China's water quality gains came at a cost to agriculture
Cornell University
ITHACA, N.Y. — China's efforts to improve water quality delivered major environmental benefits but also weakened agricultural economies in communities facing the greatest regulatory pressure, according to new Cornell University research.
More than 20 years ago, the Chinese government instituted the Scientific Outlook on Development (SOD) program, tying local leaders’ job performance evaluations to environmental quality improvements. More than 350 river monitoring stations measured their success. However, the stations only identified pollution from upstream agricultural sources, placing the burden of compliance on those farms and individuals.
Those upstream counties saw "agricultural value added" — the net economic output from farming, forestry, livestock and fisheries — drop by 58%, according to the study. Upstream counties also hired fewer agricultural workers, cultivated less land and applied less fertilizer — all signs of a weakened agricultural economy. Downstream farms were not affected.
“If you’re just looking at the core objectives of China’s environmental policy, it’s remarkably successful,” said senior author Wendong Zhang, associate professor of applied economics and management, noting major improvements in both air and water quality over the past two decades. “But underlying these very significant successes, there are also important, nuanced trade-offs that got affected by these regulations.”
Zhang and his team used a spatial regression discontinuity design — treating the upstream/downstream boundary as a natural dividing line — to calculate the effects of government environmental policies on all counties following the 2003 introduction of the SOD. Their dataset covered 462 counties across China's major river basins over two decades.
The study found that people with rural household registration — known as "hukou" — were significantly more likely to migrate out of upstream counties following the reform, suggesting farming families bore the highest costs of the regulatory squeeze.
The study also found an environmental upside: Upstream counties saw measurable reductions in nitrous oxide emissions from both farmland soils and livestock manure, a meaningful climate benefit.
The key takeaway? Regulatory pressures can differ based on location – “Borders matter,” Zhang said, referring to the sharp divide in regulatory enforcement between counties just upstream versus just downstream of monitoring stations – and those pressures can create upheaval. Trade-offs between environmental concerns and the agricultural economy have to be considered, Zhang said.
Support for this work, for Zhang's co-authors at Southwestern University of Finance and Economics and Tongji University, came from the National Natural Science Foundation of China, the National Social Science Foundation of China, and China's Fundamental Research Funds for the Central Universities.
Journal
Journal of Environmental Economics and Management
Article Title
Impact of water quality regulation on the agricultural economy in China
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