in their jurisdictions,forcing them to produce cleaner products and reduce pollution emissions,leading to the long-term improvements in environmental quality.Further,this dissertation empirically tests the industrial upgrading effect of the first round and the “looking-back review” of CEI.By solving the SBM-DDF productivity calculation model with Matlab,the green total factor productivity of cities and enterprises are taken as the indexes of industrial upgrading.Additionally,the long-and short-term industrial upgrading effects of CEI are deeply investigated from the regional and micro levels,and we also discuss the moderation effect played by local government-enterprise collusion.The study found that the first round of CEI did not promote the upgrading for firms and industrial green development,but the “looking-back review” could force enterprises to carry out cleaner production by increasing environmental protection expenditure and technological innovation,and promote enterprises’ upgrading and regional industrial upgrading.The study also found that the enterprises and regions with lower degree of collusion between government and enterprises will have the first mover advantage in the power of cleaner production transformation.Under the pressure of the “looking-back review” from the central environmental inspectors,they will be more likely to realize the long-term mechanism of high-quality environmental and economic development.Finally,we put forward the corresponding policy recommendations and possible future research directions according to the research conclusions.Specific policy suggestions are listed as follows: First,to eliminate the possibility of collusion between local government and local firms from the perspectives of external environment and internal incentive.Second,local governments should change their awareness of environmental protection and take the initiative to be responsible for pollution control.Then,it is essential to explore the establishment of a from-the-bottom-to-up new model central environmental inspection for policy makers and optimize the environmental governance system with more supervision tools.