Effect of Environmental Courts on Pollution Abatement: A Spatial Difference-in-Differences Analysis
The construction of environmental rule of law can be broadly categorized into two aspects: the development of regulations and the strengthening of judicial capacity.
This paper seeks to establish a quasi-experiment using the policy experiment initiated by Chinese environmental courts. The primary objective is to employ the difference-in-differences (DID) method, discerning the causal impact of reinforcing environmental justice on pollution control. However, the presence of significant neighbourhood effects from environmental courts may influence both the cities with environmental courts and adjacent cities without environmental courts, violating the DID method’s assumption of individual intervention. To address this challenge, we incorporated the neighbourhood effects of a spatial meteorological technology control policy. Subsequently, a spatial difference-in-differences (SDID) model was constructed to accurately identify the effect of environmental courts on pollution abatement. To further enrich our understanding, this paper explores heterogeneity and mechanisms by leveraging multiple channels and original databases, collecting panel data from 285 prefecture-level cities and firms in China, spanning from 2006 to 2022.
This paper contributes on several fronts. First, by utilizing data from prefecture-level cities in China, it establishes a quasi-natural experiment through the implementation of environmental courts. It assesses the impact of environmental courts on pollution abatement in China and employs mathematical models to probe the underlying mechanisms. This empirical analysis offers valuable insights for resolving contentious issues arising from the practical implementation of environmental courts in China. Second, recognizing the proximity effect of policy implementation, this paper employs the SDID model. This model effectively distinguishes the impact of environmental courts on pollution abatement within a region and in neighbouring areas. This enhances the depth of our understanding regarding the operational effects of environmental courts, presenting innovative methodologies and empirical insights for the quantitative analysis of policy effects. Third, we verified the mechanism of environmental courts on promoting regional pollution control from the perspectives of the government, the public, and firms, clarifying the pathways through which environmental judicial enforcement functions and providing valuable supplementary insights into the mechanisms of environmental judicial effectiveness.
2. Institutional Background
Environmental rule of law has become a crucial means for all countries to protect the ecological environment. Compared to other regulatory means, environmental rule of law has more potent binding force and deterrent power. In November 2007, China established its first environmental courts, the Environmental Protection Tribunal of the Intermediate People’s Court of Guiyang, and the Environmental Protection Tribunal of the People’s Court of Qingzhen City, simultaneously. The Guiyang City Intermediate People’s Court subsequently released “designated jurisdiction court cases accepted by the environmental protection scope of the provisions concerning the trial of the destruction of environmental resources” and other guidance documents. These documents specify that the two levels of courts are responsible for the cross-regional trial-related scope of environmental concerns in criminal, civil, and administrative first-instance cases related to environmental issues, as well as relevant enforcement cases. China took the lead in consolidating three categories of environmental cases into one trial and exercising centralized and exclusive jurisdiction over them. Consequently, the proliferation of pilot environmental courts expanded nationwide, significantly contributing to the promotion of the rule of law in China’s environmental governance. The formalization of the environmental court system in China took place in July 2014, marked by the announcement from the Supreme People’s Court of the People’s Republic of China regarding the establishment of the Environmental and Resources Tribunal.
3. Theoretical Model and Hypothesis
Assuming there are two local governments, referred to as a and b, engaging in a repeated random game. After implementing (or not) environmental governance policies, the reduction (or increase) of regional pollutant emission of a and b is presented by () and (), respectively. Pollution control costs are represented by and , respectively. The probabilities of governments a and b implementing environmental governance policies are n and m, respectively. Assume the externalities from government a to government b and vice versa are represented by and , respectively, and a reward M is given for implementing environmental governance policies, while a punishment F is given for not implementing them, and F > M. is the weight of environmental performance in performance evaluation (). Based on the above assumptions, the dynamic equation for the environmental governance behaviour of government a and government b is as follows:
Establishing an environmental court will improve the government’s environmental control and encourage a “race to the top” among governments to achieve better environmental control, ultimately promoting pollution control in both the local and nearby areas.
where represents the probability that a firm chooses cleaner production technology and meets the following conditions:
where and . Firms face a cost–benefit analysis when deciding whether to adopt cleaner production technology. If the cost of a potential lawsuit resulting from less clean production technology exceeds the cost of transitioning to cleaner production technology, the firm will choose the latter; otherwise, it will continue polluting. Therefore, the consumers’ optimal choice is:
The expected earnings of firms that adopt cleaner technology and less clean technology are, respectively: and .
Establishing environmental courts can enhance public participation in environmental protection, increase enterprise expenditure on pollution control and promote pollution control not only in the local area but also in neighbouring regions.
The effect of the environmental court’s pollution control is more pronounced in the local area than in neighbouring regions, and it gradually decreases as the distance from the court increases.
This paper utilizes a quasi-experiment framework to identify the impact of environmental courts on pollution abatement, considering the proximity effect of policy implementation. We focus on municipal-level samples as the research subjects and employ a spatial difference-in-differences model to identify the pollution abatement effect of environmental courts in the pilot cities and adjacent cities, as well as exploring heterogeneity and mechanisms. Our results demonstrate that environmental courts have effectively reduced industrial wastewater emissions, sulphur dioxide emissions, and nitrogen oxide emissions. After considering the proximity effect of the policy, the pollution abatement effect of environmental courts is more significant. Environmental courts have a stronger effect on pollution abatement in cities with stronger environmental regulations, higher economic agglomeration, and a higher level of openness. Mechanistically, environmental courts promote the government’s environmental supervision and public participation in environmental protection, and expenditure on environmental governance by firms.
The research presented in this paper demonstrates that the implementation of environmental courts, which symbolizes the enhancement of environmental justice, has the potential to transcend the territorial governance model of pollution control. This, in turn, can facilitate the advancement of the overall environmental governance level and improve the local government’s enforcement of environmental laws, foster the public’s participation in environmental protection, and incentivize firms to enhance their pollution control endeavours. Consequently, it can lead to the establishment of an environmental governance system where the public is an active participant. However, it is crucial to acknowledge that the overall regional pollution control effect of enhanced environmental justice must be reinforced by various measures, such as strengthening environmental law enforcement, promoting urbanization, and deepening reform. Hence, to promote pollution control in the future, it is necessary to deepen the reform of the judicial system and encourage the establishment of cross-regional environmental courts to reduce local obstacles to environmental and resource cases. Additionally, improving the government’s environmental law enforcement can form a virtuous circle between administrative law enforcement and environmental justice. It is also essential to promote economic agglomerations and regional economic integration and establish a coordination and cooperation mechanism between regional governments. Continuing to deepen reforms and increase economic openness, while being open and inclusive to all parties’ opinions and suggestions, is crucial. Optimizing the processes associated with environmental justice is also necessary to achieve the maximum effect of environmental justice on pollution control.
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