Command and control policies are widely used in both developed and developing countries. However, the command-and-control policy, represented by the responsibility system for environmental targets, was created in China. The policy assigns emission reduction targets to local governments and links official promotions to emissions reduction performance. How this policy guided companies to reduce emissions has not yet been explained in detail. Therefore, this paper analyzes the impact of the total pollution control policy (TPCP) on corporate pollution reduction in China.
The paper uses the two-way fixed effects model to evaluate the impact of total pollution control policy (TPCP) on corporate pollution reduction in China. We focus on the critical pollutant emission reduction target policy formulated during the 11th and 12th Five-Year Plans. We use the Chinese industrial enterprise database and city-level data from 2006 to 2014. The paper constructs emission reduction targets at the prefecture-level cities based on the provincial emission reduction targets and the pollution emissions of each prefecture-level city.
Our paper finds that TPCP significantly reduced enterprises’ sulfur dioxide emissions and chemical oxygen demand. The TPCP promoted corporate emission reduction through specific target allocation and official evaluation incentives. Specifically, local governments increased investment in pollution control and enterprises strengthened end-of-pipe control. However, enterprises also decreased pollution by reducing output. Heterogeneity analysis shows that the stronger the policy implementation and the more stable the policy, the better the emission reduction effect of enterprises.
Our paper proves that emission reductions can be achieved by total pollution control policies combined with promotion incentives. Compared with the existing total pollution control policy, the TPCP not only assigns clear emission reduction targets to local governments but also incorporates emission reduction results into the promotion evaluation system of local officials. This paper proposes to improve the pollutant emission trading mechanism, realize cross-regional production compensation and incentivize green innovation of enterprises. This provides a practical policy reference for optimizing the design of TPCP and sustainably driving corporate emission reduction.
