Author: Fan, Kwok Yuen
Title: Institutional designs and environmental governance
Advisors: Shen, Jianfu Jeff (BRE)
Hui, C. M. Eddie (BRE)
Degree: Ph.D.
Year: 2023
Subject: Environmental policy -- China
Local government and environmental policy -- China
China -- Politics and government
Economic development -- Environmental aspects
Hong Kong Polytechnic University -- Dissertations
Department: Department of Building and Real Estate
Pages: xii, 308 pages : color illustrations
Language: English
Abstract: This thesis investigates how institutional design influences environmental governance across countries at different stages of development. I examine China as an example of a developing economy that has shown significant improvement in environmental governance while maintaining rapid economic growth over the past decade. My empirical evidence indicates that reforms to institutions such as the cadre evaluation system, environmental quality measurement, and restructuring political hierarchy of environmental protection agencies have been critical to China's success in environmental governance. Specifically, the inclusion of environmental performance as an important component of the cadre evaluation system has incentivized local officials to prioritize environmental outcomes when allocating public resources, rather than solely focusing on economic achievement. In addition, implementing incentive-oriented performance contracts tied to measurable environmental quality indicators has enabled effective pollution control policies by reducing information asymmetry between central and local governments, as well as and local officials' tendency to game the system. Furthermore, strengthening the independence of environmental protection bureaus through verticalisation reforms has eliminated conflicts of interest with local economic goals, enhancing these agencies' capacity to enforce environmental laws on state-owned enterprises.
I also examine institutional factors that distort climate policy and expand carbon-intensive investment in the United States as a developed economy. My findings suggest that fossil fuel companies, incentivised by goals to improve financial performance, engage in political lobbying which obstructs climate action. My findings also show that lobbying results in an increase in oil and gas investment, as well as an increase in pollution emissions. This ultimately leads to a greater reliance on fossil fuels, and a further delay in the implementation of climate action. Additionally, real estate companies, which account for approximately 40% of global greenhouse gas emissions, are encouraged to invest in social practices and corporate governance instead of environmental measures, as social and governance practices often lead to better corporate fundamentals and higher market value over the long term. However, this selective approach toward Environmental, Social and Governance (ESG) efforts results in a significant increase in carbon emissions, which the capital market cannot discipline this behaviour and even incentivise higher returns. This highlights the need for appropriate institutional designs in developed countries to overcome political economy challenges and unintended consequences of voluntary corporate measures in order to effectively address greenhouse gas emissions.
The significance of my research is threefold. First, I emphasise the critical role of institutional design in improving environmental governance based on a country's stage of development. Developing economies face distinct challenges compared to advanced economies, and institutions must be tailored accordingly. Second, I highlight the unique challenges faced by both developing and developed economies arising from institutional distortions, such as political affiliation and information asymmetry. Overcoming these requires targeted institutional reforms. Finally, my thesis provides evidence-based assessments of various institutions and policies to inform environmental governance strategies. Policymakers aiming to enhance sustainability can leverage my research findings to identify solutions in accordance with their development stage and political system. Overall, my research elucidates how institutional design are crucial for good environmental governance, which aid policymakers pursuing better environmental policies worldwide.
Rights: All rights reserved
Access: open access

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