Performance Management, High-Powered Incentives, and Environmental Policies in China

China has a highly centralized bureaucracy that is no longer strictly monitored by political loyalty but by governance performance (e.g., economic growth), rewarded with promotion and monetary incentives. In the early 2000s, environmental criteria were added to this system. As part of this effort, a high-powered performance management system was introduced in 2006. It held high-level provincial officials, who are part of the nomenklatura, personally responsible for meeting specific emissions targets. Using data from China Statistics Yearbooks and several official news archives, the empirical results indicate that the implementation of the new performance management system reduced emissions only for air pollutants, which are the most publicly visible among the targeted pollutants. Water pollution, which is less visible but also a mandated target, was unaffected. Emissions of soot, an untargeted pollutant, were also unaffected. The findings imply that, even in centrally managed systems like China, compliance with a high-stakes reward for measured performance is not universal.