The Changing Face of China’s Environmental Governance: and Central-Local Relations Dali L. Yang Professor of Political Science Faculty Director, Uchicago.

The Changing Face of China’s Environmental Governance:and Central-Local Relations

Dali L. Yang

Professor of Political ScienceFaculty Director, Uchicago (Beijing)

Director, Center for East Asian StudiesThe University of Chicago

What Is the Chinese Development Model?

• Economist: productivity gains due to transition from agriculture (underemployment) to non-agricultural activities (industrialization/ urbanization); high savings, high investment rapid growth even if TFP gains have been limited

• Trade economist: welfare enhancing trade from self-reliance (autarchy) to specialization both domestically and internationally; the world’s top trader

• Demographer: demographic transition/ dividend; draconian population control policy has the effect of reducing dependency ratio, for now (but wait till a decade from now)

The Chinese Development Model

• Political Economist: authoritarian political stability– In particular, while property rights

protection is not perfect (no country is!), the CCP has become increasingly business-friendly; efficiency grains from improving property rights protection

– Keep labor quiescent and labor costs down—CCP--making China safe for capital (privatization of SOEs and FDI)

let Marx and Mao turn in their graves

The Costs and Advantages of the Chinese Development Model

— Government ownership of urban land (and the right to convert agricultural land to non-agricultural use)—good for developers, local governments eager for revenue, and investors

– labor’s share of GDP has lagged other countries—as long as wages continue to rise with GDP growth, this can keep going but this constrains consumption

– under-pricing of labor, land, and environment (as reflected in foreign exchange rate)

The Advantages…

• Attract investments to take advantage of cheap labor, cheap land, and cheap environment World’s workshop

• Learning by doing; Agglomeration and spillover effects: backward and forward linkages

Increasing Returns

• Once the manufacturing comes, it’s not just cheap labor, but also R&D and others (regional headquarters) that elevate pay levels

• In general expanding Chinese market and growing wealth allows Chinese to move up product cycles/production chains—China becomes more competitive as an economy

China: urban and rural populations

20

40

60

80

Pe

rce

nt

1980 1990 2000 2010year

Urban

Rural

China advances but…

• distributional effects in wealth; who wins and who loses (both absolute/relative)

• Not just in jobs but who loses the land, who enjoys the urban highways and…

• Who are the victims of environmental pollution? – Air, water, heavy metals (esp. lead)

poisoning

National Stadium: Bird’s Nest (seats 100,000)

Blood, Sweat, and GDP

Hebei Province Shexian Tianjin Iron and steel plant ( 河北省涉县天津钢铁厂 ) is a heavily polluting company. Company scale is still growing, seriously affecting the lives of local residents. March 18, 2008. Photo Lu Guang.

Guiyu, Guangdong province, ( 广东省贵屿镇 ) rivers and reservoirs have been contaminated, the villager is washing in a seriously polluted pond. November 25, 2005. Photo by Lu Guang 卢广 http://www.chinahush.com/2009/10/21/amazing-pictures-

pollution-in-china/

Anhui Province Cihu Chemical Industry District ( 安徽省慈湖化工园区 ) built a underground pipe to discharge wastewater into the Yangtze River. The wastewater sometimes is black, gray, dark red, or yellow, wastewater from different chemical factories has different colors. June 18, 2009

南方都市报 2009-05-09

( reported) Cancer Villages in China

In Shexian Village, Hebei Province, ( 河北省涉县固新村 ) the existing cancer patients are more than 50 people and more than 20 cancer patients die each year. March 18, 2008. Photo Lu Guang

Patterns of Economic Growth and Environmental Degradation

• The environmental economist: – Kuznets curve, inverted U shape

• Growth is associated with more pollution initially

• But wealthy countries eventually turn to effectively tackling pollution

• Most wealthy countries, UK, US, Japan, have gone through this process

• On this account, less developed countries find it hard to learn from the lessons of the past and cannot avoid repeating what the developed economies have gone through—China would be no exception

How Will China Do?

• Will China follow in the footsteps of the developed countries?

• Or could China be an exception?– sheer scale– limited environmental carrying

capacity (quote MEP official)– at a time of accelerating global climate

change– Features of the Chinese system

Signs of progress amid rising pollution

Institutional Evolution

• August 1973, first National Conference on Environmental Protection

• May 1974, the State Council Leading Group on Environmental Protection 国务院环境保护领导小组

• 1979, establishment of Environmental Protection Bureau

• 1982, EPB as part of Ministry of Urban/Rural Construction and Environmental Protection

• 1988, separate 国家环境保护局 SEPA• 1998, SEPA upgrade to status of 国家环境保护总局• 2008, Ministry of Environmental Protection

(cabinet status)A new era for environmental regulation in

China?　　　

Where Does Regulatory Capacity Come from?

—the U.S. Experience• US: Richard Nixon, Reorganization Plan No. 3 of 1970 to

Establish the Environmental Protection Agency and the National Oceanic and Atmospheric Administration– The federal EPA alone has more than 17,000 dedicated

staff in 14 headquarters offices in Washington, D.C., 10 regional offices, and more than a dozen labs.

– More than half are engineers, scientists, and policy analysts.

– The budgetary resources for FY 2008 totaled $7.472 billion or $25 per person.

The U.S. Regulatory State

• Federal EPA complemented by EPAs in the states. The state EPAs are separate from the EPA and some, e.g., California EPA, enforce state laws that have stricter requirements than federal laws.

• A system of laws; important anti-pollution laws preceded the EPA

Year   Law  

1899 Refuse Act

1948 Federal Water Pollution Control Act

1955 Air Pollution Control Act

1963 Clean Air Act (1963)

1965 Solid Waste Disposal Act

1965 Water Quality Act

1967 Air Quality Act

1969 National Environmental Policy Act

1970 Clean Air Act (1970)

1970 Occupational Safety and Health Act

Major US Environmental Laws Before the EPA

Making Sense of the Chinese Regulatory Environment

• Growing awareness of environment issues and leadership commitment

• Should countries that are part of international trade agreements be required to maintain minimum standards for environmental protection? – China: 85 % Yes

• Incentives: growth vs. environment for a developing economy

Central-Local Relations and Environmental Enforcement

• China: Center vs provinces/local authorities (externalities and prisoner’s dilemma)

• The environmental administration’s weak regulatory authority as reflected in • Small MEP staff in Beijing and few

capabilities• dependence on local authorities

Testing Stations

Year Total Central Provincial Pr/Muni County

2007 2399 1 39 347 2012

Capacity Distribution between Central and Local Authorities

Central-Local Relations and Regulatory EnforcementThe conventional wisdom

• Divergence of interests; principal-agent problems coupled with prisoner’s dilemma issues

• Corruption, esp. by local regulators• Fraud, by firms• 上有政策，下有对策 The Center has its

policies, the locals have their counterstrategies

Growing the Fingers of Regulatory Capacity: The Center

• MEP needs independent capacity. Establishment of Regional monitoring centers for MEP is a good step but these centers have little enforcement power.

• Experiments with vertical administration –but focused on intra-provincial relations.

Accountability and Local Government Behavior

• Experiments with vertical administration –but focused on intra-provincial relations. Overall, as the recent lead poisoning cases indicate, local authorities often privilege growth for the sake of revenue.

• Local experiment with environmental police (Kunming and a small # of other places) 环保警察 but still likely to be constrained by local protectionism.

Hierarchy and Accountability

• Nomenklatura system—performance/promotion have led officials to privilege growth that may be detrimental to the environment

• 2008 ： Ministry of Environmental Protection cabinet status

• Recently environment has become a factor in evaluation (though not 一票否绝 ）

• MEP Environmental impact assessment: collective accountability: 区域限批； 流域限批

promote energy savings and emissions reduction ( 节

能减排 )• Current initiatives to promote

energy savings and reduce emissions ( 节能减排 ) points to Chinese government’s ability to promote environmental protection if it gets serious about the issue.

• Set up competition among local authorities, rank them, publicize the results, and force local officials to take action

A virtuous cycle

• Realignment of central policy and local incentives

• Laggard provinces seek to catch up: Yunan, 43 new water treatment plants by year-end; Shanxi, praised for negative growth

Performance indicators

Goals: energy intensity (-20%); emissions (-10%) for 2006-2010

2006: Energy Intensity: -1.2% (target -4%)COD, +1.2% ; SO2 , +1.8% (target -2%)

2007: Energy: -3 %COD, - 3.1; SO2, - 4.7%

2008: Energy: -4.7%COD, -4.4%; SO2, -6% now on track

Implications

• A transformation in environmental governance

• capacity; and desire and capacity to do more

• Hu Jintao speech commits China to making substantial reductions but does not go beyond what China is already doing

• Would the US rise to the occasion?

Local Governments, Public Protests, and Environmental Protection

• Massive increase in college education• More public awareness

• more people capable of articulating their interests--Not in my neighborhood– Xiamen PX project protests– Shanghai Maglev protests– Recent lead poisoning protests

• Also environment protests vs stability lead to more locl attention to environmental protection

People form Fanjiazhuang ( 范家庄 ) are ready to submit a complain filled with their fingerprints, to seek compensation for pollution damages. March 19, 2008. Photo by Lu Guang

The Limits and Promise of Civil Society

• Social demands/protests have served as constraint on local authorities, but only in a limited manner despite large number, people don’t protest easily.

• Some scholars have also emphasized the role of NGOs in effecting change in environmental policy, especially in the case of the Nujiang Dam

• Exaggerated role, esp. because NGOs have to have government sponsors. Indeed, MEP has sought to enlist the assistance of NGOs.

• Role of elites (environmental impact assessment at SEPA)—e.g. Nujiang.

Can Fines Deter Polluters?

• Not so far. Many polluters pay the fines as part of the cost of doing business. Cheaper than installing and operating pollution control equipment.

• Costs of Environmental Protection: Even some municipal water treatment operate below capacity, even not at all, to save on operating costs.

Raising the Penalties for Polluters

• Water Pollution Prevention and Control Law (2008 amended) raises amount of fines to 500K, plus 50% of responsible individual’s income [issues of calculation]

• Secured the use of administrative detention for polluters (2008-07) (NPCSC Law Committee

• Formal jail terms are rarely sought.

The Limits and Promise of Environmental Law

• US model: strong federal bureaucratic enforcement (EPA) coupled with empowerment of civil society to resort to law to fight corporate polluters (tort law)

• China: local authorities tend to favor GDP growth and make legal enforcement difficult. Generally weak legal system for environmental protection

• Conventional paradigm: victims of pollution: petition—protest—petition– The politicization of environmental protection;

weak system of laws calls for more political intervention. Not just in environmental protection

Chinese Environmental Law: in whose interest?

• Torts– Presumed innocence for polluters!

• Hard for plaintiffs to sue polluters• 刘德胜 v 吉首市农机局— Liu dies from cancer

Liu Desheng vs Jishou AMB

http://review.jcrb.com/zywfiles/ca585619.htm

Liu Desheng’s Odyssey

• 1998: administrative appeal. Fifth appeal rejected in 2003.

• Lawsuit filed in 2002. Lost first trial in 2002.

• Three more appeals, including SPP appeals to SPC

• Liu Desheng died of cancer November 2006

• Final trial at Hunan Higher People’s Court, 2007– Final judgment—still against Liu

Desheng

2009: New directions in Chinese environmental litigation?

• Ji Zhiqi( 纪执歧 ) v. Chengyuan Toiletries 沧州成原化妆用具有限公司 (2009)– Qing County People’s Court puts burden of proof on

defendant and finds for plaintiff. Defendant was held partly liable and ordered to pay damages for cancer case.

– Limits: relatively modest penalty; civil law system and this case doesn’t set precedent. May have been helped by the fact that defendant was Korean WFOE

– Yet inspiring to others and may have demonstration effect– Recently: the long-standing tadpole case concluded in

favor of plaintiffs against polluters

New directions?

• Yancheng Procuracy v. Hu Wenbiao ( 胡文标 )and Ding Yuesheng ( 丁月生 ) [2009]

• Invocation of art. 115 of amended Criminal Law 危害公共安全罪 第一百一十五条　放火、决水、爆炸以及投放毒害性、放射性、传染病病原体等物质或者以其他危险方法致人重伤、死亡或者使公私财产遭受重大损失的，处十年以上有期徒刑、无期徒刑或者死刑。　　

Yancheng Procuracy v. Hu Wenbiao ( 胡文标 ) and Ding Yuesheng ( 丁月生 )

• Hu was found responsible for the discharge of large amounts of untreated waste water. He knew that waste water should not be released. More than 200,000 people lost access to tap water for 66 hours.

• Hu sentenced to 10 ten years in jail for his responsibility. Currently under appeal.

• Does this use of Art. 115 signal a new trend? Debate over appropriateness of judgement.

Environmental Law and the Public Interest

• Public interest cases ： ACEF• Local procuracies (public prosecutors).• Environmental courts 环保法庭

– In a small number of cities in Guizhou, Jiangsu, Yunnan, Liaoning (Shenyang)

• However, recent crackdown on rights lawyers; refusal to accept legal cases by the courts (Party). China is not going to follow in US steps

• Thus back to politics

The Struggle for Human Dignity

• Top Down: Party leadership emphasis on human-centered development ( 以人为本 )—scientific outlook on development in 17th Party Congress Report

• Bottom Up: the spread of universal values in a more educated society; the internet enables virtual communities to express outrages at injustices (e.g., the brick kiln slave labor cases) – in spite of debate on universal values in China

• External Pressure: International demands/standards

Risk, Governance and the State

• Enactment of new Food Safety Law (June 1, 2009); Improvements in enforcing product quality and food safety laws;

• Reduction in coalmine fatalities• Cleanup at SFDA (Zheng Xiaoyu)• Establishment of Ministry of Environmental

Protection• Spread of minimum livelihood protection for

both urban and rural populations• Proposed healthcare reforms to promote

universal access to healthcare