Costs and Benefits of China’s Environmental Regulation

LI Gang1, MA Yan2 and YAO Leilei1

1Institute of Industrial Economics, Chinese Academy of Social Sciences
2International Statistical Center, National Bureau of Statistics (NBS)

Abstract: This paper examines the current costs, benefits and intensity of China’s industrial environment regulation, as well as the path of regulatory enhancement. Regulatory intensity has been on the rise since 1997. The intensity was only 43 in 1997 and then reached 68 by 2007. This paper for the first time compares the treatment costs at the front and rear ends of pollution chain, employs the concept of regulatory benefit multiplier, and calculates the benefit multipliers for different pollutants. Results indicate that enhanced environmental protection since 1997 makes social and economic sense, particularly for the front end treatment of various pollutants since 2004, which have considerable economic benefits. After comparing the benefit multipliers, we have prioritized the pollutants for regulatory consideration: environmental regulation should be made tougher for waste water first, and then dust and fumes, followed by SO2 and lastly CO2. This will help to achieve the best environmental outcomes while incurring no additional economic costs.

Key Words: protection of industrial environment, environmental regulation, environmental cost, competitiveness

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