China Policy Journal Volume 1, Number 1, Fall 2018 | Page 16

Water-Pollutant Discharge-Fee System in China
ket-based instrument is an incentive by
which to correct environmental externality
and its implementation needs to
be combined with related policies. The
diversity of water resources in America
determined the different states’ water
policies. Empirical study support that
water-pollution regulations had significant
effects on firms’ production in water-polluting
industries (Chakraborti
2016; Chakraborti and McConnell 2012;
Rassier and Earnhart 2015; Shimshack
and Ward 2008). The water policy and
water quality mutually influence each
other and a reverse effect has been observed
in that the decline of water quality
stimulates the stringency of the permitted
discharge level, leading plants
to consequently reduce their pollution
emissions (Chakraborti 2016). Significant
results in water-pollution control
were achieved in developed countries
that rely on well-defined property
rights. The comments summarized that
using market instruments and prices as
the primary instruments to control pollution
in developing countries is fragmented,
due to the fact that the range
of political, institutional, and administrative
rules, practices, and processes
is powerless in handling market-based
strategies. In India, water governance is
a challenge at almost all scales, whereby
the states’ limited power not only weakens
their capacity to solve transboundary
water issues but also makes them
powerless in the field of domestic water
use and pollution (Chokkakula 2012).
Evidence in Malaysia suggests the financial
condition limits the investment
in technical-abatement measures for
water-pollution control in the sewage
system, and that the lack of cooperation
between governments and plants
impedes water-quality improvement
(Muyibi, Ambali, and Eissa 2008).
Water and its derivative functions
serve economic users, so that
adopting a market instrument by which
to guide water allocation and pollution
issues is theoretically considered as a
cost-effective approach. Therefore, the
market paradigm was introduced and
promoted in developed and transitioning
countries, including China. To assess
the market’s power on water governance
in China, several questions have
been addressed: How successful is the
water-pollutant discharge-fee system
in controlling water pollution? Which
factors are responsible for its success?
With regard to the first question, increasing
empirical evidence demonstrates
that the combination of the fee
system and water-pollution regulations
reduces pollution-intensive activity
(Chen et al. 2018; Yuan, Jiang, and Bi
2010). Additionally, the collection of
water-pollution discharge fees directly
revealed the system’s degree of enforcement,
which could be one of the main
factors by which to assess its effectiveness.
The national grand total pollution-fee
amount from 1992 to 2014 is
237.59 billion RMB. The adjustment of
the fee system in 2003 can be seen as
a turning point: the growth rate of the
pollutant discharge fee was below 10%
until 2003, after which it doubled to
reach its first peak at 17.68 billion RMB
in 2008. It subsequently fluctuated due
to the decreasing number of enterprises
during the financial crisis. The total
of the discharge-fee collection corre-
13