Sustainability and Waste Imports in China: Pollution Haven or Resources Hunting

Motivations behind a country’s importation of waste are categorized into the pollution haven hypothesis (PHH) and the resource hunting hypothesis (RHH). The importation of wastes can lead to environmental sustainability concerns, requiring governments to intervene when the market fails to reduce the negative externalities by strengthening and implementing environmental regulations. Motivated by China’s position within a rapidly growing but environmentally damaging sector of trade, this paper has three goals: (1) to classify the primary hypothesis that governs China’s flow of traded wastes; (2) to verify the heterogeneous impact of the pollution paradise motivation and resource demand motivation of waste imports from developed and developing countries, and across industries; (3) to assess the impact of domestic environmental regulations on the motives behind China’s waste imports. Using 28 imported waste-varieties from 20 of China’s major trade partners across 24 years, findings indicate that the flow of Chinese waste imports is relatively unresponsive under the pollution haven effect. However, the resource hunting effect from developing countries is significantly greater than what originates from developed countries, despite the laws of 2011 and 2017 established to restrict resource hunting activities. These results have important implications for improving the efficiency of China’s waste sorting and recycling systems.

Free trade and the environment – evidence from Chinese cities

This paper studies the impact of trade openness and the proportion of exporters on environmental quality through the scale, composition and technique effects from 1998 to 2007 using firm- and city-level data for 287 Chinese cities. Our results reveal that, on average, trade openness has a detrimental impact on the environment in Chinese cities, but this impact remains heterogeneous across regions. A higher proportion of exporters improves the environment in central and eastern cities while generating nevertheless more pollution in western cities. As regards the sector-specific impact, we find that the higher proportion of exporters in the mining and less-polluting manufacturing sectors in eastern cities diminishes the emissions of particulate matter 2.5 (PM2.5). Our finding also suggests that a pollution haven effect emerges in China at the city level. Finally, our results confirm the presence of an environmental Kuznets curve effect for the PM2.5 pollutant across Chinese cities.

Environmental Regulation and Foreign Direct Investment: Evidence from China’s Eleventh and Twelfth Five-Year Plans

This paper investigates environmental regulation and its impact on inward foreign direct investment (FDI) in developing countries. Based on the Chinese province-industry-level panel data in the period 2001 to 2015, we use a difference-in-difference-in-differences (DDD) model to evaluate pollution haven behavior in the context of China’s 11th and 12th Five-Year Plans SO2 emissions reduction policy. The results show that the policy leads to fewer FDI inflows to its highly-polluting industries in provinces with tougher pollution reduction targets. In addition, the environmental policy has significantly inhibited FDI inflows in provinces with stricter environmental enforcement, while investment in provinces with worse environmental enforcement is insensitive to environmental policy. These findings are consistent with pollution haven behavior. In contrast, FDI in industries with high levels of technology is not significantly influenced by the policy, whereas the FDI in industries with low levels of technology shows a negative response to environmental policy. This is overall evidence confirming a pollution haven effect (PHE), although technology differences could alleviate the negative effects of environmental regulation on inward FDI.

Is Pakistan Really a Pollution Haven Country?

In this study, the Pollution Haven Hypothesis (PHH) validity has been tested for Pakistan and also investigates its impact on exports of Pakistan. The PHH predicts that environmental regulations variability among countries or regions affect polluting industries location and trade flows. This study used the Kolstad (2011) model and Trade Balance Index (TBI) of Lafay (1992) to test the FDI-environment and trade-environment relationship for existence of the pollution haven effect. Time series data from 1980-2017, Autoregressive Distributed Lag (ARDL) or bound test of cointegration is used to investigate the short and long-run relationships. We found positive and statistically significant short-run and long-run relationships between CO2 (proxy for lax environmental policy) and FDI inflows. Finally, Trade Balance Index (TBI) of metal and mining, primary iron & steel, chemicals and rubber products does not support the PHH. While the pulp & paper and the textile industry validated the existence of pollution haven effect. We can conclude that PHH does exist for Pakistan and therefore effective policies needs to be put in place to encourage the FDI inflows without having implications for the environment and thus quality of life of the citizens.

Environmental Regulations and Trade Patterns in Hazardous Waste: Facility-level Analysis

This paper offers a fresh look at the pollution haven hypothesis (PHH) in the context of the waste management industry. Unlike previous research examining trade in waste products, the present study distinguishes between waste destined for final disposal and waste destined for recovery. Furthermore, it combines very disaggregated data with the highly flexible mixed logit model and a reliable measure of environmental policy stringency. Including all those elements in one analysis allowed for the uncovering of the dramatic differences in the reactions of waste generators to the environmental policy stringency of the destination country, depending on the treatment option their waste is slated for. Although there is no evidence confirming the PHH, a significant pollution haven effect has been found. This effect is apparent in the case of waste destined for final disposal. In contrast, facilities exporting waste for recovery are often attracted by the stringency of environmental policy.