China Policy Journal Volume 1, Number 1, Fall 2018 | Page 14

Water-Pollutant Discharge-Fee System in China
lution in a cost-effective way, there
is widespread debate on whether the
economic-incentive approach is more
suitable than a command-and-control
policy in developing countries (Barde
1994; Blackman and Harrington 2000;
Panaiotov 1994; Motta, Huber, and
Ruitenbeek 1999; Wolverton and West
2005). The advantages and disadvantages
of such an approach have been
analyzed in various situations. Bell and
Russel (2002) indicate that developing
countries do not possess the conditions
for the implementation of market-based
strategies. While constructive efforts
are made to practice the fee system in
China to control water pollution, even
its stimulating effects are not that obvious
and there exists deviation from the
policy’s main purpose. Especially, the
fee design impedes enterprises from reducing
emissions: theoretically, the optimal
charge level should be set at the
point at which the marginal control cost
equals the average marginal loss. If the
pollutant-fee standard is higher than
enterprises’ cost on pollutant reduction,
the profit would drive enterprises
to pursue technological innovation and
device upgrades for emission reduction,
or simply to choose to pay for pollutant
emission rather than investing in
pollution control, so that the incentives
of the water-pollutant discharge-fee
system would ultimately become ineffective.
As difficult to define each pollutant’s
marginal loss, the average cost
on pollutant control has been adopted
under technical assistance from World
Bank’s research of The Design and Implementation
of Pollution Discharge
Fee in China in 1994, instead of calculating
pollutants’ marginal treatment
fee. Consequently, the cost of illegal
discharge is lower than that of abiding
by the law, which leads to the strange
phenomenon of active contaminating
payment versus passive improvement
measures on pollution reduction.
2.2.2. Low Efficiency
The process of collecting the pollutant
discharge-fee met great resistance in its
initial steps and significant percentages
of enterprises eager to obtain higher
profits consequently ignored environmental
pollution, with some even refusing
to pay the pollution fee, though
investing in the visible short-term
benefit program. Local environmental
protection bureaus are understaffed,
underequipped, and underpaid, thereby
generating a poor system-implementation
condition. The implementation
of bank transfers appeared as a
milestone in normalizing the pollution
discharge-fee collection. As disputes
between dischargers and executors
mostly occur in the disconnection and
noncompliance operation of the apply–
verify procedure, false and concealed
reports, lax law enforcement, and negotiated
charges are common. Additionally,
regulators set a single fee that
was applied to all plants, with no regard
for different levels of environmental
tolerance or the demand of the regional-development
function. In principle,
the system not only lacks flexibility but
also obstructs polluters’ adoption of
abatement technologies. Furthermore,
technical support is rarely mentioned
and grossly limited in the system’s implementation.
Disconnections within
the water-pollutant discharge-fee system,
including discharger registration,
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