A Study About The Effectiveness Of Government Environmental Regulation

Based on the economics of regulation, environmental economics and new institutional economics, this thesis will discuss the major factors that impact the effectiveness of environmental regulations through theoretical analysis, at the same time analyzes the effectiveness and problems of China environmental regulation by empirical analysis. The present study aims at providing the theoretical basis and policy recommendations for the reformation of China environmental regulation system and the improvement of environmental regulation effectiveness.The effectiveness of government regulation, including the effect and efficiency of the regulation, reflect the approximation between the regulatory results and the level of regulatory objectives effective. The effect of regulatory measures the execution of regulatory objectives while the efficiency of regulation refer to the cost for achieving a specific objective of the regulatory system, that is, the comparison of benefit-cost of regulation. The effectiveness of government regulation requires not only effective but also efficient. According to traditional theory of regulatory economics the effectiveness of government regulation is based on three assumptions: regulator pursues the maximum of social welfare, regulator has complete information, and regulator is a fully rational person. However, the regulator is not a "moral man", but "economic man" in reality. The goal of the regulator is not seeking the maximum social benefits but achieving the maximum self-interest. Further the regulator and regulatee has asymmetric information, under this circumstance, the regulator who has the discretionary power will distort the regulatory to seize their maximum interests.For an effective government regulation, the awry behavior of government regulation must be corrected. According to the new institutional economics theory, the main act is the product of a specific system environment, and certain behavior is bound to certain system. Accordingly, we believe that the ultimate deciding factors which affect the effectiveness of regulation lie in the institution behind the behavior that is the government regulation system. Government regulation system is made up of regulatory legislation, regulatory agency, regulatory object, and regulatory policy. The regulatory legislation provides the legal basis for government regulation, and it is the first step in the process of regulation. The regulatory agency act as regulators, their nature and behavior characteristics are closely related to the effectiveness of regulation. The regulatory policy is the specific ways to achieve regulatory objectives. Different ways of regulation have different characteristics and bring different effects.The empirical analysis shows that the intensity of environmental regulation in China is increasing from 1996 to 2008. Though the cost of environmental regulation is increasing, the effect of it is not satisfactory. Based on the results of empirical analysis, we claim that the increasing environmental problems in China are due to the ways of economic growth we took and the faulty environmental regulation system in operation. There are mainly four problems in China environmental regulatory system. Firstly, the institutional obstacles; secondly, the environmental legislation does not reflect the concepts and principles of sustainable development, going into some "heavy economic, light green," "treatment after pollution" errors; thirdly, the environmental regulatory agency lacks independence, thus it is difficult for them to resist local protectionism. The independence is the key element for environmental regulation agency, it decides whether the regulator could safeguard the public interests or not. At present, China environmental regulation agency lacks independence on both human resource and financial support, especially at the local area. To meet the local pursuit of GDP growth and the fiscal revenue growth, the environmental regulation agency which leaches on to the local government give weak regulation even no regulation on the pollution of local enterprises. Fourthly, the command control regulatory way have the dominate place in the environmental policy.Based on the experience of developed countries and take existing problem in China into consideration, we claim that the main methods to improve the effectiveness of China environmental regulation are: establish an effective environmental regulation system by deepening system reform; improve the quality of environmental legal system; establish effective monitoring and restraint mechanisms to regulate regulator; implement the multi-regulatory measures.