Does environmental decentralization aggravate pollution emissions? Microscopic evidence from Chinese industrial enterprises

Abstract

Rational division of environmental management power among governments is a necessary institutional support for speeding up the realization of green development goals. Based on the combined microdata of China Industrial Enterprise Database and China Enterprise Pollution Database from 2000 to 2012, the effect of environmental decentralization on enterprise pollution emission is empirically examined in this research. Results show that Chinese-style environmental decentralization, especially environmental supervision decentralization and environmental monitoring decentralization, significantly aggravates the pollution emissions of enterprises. Moreover, the impact of environmental decentralization on enterprise pollution emissions has regional and enterprise ownership heterogeneity. The mechanism test results denote that the production scale effect, energy structure effect and pollution control effect are the micro mechanisms of environmental decentralization aggravating the pollution emission of enterprises. This research confirms the existence of "race to the bottom" among local governments in China and provides evidence support and beneficial enlightenment for the vertical reform of the environmental management system.

Keywords: Environmental decentralization; Micro mechanism; Pollution emissions; Race to the bottom.