Can China's pollution reduction mandates improve transboundary water pollution?

This paper discusses how the pollution prevention mandate imposed by China's central government triggers water pollution across provincial borders. Because the central government has put the pollutant reduction into the promotion evaluation, and pollution control in the downstream area of a province mainly brings benefit to other regions, the provincial officials are incentivized to reduce the water pollutants away from the downstream city and strengthen environmental regulation within the province. We apply the difference-in-differences-differences (DDD) method to the dataset on water quality in cities along 18 major rivers in China from 2007 through 2016. We find that compared with the interior cities, the most downstream city of a province faces worse water quality. Besides, we find that environmental policy significantly increases the extent of pollution across jurisdictional boundaries. Then, we turn on the mechanism and find that the pollutant reduction target is significantly lower in the most downstream city of a province. Unanticipated provincial government behavior leads to severe transboundary water pollution.