The Environmental and Economic Consequences of Reducing State-Firm Information Asymmetry

For the government, measuring firm-level emissions accurately is critical for the enforcement of well-targeted regulation programs, and is also the building block to the establishment of potential Emission Trading Systems. The Chinese government spends substantial resources on firm-level automatic emission monitors: more than 30,000 polluting plants are being monitored by the central government, and another more than 200,000 by local governments. However, firms are able to manipulate the readings of the monitors, leaving the government with inaccurate readings. The researchers are studying the randomized roll-out of a device that detects manipulation of monitors to estimate the effect of improved monitoring quality (reduced government-firm information asymmetry) on firm production and emission outcomes.

Double-Random Inspections and Marginal Abatement Costs of Chinese Firms

In 2016, the Chinese government started to oversee polluting firms’ environmental performances through the “Double-Random Inspections” (DRI) program. The program requires local governments at different levels to randomly select inspectors to check the environmental compliance and emissions of randomly-selected polluting firms. In this project, the researchers are  estimating the marginal emission abatement costs for different types of polluting manufacturing firms, which are critical for optimal environmental policy design.

Economic Activity, Pollution, and Health: Evidence from China’s Air Pollution Alert System

As part of China’s “war on pollution,” local officials are permitted to require emissions reductions from polluting factories, and often do so by closing down factories that are high polluters. The researchers are taking advantage of a natural experiment where “yellow,” “orange,” and “red” alerts are triggered at different pollution levels, with higher alert levels requiring higher reductions in industrial emissions. For each alert type, the local government has a pre-set “action plan” describing which firms will be required to shut down or curtail production. The researchers are comparing days that had forecasted pollution barely below an alert threshold to those with forecasted pollution barely above an alert threshold, as well as comparing between locations just inside and just outside prefecture city boundaries. This allows them to estimate the effects of pollution forecasts on emissions, government actions, firm production, and health outcomes.

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