How Economic Forces Drive Environmental Change in China

Many people talk about the intensity of air pollution and have heard about the power of corporations in China. They may not know, however, how the two are connected. On Friday, January 25, 2019, Deborah Seligsohn, Assistant Professor of Political Science at Villanova University, shed light on energy and environmental politics in China. Students and professors learned about the unlikely link between business competition and air pollution standards. 

She began her talk with, what may seem like, a paradox: Air pollution is actually rapidly declining in a rapidly growing autocracy. While the pollution in China is still significant in comparison to other parts of the world, it actually has been decreasing since 2011. Professor Seligsohn studied this phenomenon by measuring sulfur dioxide omission numbers. 

Why this change in air pollution? 

Other scholars have looked at the relationship between the Chinese government and civil society to help explain the reduction. Professor Seligsohn, however, showed how pollution was not heavily concentrated in areas of relatively strong civil society. This data debunked the idea that civil society served as the most important driver of reduced pollution. 

Professor Seligsohn, instead, focused on the relationship between the government and business to study these lower levels of air pollution. Through qualitative and quantitative studies and through in-depth interviews, she analyzed how the government works with the polluters to drive down air pollution. 

Before revealing how corporate concentration impacts the political behavior of the industry, it is important to review the history between the Chinese Communist Party (CCP) and the polluters. In 2003, the CCP broke up the power monopoly into five companies. This corporate split actually doubled power generation output and reduced power level emissions in 2007. By 2008, the five companies controlled only 45% of the power market, marking a huge change from the one company dominance before 2003. In 2011, these five power companies increased their air pollution standards to match those of the U.S. and Europe, in terms of sulfur dioxides and nitric oxides. Going farther, these companies announced considerable reduction in sulfur emissions from power plants in 2016. 

These series of stricter standards simultaneously puzzled and encouraged me. What was driving the push for stricter standards?

Professor Seligsohn explained that the increase in corporate competition actually catalyzed this change. Using a “Stigler-Peltzman” model (also known as the Economic Theory of Regulation), she found that these State-Owned Enterprises (SOEs), in order to gain market share advantage over each other, strengthen air pollution standards. In other words, more competition leads to more effective pollution regulation. 

Professor Seligsohn gave an insightful talk on an often overlooked topic in the China field. She balanced her presentation between rich quantitative data and insightful personal anecdotes. Responding to tough questions, she provided a convincing case for how corporations may be actually mitigating air pollution in China. 

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