Effective Regulation Enforcement——Analysis on Chinese Environmental Regulation 〔*〕

Fu Jingjing,Zhang Kaiyue

(School of Law　Southwest Petroleum University,Chengdu　Sichuan　610500)



Effective Regulation Enforcement
——Analysis on Chinese Environmental Regulation〔*〕

Fu Jingjing,Zhang Kaiyue

(School of LawSouthwest Petroleum University,ChengduSichuan610500)

It is concluded that economic drivers have a significant impact on enterprise environmental behavior.These economic drivers include the amount of penalty,economic incentive instruments,reputation,and so on.As a result,while environmental protection agencies still must punish wrongdoing and deter others from violating the law,they must also consider,as a strategic matter,how compliance and enforcement resources can have an impact on economic drivers of environmental behavior and how the resources can influence societal values more generally.

regulation enforcement;environmental regulation;cost-benefit analysis

Ⅰ.Variables for enforcement strategies in China

There are a list of variables that determine the styles and strategies that regulators will adopt and the likelihood that they will be effective in fostering compliance.The following subsections will analyze how these factors have interacted to shape environmental law enforcement variation in China.

1.Institutional design

The institutional design of the bureau is an important variable for the quality of enforcement.If the agency in charge of enforcement work suffers from conflicting goals,dependent management structures and unfair enforcement procedures,enforcement will be problematic.

To begin with,in the organizational perspective of enforcement,the enforcement agency’s organizational goals are central.To the extent that environmental officials perceive that they have insufficient clarity from agency administrators there will be little consensus on goals within the enforcement unit and across departments within the agency.〔1〕Recent studies of environmental enforcement in China have highlighted the problem of conflicting primary goals.Lo et.al.(2000) argue that with a strong pro-growth orientation,both central and local governments have usually sided with these economic bureaus and have subordinated environmental protection to economic interests when the two have been in conflict.〔2〕

The second variable of the institutional design is the procedural factor.Aside from the substance of the decision that a regulator ultimately reaches,it is important that regulated actors are confident that the process used to reach that decision was fair.As such,procedural fairness (also referred to asnatural justice) is concerned with the procedures used by a decision maker,rather than the actual outcome reached.It is also understood that a decision maker following a clear,objective set of procedures is more likely to reach a fair and correct decision.

The third variable relates to enforcement capacity is the degree of independence.Independence is a critical attribute for a regulator to be effective.To be more specific,independent requires structural independent,financially independent and functionally independent.Providing a regulator with structural independence will reduce the possibility of political or industry capture.Although complete independence is nearly impossible to attain,the regulator should have sufficient independence to implement regulations and policies without undue interference from interested parties such as politicians or other government agencies.This is the so-called functional independence.

2.Enforcement capacity

Enforcement capacity is used to measure the regulatory agency’s ability to implement the laws and regulations.In order to fully exercise their enforcement powers,a certain level of staff and financial resources must be available.Enforcement agencies can only accomplish the basic tasks of rule enforcement if they have sufficient resources to do.

3.Targeted actors’ behaviors

Enforcement work is also influenced by the targeted actors and their actions.A first variable is the type of regulated actors.Scholars have identified that regulatory agencies appear more inclined to adopt accommodative andless legalistic approaches when dealing with public bodies.Pollution controls have been found tobe less stringent when directed towards public entities as opposed to private industries.〔3〕

4.Political context

The political context,especially in developing countries,can affect regulatory enforcement.In the context of China,the political factor seems to be a rather strong ‘motor’ for both regulation enforcement and compliance behavior.Talking about China’s governance framework without reference to the Communist Party of China (hereinafter CPC) is a bit like trying to define the circulatory system by only describing the veins while ignoring the heart and arteries.Policy preferences and political commitments of top Party-state leaders determine the pattern of governance in the Chinese Communist regime.Under the policy orientation of sustainable development with open support from national and municipal leaders the environmental governance system has been given a wider jurisdiction and the MEP has been granted greater authority for implementing the active strategy of pollution control.

5.Social context

The social context can influence the enforcement through a variety of approaches,including citizens,local communities,and NGOs.

Abundant evidence from Asia,Latin America,and North America shows that neighboring communities can strongly influence factories’ environmental performance.Where formal regulators are present,communities use the political process to influence the strictness of enforcement.〔4〕Although these groups vary from region to region,the pattern is similar everywhere:Factories negotiate directly with local actors in response to threats of social,political,or physical sanctions if they fail to compensate the community or reduce emissions.

Ⅱ.The way to improve the effective regulation enforcement

1.Establishing effective administrative penaltymechanism

Compliance failures may derive from failures in implementation of enforcement strategies.As for the rule and deterrence enforcement style,the effectiveness of enforcement is based on the probability of detecting violations and the severity of sanctions.As a result,it is suggested that the current administrative penalty mechanism needto be redesigned.First of all,one needs to find the balance between the costs of compliance and the costs of violation,so that the regulated actorscould give up the illegal behavior and turn to compliance the lawvoluntarily.As mentioned above,costs of violation are based on fines and the probabilities of detection.Therefore,when redesigning the penalty regime,we should focus on two factors,i.e.,the level of fines to the extent of efficient deterrence and the frequency of inspections.The lack of any factor would lead to the failure in enforcement.It is worth of noting that information asymmetry is a common phenomenon in the field of environmental enforcement.It’s impossible for legal authority to carefully inspect each enterprise on-site due to the limited human resources,material resources and money.Therefore,the possibility of the violation being escapedfrom punishment will be greatly increased and the deterrence of law will be greatly reduced.

As shown in Figure 1,when polluter’s illegal behavior is punished accordingly each time,that is,when P=1,the law could achieve the most efficiency status.When polluter’s illegal behavior is not always be punished accordingly,namely 01,the legal efficiency will be decline as well,due to the excessive punishment will increase transaction costs and undermine the order of economic market.

Constrained by the frequency of legal inspection,penalty of violation in law is always less than the regulated person’s actual illegal costs.In other words,no matter how severe the punishment mechanism is,it will be diluted accordingly with the probability of illegal behavior being found decreasing.Therefore,when legislators designing related legal regimes,they should not only improve the amount of penalty,but also consider how to increase the frequency of daily inspections.

(1) Redesign the amount of fines.

At the very beginning,parties (government and polluters) are assumed to be risk neutral,rational,and utility maximizing.Denote with x the seriousness of the violation.We measure the severityof the punishment along the vertical axis.D represents direct economic compensation for pollution accidents.In order togenerate sufficient deterrence,the law should not only make the enterprises compensate for the direct economic losses they have caused,but also make enterprises to bear the punishment of violations.Therefore,the perfect-fines-curve should exceedthe compensation for direct damages.

(2) Redesign the supervision mechanism.

As we mentioned before，the costs of violationequal to the amount of punishment multiplies the probability of punishment.As a result,the probability of punishment affects the deterrence of punishment regime.Whether an environmental violation can get its due punishment,the key lies in environmental protection authorities’ capacities.As a result，it is significantly important that we should focus on the improvementof enforcement capacity,including increasing investment,establishing the grid-based environmental regulation system,and increasing the frequency of on-site inspections.In addition,aiming at the problem that some enterprises discharging pollutants secretly,it is suggested that public participation is a useful tool for environmental governance.We should emphasize the role of citizens and NGOs in environmental protection.

2.Enabling public participation to avoid “regulation captured”

As mentioned before,one of deficiencies in the cooperation and conciliatory style is the so-called “regulation capture” phenomena.Regulatory agencies face the need to maintain regular dialogue with their constituencies,yet this interchange itself increases the likelihood for co-optation.Sometimes those agencies that have the most powerful constituencies tend to gain more administrative favor,whereas agencies whose constituencies are relatively less organized,such as wildlife management or environmental protection agencies continuously face shortages in the resources needed to function.Under this situation,the strong roles for citizens and NGOs are to supervise the discretion power of local governments.Citizens and NGOs can perform a strong monitoring role that can influence on environmental regulation.

Enabling the public to more directly affect environmental regulation can occur through a variety of channels,such as “public litigation suits”,report pollution case,hearings,and so on.However,up until now,there is no legal provision that allows citizens to file civil or administrative law suits against organizations or administrative departments that violate the law.In addition,public involvement in environmental decision making process can help reinforce community norms and have an impact on economic drivers such as community relations and reputation.The challenge for government is to increasingly make public engagement a part of a strategic approach to governance that helps produce better environmental results.To do this,agencies must view public engagement not simply as a method of complying with legal requirements in environmental laws and under state or federal administrative procedures acts,but as a mechanism for creating pressure on sources of pollution to improve their conduct.

3. Design appropriate regulatory instruments

The regulatory instruments can influence the compliance behavior. When regulatory instruments are cost effective, regulation enforcement and compliance could be more effectively achieved. In its 2005 Report the OECD notes that identifying the appropriate regulatory mix of instruments (including selecting efficient tools that are proportionate to the regulatory aim), minimizing complexity andoverly legalistic regulation (which can reduce confidence in the regulations) and eliminating as faras possible the existence of competing policies or regulatory instruments are all of vital importance.

〔1〕Carlos W.H.Lo & Gerald E.Fryxell,Enforcement Styles among Environmental Protection Officials in China,2003,23 Journal of Public Policy,pp.81-115.

〔2〕Carlos Wing Hung Lo,Plato Kwong To Yip & Kai Chee Cheung,The Regulatory Style of EnvironmentalGovernance In China:The Case of EIA Regulation In Shanghai,2000,20 Public Administration and Development,pp.305-318.

〔3〕Ackerman B.,A.,Rose-Ackerman,S.,Sawyer,J.,R.,and Henderson D.,W,The Uncertain Search for Environmental Quality,New York:The Free Press,1974,p.286.

〔4〕World Bank,Greening Industry:New Roles for Communities,Markets,and Governments,Oxford University Press,1999,p.59.

About the authors：Fu Jingjing,vice professor in School of Law,Southwest Petroleum University,Master Tutor,PhD of Maastricht University in the Netherlands;Zhang Kaiyue,postgraduate student in School of Law,Southwest Petroleum University.

〔*〕This paper is the staged achievement of National Social Science Project (15CFX053),special fund for social sciences of Southwest Petroleum University (2014QHZ004),and also funded by the Chinese Scholarship Council.