Advanced Search
MyIDEAS: Login to save this paper or follow this series

Pricing industrial pollution in China : an econometric analysis of the levy system


Author Info

  • Hua Wang
  • Wheeler, David
Registered author(s):


The authors analyze China's experience with the water pollution levy, an emissions charge system that covers hundreds of thousands of factories. The levy experience has not been studied systematically, but anecdotal critiques have suggested that the system is arbitrarilyadministered and ineffective in controlling pollution. Enforcement is thought to vary widely, so that factories in different regions face different penalties for polluting. And it is widely believed that the levy provides little incentive to control pollution because official rates are below marginal abatement costs. The authors test the conventional critique of the levy system using solid new province-level data for 1987-93. Their results suggest that the water pollution levy system is neither arbitrary nor ineffective. During 1987-93, rapid development in many provinces led to sharp increases in the effective rate. Their results also suggest that the emissions intensity of Chinese industry was highly responsive to those increases, because marginal abatement costs were often lower than levy rates. And from 1987 to 1993, provincial pollution intensities fell at a median rate of 50 percent, and total discharges at a median rate of 22 percent. The results suggest several lessons for regulators in developing countries: 1) local enforcement of national standards will determine the effective price of pollution in each area; 2) the locally enforced price of pollution rises with industrial development; and 3) early in the regulatory process, industrial emissions intensity is highly responsive to changes in the price of pollution, mainly because marginal costs are often quite low in low to medium abatement ranges. In China, provincial adjustments of effective levy rates and other regulatory instruments have been sufficient to induce sharp declines in emissions intensity and reductions in total emissions from registered factories during a period of rapid industrial growth.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1644.

as in new window
Date of creation: 30 Sep 1996
Date of revision:
Handle: RePEc:wbk:wbrwps:1644

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page:
More information through EDIRC

Related research

Keywords: Environmental Economics&Policies; Water and Industry; Pollution Management&Control; Water Conservation; Public Health Promotion; Sanitation and Sewerage; Water and Industry; Environmental Economics&Policies; Pollution Management&Control; Health Monitoring&Evaluation;


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Dasgupta, Susmita & Huq, Mainul & Wheeler, David, 1997. "Bending the rules : discretionary pollution control in China," Policy Research Working Paper Series 1761, The World Bank.
  2. Sedigh, Golnaz, 2008. "Do environmental regulations reduce greenhouse gas emissions? A study on Canadian industries," MPRA Paper 10003, University Library of Munich, Germany.
  3. Stavins, Robert, 2001. "Experience with Market-Based Environmental Policy Instruments," Discussion Papers, Resources For the Future dp-01-58, Resources For the Future.
  4. Hettige, Hemamala & Mani, Muthukumara & Wheeler, David, 2000. "Industrial pollution in economic development: the environmental Kuznets curve revisited," Journal of Development Economics, Elsevier, Elsevier, vol. 62(2), pages 445-476, August.
  5. Dean, Judith M. & Lovely, Mary E. & Wang, Hua, 2004. "Foreign Direct Investment and Pollution Havens: Evaluating the Evidence from China," Working Papers, United States International Trade Commission, Office of Economics 15854, United States International Trade Commission, Office of Economics.
  6. Afsah, Shakeb & Laplante, Benoit & Wheeler, David, 1996. "Controlling industrial pollution : a new paradigm," Policy Research Working Paper Series 1672, The World Bank.
  7. Dasgupta, Susmita & Laplante, Benoit & Mamingi, Nlandu & Wang, Hua, 2001. "Inspections, pollution prices, and environmental performance: evidence from China," Ecological Economics, Elsevier, Elsevier, vol. 36(3), pages 487-498, March.
  8. Hettige, Hemamala & Mani, Muthukumara & Wheeler, David, 1998. "Industrial pollution in economic development: Kuznets revisited," Policy Research Working Paper Series 1876, The World Bank.
  9. Hua Wang & Nlandu Mamingi & Benoit Laplante & Susmita Dasgupta, 2003. "Incomplete Enforcement of Pollution Regulation: Bargaining Power of Chinese Factories," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 24(3), pages 245-262, March.
  10. Hua Wang & Ming Chen, 1999. "How the Chinese system of charges and subsidies affects pollution control efforts by China's top industrial polluters," Policy Research Working Paper Series 2198, The World Bank.
  11. Hua Wang, 2000. "Pollution charges, community pressure, and abatement cost of industrial pollution in China," Policy Research Working Paper Series 2337, The World Bank.
  12. Hua Wang & Wheeler, David, 2000. "Endogenous enforcement and effectiveness of China's pollution levy system," Policy Research Working Paper Series 2336, The World Bank.
  13. Sterner, Thomas & Hoglund, Lena, 2000. "Output-Based Refunding of Emission Payments: Theory, Distribution of Costs, and International Experience," Discussion Papers, Resources For the Future dp-00-29, Resources For the Future.
  14. Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(1), pages 147-168, Winter.
  15. Dasgupta, Susmita & Laplante, Benoit & Namingi, Nlandu & Hua Wang, 2000. "Industrial environmental performance in China - the impact of inspections," Policy Research Working Paper Series 2285, The World Bank.
  16. Clive Harris, 2003. "Private Participation in Infrastructure in Developing Countries : Trends, Impacts, and Policy Lessons," World Bank Publications, The World Bank, number 15124, August.
  17. Wang, Hua, 2002. "Pollution regulation and abatement efforts: evidence from China," Ecological Economics, Elsevier, Elsevier, vol. 41(1), pages 85-94, April.
  18. Yun Ping, 1998. "The Pollution Charge System in China: An Economic Incentive?," EEPSEA Research Report, Economy and Environment Program for Southeast Asia (EEPSEA) rr1998092, Economy and Environment Program for Southeast Asia (EEPSEA), revised Sep 1998.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1644. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.