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Do industrial pollution activities in China respond to ecological fiscal transfers? Evidence from payments to national key ecological function zones

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  • Changan Gong
  • Jianhua Zhang
  • Hao Liu

Abstract

The policy of payments to National Key Ecological Function Zones (NKEFZs), a type of instrument for Ecological Fiscal Transfers, has been introduced in China. We employed propensity score matching and difference in difference estimation to investigate the effectiveness of this policy on the reduction of industrial pollution. We found evidence that the policy had reduced pollution-intensive activity in the NKEFZs. Meanwhile, implementation of the policy had been selective. First, the downstream NKEFZs with higher opportunity costs had lower efforts to reduce industrial pollution. Because performance-based payment mechanisms neglect opportunity costs, financial stress weakens the efforts to reduce pollution. Secondly, the NKEFZs policy suppresses air-polluting industries but not water-polluting industries. Local governments may reduce only the target pollutant (chemical oxygen demand) while ignoring non-target pollutants. There may be moral hazards under information asymmetry in pollution reduction.

Suggested Citation

  • Changan Gong & Jianhua Zhang & Hao Liu, 2021. "Do industrial pollution activities in China respond to ecological fiscal transfers? Evidence from payments to national key ecological function zones," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 64(7), pages 1184-1203, June.
    • Handle: RePEc:taf:jenpmg:v:64:y:2021:i:7:p:1184-1203
    DOI: 10.1080/09640568.2020.1813695
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    Cited by:

    1. Julio López-Laborda & Andoni Montes-Nebreda & Jorge Onrubia, 2023. "Going green through local fiscal equalisation," Working Papers 2023-07, FEDEA.
    2. Sun, Hong & Cheng, Nanyang & Zhang, Renjian & Shen, Wenxing & Miao, Chunxia, 2024. "Repression or promotion? Transfer payments, ecological constraints, and enterprise development," Finance Research Letters, Elsevier, vol. 63(C).
    3. Siying Yang & Hua Bai & An Li, 2023. "A futile help: do vertical transfer payments promote haze control?," Economic Change and Restructuring, Springer, vol. 56(5), pages 3411-3436, October.
    4. Yang, Qiuyue, 2023. "Do vertical ecological compensation policies promote green economic development: A case study of the transfer payments policy for China’s National Key Ecological Function Zones," Economic Systems, Elsevier, vol. 47(4).
    5. Cheng, Yuhong & Ma, Ben & Sun, Yidan, 2023. "Does central ecological transfer payment enhance local environmental performance? Quasi-experimental evidence from China," Ecological Economics, Elsevier, vol. 212(C).
    6. Wang, Mingzhe & Huang, Hai & Xiong, Jie & Yuan, Zhe & Zeng, Keya, 2023. "Impact of ecological reserves on the local residents’ health: Evidence from a natural experiment in China," Social Science & Medicine, Elsevier, vol. 336(C).
    7. Meiyu Liu & Guofeng Zhang & Du Yang, 2022. "Do the National Key Ecological Function Zones Promote Green Development? Evidence from the Yanshan–Taihang Mountainous Area in Hebei Province, China," Sustainability, MDPI, vol. 14(16), pages 1-19, August.

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