| Beyond years of effort with command-and-control measures on pollution regulation,China has been committed to policy innovations with environmental economic tools such as pollution trading and taxation,which are merited as cost-effective in approaching discharge abatement.As a localized policy experiment,recently a "Pay for Permit(PfP)" policy was initiated within the Tai Lake Basin in Jiangsu province.Initiated by the provincial government in 2008,this program required firms pay for pollution permits,which were allocated to each enterprise based on pollution discharge historical discharge records.Charging for a much higher price than the existing pollution levy system,this policy was supposed to create a strong motivation for pollution discharge abatement,since firms would be motivated to reduce pollution discharge when the permit price exceeds their marginal abatement cost.Yet whether it indeed works in practice still remains to be seen.In this research,I applied the difference-in-difference estimator to test the effect of PfP policy in promoting pollution abatement of enterprises.With balanced firm level panel data in period of 2007-2010,I found that the PfP policy significantly reduced the COD discharge with a control group of firms in areas other than Jiangsu Province within Tai Lake Basin.This result is robust over several tests.Through more detailed analysis,the PfP policy turns out to affect the end-of-pipe abatement but not input substitution;the scale has a positive effect on the policy effect so that the larger a firm,the more it would abate because of the PfP policy.Yet the ownership doesn't differ the policy effect,falsifying the assumption that the enforcement would be weaker for state-owned firms since they have more bargain power.It implies that the price tool has the potential to be effective in promoting pollution abatement,although its impact on local economy and the possible pollution transfer issue are still to be estimated for the comprehensive policy evaluation. |
PDF Full Text Request