A Study On The Relationship Between Fiscal Decentralization And Environmental Interests

China’s economy has witnessed a continuous rapid growth in the past three decades; meanwhile, the environmental problem which concerns every resident has become increasingly prominent. The impact of environmental damage has won more concern. After solving the problem of food and clothing, people pay more attention to the environment issues and the environmental interests of themselves. The concern of environmental interests inspired us to study the factors that affect the environmental interests.Since the founding of PRC, the fiscal system has gone through a series of exploration and adjustment. A Chinese-style fiscal decentralization system has been generally formed, since the tax system reform in1994. The fiscal decentralization and political centralization system has promoted the competition among local governments. To build a prosperous economy, the local government officials can win not only tax revenue, but also the opportunity to move up their career ladders. For the reason of strong externality, the local governments often neglect the service of public good, among which is the environmental interests.Then the article describes the status quo of China’s environmental interests. We enumerate the expected target on resource and environment listed on the12th Five-Year Plan. We also present the environment-related fiscal policies on environment.In the empirical research section, we examine the effect of fiscal decentralization on major pollutant emissions using the panel data from1995to2011. Fiscal decentralization has significant positive effect on the volume of industrial solid wastes produced, industrial waste gas emission and sulfur dioxide emission by industry. And the effect is different among east, central and west region of China. The government officials of the central and west region tend to sacrifice environment for the economy growth.Then we analyze the impact of fiscal decentralization on the investment completed in the treatment of industrial pollution. The result is that the investment decreases with the rise of fiscal decentralization degree. The result verifies the previous conclusion, for that the local governments tend to neglect the environmental interests, instead of increasing investment on pollution treatment and pollutant emissions inhibiting.To protect the environment and promote the environmental interests, we need to improve the fiscal system and the performance evaluation standards for the local officials, thus impelling the local government officials to value environmental interests. We also need to reform the Hukou system to promote population mobility. We should strengthen environmental regulation, and especially prevent the central and west region turn to pollution haven.