Top-runner incentive scheme in China: a theoretical and empirical study for industrial pollution control.

Affiliation

Chang D(1), Gao D(1), Xu X(2)(3), Wang X(4), Ju Y(1), Shen X(5).
Author information:
(1)School of Environment and Natural Resources, Renmin University of China, Beijing, 100872, China.
(2)Key Laboratory of Ecosystem Network Observation and Modeling, Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, 100101, China. [Email]
(3)International Ecosystem Management Partnership, United Nations Environment Programme, Beijing, 100101, China. [Email]
(4)China National Environmental Monitoring Centre, Ministry of Ecology and Environment, Beijing, 100012, China.
(5)Policy Research Center for Environment and Economy, Ministry of Ecology and Environment, Beijing, 100029, China.

Abstract

Pollution control policies have achieved remarkable results in China. However, industrial firms still lack enthusiasm for technological innovation to reduce pollution and endogenous motivation for controlling pollution, which pose severe obstacles to industrial pollution control. The top-runner scheme can stimulate the pollution control behaviors of firms to a certain extent. Therefore, the top-runner scheme is combined with economic incentive policies to design an appropriate incentive scheme in this paper, theoretical research is conducted on the selection standards and incentive methods, and four industries mainly responsible for pollution in a developed province of China are investigated as case studies. The results show that (1) the selection standard that stipulates the rewarded quotas instead of the discharge amount achieved higher emission reduction efficiency; (2) tax cuts are the best incentive for top-runners, and (3) the top-runner incentive scheme achieves a greater reduction effect in high-pollution industries than low-pollution industries. Value-added tax exemption for the top-runner, as determined by the rewarded quotas, contributes to increasing the enthusiasm from firms to participate in and improve pollution control measures.