Denise van der Kamp on how China’s environmental businesses are regulated

I recently talked to Denise van der Kamp about how her new book, Clean Air at What Cost? The Rise of Blunt Force Regulation in China (Cambridge University Press, 2023), corrects this narrative about China’s environmentalism. Denise is an associate professor in the political economy of China at Oxford’s School of Global and Area Studies. Her research focuses on Chinese politics, comparative political economy, and environmental politics.

Denise began by explaining the concept of blunt force regulation that she examines and comparing it with command and control regulation. In short, blunt force regulation is characterized by inflexibility, coercion, and arbitrariness, which as we discuss are counterproductive to business and economic growth and governance more generally. So we delved deeper into the motivations for the Chinese government to pursue such a strategy.

Denise pointed out that the central government has attempted to establish more conventional regulatory mechanisms for decades. However, because local officials are reluctant to follow along, the government has no choice but to fall back to blunt force regulation as the least unfavorable option. This raised the question of why the central government does not create more incentives for local officials to bridge this principal-agent gap. Denise explained that local officials also personally benefit from economic growth in various ways, making it challenging to implement environmental protection policies that may strain their relationships with businesses.

Our conversation revealed that while blunt force regulation does yield results in achieving environmental targets, it comes with both short-term and long-term costs. Apart from revenue loss and rising unemployment, Denise highlighted that the real issue lies in its long-term sustainability. She recalled three evocative stories from her fieldwork that illustrate not just how arbitrary but also how perverse the approach can be.

Drawing from her experience working for environmental NGOs in Beijing, Denise suggested that a bottom-up regulatory approach, harnessing the power of civil society, is a preferable alternative, as it holds local governments accountable. However, she noted that much of the pollution data collected through bottom-up efforts is eventually retained within the government.

What is also interesting is that blunt force regulation is a universal form of governance that can be found not only in China’s efforts to reduce pollution. Denise explained that such an inflexible, arbitrary, and coercive regulatory apparatus can also be seen in China food safety regulations and in Europe’s COVID lockdown measures.

Last but not least, Denise pointed out that the blunt force regulation is not just a temporary transition phase for the Chinese government. Her work really highlighted that while China is able to achieve environmental protection, the way in which it is carried out is really not as efficient as outside observers might assume.

Christopher Marquis: Your book focuses on blunt force regulation, particularly in environmental governance. Can you say just a little bit about what this type of regulation and enforcement is? Particularly, compared with other types of governance.

Denise van der Kamp: Briefly, it’s the use of indiscriminate, inflexible methods to deliver a regulatory outcome quickly, such as reducing pollution. A classic example in the China case is when the state shuts down entire industries to deliver blue skies or shutters entire industrial areas to meet pollution targets quickly. For businesses, it can feel like a deeply arbitrary way to regulate, because it’s done with little warning, and constitutes a major disruption to production.

What I found from my fieldwork is that it also punishes compliant firms, because when you shut down companies en masse overnight, you don’t have time to check who is compliant or not. This is especially infuriating to those firms that have made an effort to try to green their processes.

In terms of how it is different from other types of regulation – blunt force regulation is often compared to command and control regulation as we see in the US or the UK. Command and control is when the state sets very restrictive, new standards and then it shuts down all firms that don’t comply. And like blunt force regulation, command and control can seem unusually punitive and inflexible, especially for smaller firms. But the difference, as I illustrate in my book, is that under command and control, at least firms know what the rules are. They know what those standards are, and they’re given time to try and meet them. Once they do, they can feel safe that they’re not going to be punished out of the blue.

In contrast, with blunt force regulation, the reasons for punishment or imposing new restrictions are not communicated in advance. Interventions happen with very little warning and firms are not really given any indication of why they’re being shut down. So they’re left in the dark, and that means if they want to save themselves in the future or avoid punishment in the future, they don’t actually know what they should be doing. It sets incentives up in the wrong way where it leaves a lot of firms thinking – why bother to comply if I might be shut down anyway? This arbitrariness, that’s really the key difference in terms of both the approach and the outcomes that happen through blunt force regulation.

Christopher Marquis: Right, and yes, of the three characteristics you described that characterize blunt force regulation – inflexible, coercive and arbitrary, the arbitrary aspect really to me seemed very illogical in many ways. Because it’s incentivizing all the wrong behavior, particularly for the long term and even medium term. You get blue sky for the Olympics, or some other event, or meet some quarterly or yearly target. But you are setting yourself up for failure in the long run.

The next question I have then is regards to why do it this way? Both of us have identified this just as counterproductive, but it’s still used so extensively. You have a lot of interesting examples in your book. I had heard of similar processes of drastic enforcement of environmental regulations when I was spending time in China, but before reading your book, I had not connected the dots like you have. So why pursue this strategy to enforce regulation?

Denise van der Kamp: It’s actually not the first choice for the Chinese government. It’s not how they want to regulate, it’s just the least worst solution. When I was doing my field work, I realized (and you can see this also, just from following documents and data) that the Chinese government has been trying to build up a more conventional regulatory apparatus for decades much like you would see here in the UK or the US. This is where you train regulators, set standards, use inspections and sanctions to try and convince firms to change their behavior, reduce pollution. Sanctions are all evidence-based so you won’t be punishing compliant firms as well. You see what firms are doing and use that to try and enforce changes.

But what China’s leaders found is that when they tried to use these institutions to reduce pollution, they needed to get local officials to want to enforce that regulation in the first place. But local officials are reluctant to do so because it clashes with economic targets. Also local officials are promoted or transferred around quite frequently, so they have a really short-term focus when implementing policy.

In order to implement conventional regulation in a way that would reduce pollution, it could take 3 to 5 years. Local officials don’t have that time, so they really have no incentive to use this conventional regulatory apparatus to reduce pollution. And so what Beijing finds is that it has to fall back on these much more draconian measures which would actually force local officials to comply. It’s much harder to say no when Beijing or your superiors say you must shut down all factories by tomorrow. Whereas if Beijing says “Okay, in the next 3 to 5 years, come up with some ways to try and reduce pollution through the law or through these institutional means,” local officials have so much more room to maneuver and to shirk orders. That’s why the government resorts to blunt force regulation.

Christopher Marquis. Something that was really helpful for me in putting the pieces together was how you used the principal-agent dilemma to describe this situation. The higher ups are the principals and then the lower officials are agents. In principal-agent theory at least as applied to corporations, what the principal tries to do is avoid agent shirking or acting in self-interest and so one way to do this is aligning incentives, and it sounds like there’s a persistent misalignment of incentives here. Because they’re very focused on GDP as the key measure of success, which then, obviously, the environment in some ways is a countervailing force.

But why not just then create incentives for the environment? Is it just hard generally to create environmental incentives? Or maybe it’s just because of how things vary across provinces and across industries? It’s just a much more complex problem than having a simple number like GDP. Or is it because they’re rotating through the positions fast, such longer term KPIs are not worth it? My question is why doesn’t the government then focus on other ways to close the principal-agent gap?

Denise van der Kamp: So first, I do think the short term-limits are a big problem, because local officials are promoted or rotated every 3 years on average. And to reduce pollution through more conventional methods, it does take time. In the US, it took decades. Local officials in China are not rewarded for policies that take that kind of time to succeed.

But the other thing is, local officials are not just promoted for hitting economic targets, they also benefit personally from economic growth. And it doesn’t even have to be corruption. It can just be rewards in terms of setting up new businesses or a whole suite of benefits from economic growth outside of promotion (including winning support from local colleagues and cadres). Some local officials may not even care about promotion, and so what Beijing wants is meaningless to them. So how do you convince them to not care about economic growth and focus on a policy that would actually harm growth and hurt their relations with businesses? That’s a lot harder, especially for those who don’t care about being promoted at all. I think that’s the real struggle for the Chinese government.

Christopher Marquis: I’m curious if blunt force regulation could then be considered as working at least in some ways. If the central government or higher ups just want to achieve environmental targets, and longer term issues can be dealt with later, then it might be seen as working. But how about the cost? Can you say a little bit more specifically what are the benefits, and the costs are of such a strategy.

Denise van der Kamp: As you state it, the main benefit is, it actually works, and I show this with quantitative tests. Compared to all these measures they’ve used in the past, BFR does reduce pollution. And some people might say, “well, no surprise, right?”, when you shut down factories of course it reduces pollution levels, but what I’m showing is that orders to shut down factories are actually being followed at the local level, whereas orders to implement conventional regulation are not. So blunt force regulation works in that regard, that is, in overcoming non-compliance by local officials.

In terms of the costs, there are the most obvious ones, the ones that you would experience in the UK or the US like loss of employment, loss of local revenue. So local governments, at the same time that they’re losing factories, they have a lot less money to try and revive the economy afterwards, and that is very difficult, especially because I show that it’s revenue poor cities that are often subjected to the most severe shutdowns.

But as those of us who study China know, these are costs that the government is used to dealing with—managing protests, discontented firm owners, and so on. But I would say the real concern, the real cost is that this solution is not sustainable in the long term. You can’t just shut down factories en masse forever. You have to figure out a more sustainable solution. But each time they resort to this they are causing businesses to distrust the state. Polluters feel like regulation is arbitrary. It will never be to their benefit. They have zero incentive to change their behavior. And if China locks itself down that path, it’s going to be very hard to green the economy once all that low hanging fruit for reducing emissions is gone.

Christopher Marquis: Speaking of greening the economy, so China has announced a 2030 peak carbon, 2060 net zero goal. All of this seems counter that. Do you have any insight into the measures that are being used for those net zero future targets? At least as I read in the media, it seems like they’re still building lots of coal fired factories.

One of the things you do talk about as an alternative explanation for why this may work is that it spurs transition in infrastructure. Cohorts of factories that are polluting are shut down, and then people can build new factories which are probably more energy efficient.

Denise van der Kamp: Certainly, industrial upgrading is part of what’s going on here. But you know, the fact that they shut down technologically advanced firms (as I found in my fieldwork) or when an entire city’s industry is forced to shut down for months at a time, it’s hard to say that’s about upgrading the economy.

In terms of net zero, a lot of that has to do with their policies around energy, how they’re trying to transform the energy structure to bring in more green energy. That is different from what I am looking at because coal-fired power plants are all centrally regulated. It’s a very different regulatory structure for energy, there is more accountability. What I’m focusing on are second tier industries that might be regulated by a province, or even city government, which still contribute a massive amount of pollution, because to produce cement or steel you’d need high levels of heat that you just can’t get from a power station. So it’s in these industries that the government might struggle to meet net zero goals.

Christopher Marquis: Got it, I remember one evocative story from you book – a ceramics plant where they invested a lot of money to move out of town for environmental reasons and built an advanced factory. Then something like 3 months later, they were told they were going to shut you down. What other stories do you have from your field work that exemplifies the strategy?

Denise van der Kamp: The ceramics factory was told you need to green your production. It did. It invested so much money, and then the factory owner was still forced to shut down and given very little compensation. Some people could say, “ceramics. China is no longer at that stage of industry where they’re producing a lot of it.” So this case could be considered industrial upgrading.

But one other example I came across was a European firm in the chemical industry, producing high-end chemical products, so they would not be counted as industries that need to be phased out. And what was really frustrating for them was that they initially believed the government’s rhetoric that it cared about pollution and so they invested a lot in trying to produce at the highest standards. Their prices were much higher than Chinese competitors, but they thought it would be worthwhile in the long term, because eventually environmental regulations were going to catch up to their competitors. Instead, this company was treated exactly the same as their more polluting counterparts – just shut down. Their efforts had made no difference. That was really infuriating to them. It made no sense anymore. And so they started to say, “maybe we should just downgrade our environmental protection measures.”

Another factory I came across had coal fired furnaces and they were constantly being told to just shut off the furnace for 10 days or one month to produce blue sky days. This factory told the regulators that shutting down a furnace and starting it up from scratch actually produces more carbon than to just lower emissions for the 10 days. But the regulator said, “nope, sorry everything has to be shut down. That’s the only way we meet the target.” They’re saying this is perverse, and yet they had no choice to do it. So that illustrates not just how arbitrary, but how perverse it can be. A blunt, uniform approach to reducing pollution.

Christopher Marquis: You also discuss how more of a bottom-up type enforcement could be an alternative approach, and have some examples of places that have done that. Can you say a little bit more about it and why that might be more effective?

Denise van der Kamp: This discussion comes out of a literature looking at regulation in the developing world, where these countries just don’t have the resources or levels of capacity to implement regulation as they would do in the US or the UK. So one process scholars identified was bottom up regulation, where you leverage the power of civil society to create that sense of surveillance on local firms and officials, so that those responsible for regulating actually feel like they are under pressure to comply. In effect, it creates the pressure that independent courts or even elections might provide in the USA.

I wanted to see if you could take that argument and apply it to China’s case, because China also doesn’t have strong courts or elections, but it does have a very active public that cares a lot about the issue. I worked for environmental NGOs in Beijing before, so I was a part of this process, and I saw how active environmental civil society could be. Moreover, Chinese officials I interviewed said this was exactly their strategy going forward, they recognized that power of civil society, and wanted to use it to improve implementation.

And the reason it’s more valuable than blunt force regulation is that public scrutiny can be used to hold local officials and firms accountable to environmental laws. It’s not about overriding laws to clean up pollution, in fact, firms that go green are more likely to be spared. So it creates incentives for both firms and regulators to comply with the law, making implementation more sustainable in the future. Whereas blunt force regulation undermines incentives to comply with the law or go green.

Christopher Marquis: In terms of bottoms up information, I recently talked to Martin Dimitrov, and he has this interesting book that looks at the dictator’s dilemma, and how it’s actually hard for authoritarian rulers to really have a good sense of what’s going on. Because they don’t trust information and they don’t want to gather it, because maybe the public will see it, and that spills over in a negative way perhaps to protests or other ways to undermine the regime. And without a good sense of what is happening on the ground they frequently overreact, which in some ways blunt force regulation is an example of – the government overreacting. I’m sure there’s a petitioning system on environmental issues that people can tell their local governments; and environmental protests provide information. My question is what kind of information can be collected and utilized in more of a bottom-up way?

Denise van der Kamp: The government does collect data on pollution at the city level and this data is made public. Citizens can use that data to petition, call in a hotline, try to hold a local official accountable. But this public data is aggregated data, so you don’t know if it’s your local factory or general weather events that are causing high pollution. The state actually does have real time emissions data on individual factories. Since 2012, all top polluters in a city were required to install this device that measures emissions from their furnace in real time, and it’s expanded since to the majority of polluters in a city. So they’ve got that real time accurate data, but that data is not made public. Maybe for a brief window it was, I remember seeing it available online, but it’s not anymore.

And I think this speaks to Martin Dimitrov’s argument. The government has this data, and they have a force from below that can and wants to use this information to police polluters and local officials, so why are they not giving it to them? What choices are being made there? I believe this reveals a lot about the government’s desire to maintain discretion over how information is used. However, it also shows how this political discretion sometimes ends up shooting them in the foot when it comes to keeping agents accountable.

Christopher Marquis: Speaking of that information, let me ask you a bit about your methods. So you have quantitative regression analysis as well as deep fieldwork in a number of locations. Can you just give a general description of the different types of research methods, and then how they interplay. Because if you’re going to have mixed method study, it’s always important to know how the more quantitative and qualitative materials weave together.

Denise van der Kamp: This began as an entirely qualitative project. I started out wanting to do a case study of one of the most polluted provinces in China, interviewing local officials, and understanding what was going on. But while I was there, I found that blunt force regulation was happening in almost every city and county that I visited, so I broadened my cases. I wanted to see if these shutdowns were just a form of industrial upgrading (as so many people were saying) so I looked to more developed provinces like Jiangsu 江苏 and Guangdong 广东. And again, I found factory shutdowns were happening all over there. So I used these cases to examine if this was just industrial upgrading or if a different logic might be at play, maybe one to do with environmental non-compliance.

Once I developed that argument, I realized I would need quantitative data to show that this was happening nationwide, and also to provide stronger support for my argument (that BFR is used to force local officials to pay attention to pollution). That was hard because none of that information is readily available. This is not off the shelf data. But I came across documents that listed all the factories that were ordered to reduce capacity, or undertake blunt force measures around the country. I spoke to local officials about how this was done, and I realized it was done through top-down orders. So I coded these massive lists, geocoded all the factories to figure out where they were, and then put that data on blunt force regulation together. I also realized that pollution data is problematic if you rely solely on Chinese government data but scientists were developing methods to measure pollution with satellite data. So I spoke to some scientists at Tsinghua and other universities, and they told me how to use that satellite data to measure pollution levels. It really came down to triangulating different sources of data that I trust and that could end up providing quantitative support for my argument.

Christopher Marquis: It’s really interesting to read the qualitative stuff since it brings to life a lot of important insights. But then, to see how it generalizes across the country, I think the quantitative was paired with it very nicely.

So one of my last questions is, is this something that you see in other sectors beyond environmental policies? Or is it mainly just environment?

Denise van der Kamp: I would say there is potential for blunt force regulation in any policy space where you see this misalignment between central and local incentives, and a strong will at the center to implement this policy. You might know John Yasuda’s work on food safety regulation. He has one chapter describing exactly this, blunt force measures to deal with food safety problems.

We also see blunt force regulation outside of China, or even environmental issues. In the final chapter of my book, I talk about how the COVID lockdowns in Europe could be seen as a form of blunt force regulation in that they were also inflexible and the costs felt disproportionate to the risks to be controlled. Compared with what happened in Hong Kong, Taiwan, and Korea, I argued that it was because these governments didn’t have the capacity to track and trace and enforce compliance through more institutionalized or proportionate means, so they had to resort to this really blunt, indiscriminate approach. Ultimately, it is a universal form of governance that states sometimes fall back on, especially in times of crisis, when they use their coercive strength to push through a major change despite the massive costs.

Christopher Marquis: What’s your sense looking forward? In some ways it is reasonable to think that because of all these costs, they would move away from this strategy. At the first stage in environmental governance they have not figured out how to actually align incentives, so they do this strategy for a while, while they are actually working on figuring out ways to actually create a better or more effective governance system. Is there any indication that the Chinese government will move away for this, or is this still as popular now as it was when you did your field work?

Denise van der Kamp: Speaking purely from data, I’ve been gathering data up until 2019 on blunt force enforcement versus more conventional enforcement measures and I find that these two approaches are being undertaken at equal levels, at least in the environmental sphere. Moreover, we’ve seen blunt force regulation spill over to the tech sector, such as the shutdown of the online education sector in 2021. So it doesn’t seem to be going away.

What I will say, looking more closely at the evidence is, I think the government is very conflicted on using blunt force regulation. We see them introducing all these new methods to try and overcome their information gathering or accountability handicaps, such as more sophisticated data gathering tools. Beijing is also really trying to calibrate the promotion targets to make sure officials (at least the richer cities) are promoted for pollution control over growth. Why would they bother with this if they thought blunt force regulation could solve everything?

This shows that the government is making a real effort to try and strengthen more conventional regulatory methods so that they don’t have to resort to blunt force regulation. But the fact that they’re still implementing policies through both approaches (and at almost equal levels of intensity) suggests that there are just some handicaps that the government can’t overcome. Perhaps they might hit on a combination of accountability mechanisms that work with the Chinese governance style and what needs to be done. But it’s definitely a space that needs to be watched as this is not just a trend or a temporary transition period.

Christopher Marquis: Got it. I do a lot of work in the environment space. Almost all the teaching I do here at Cambridge is on climate and sustainability issues, and people quite frequently say, “oh, I wish we were like the Chinese. They actually are able to make changes.” And that is definitely true. But the things that I appreciated about your book is showing that while maybe they are actually able to make the skies bluer, it’s not done as efficiently as we think and also there are some significant costs to that as well.

So thanks so much, Denise, this is all an important corrective to this dominant narrative on Chinese environmental policies.

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