Is more regulation really the solution?

by Laura Van Vliet

Governmental control of water pollution is crucial in the world in which we live, where pollution would likely reach toxic levels if left unrestrained. There are two main techniques for governments to exert their control, the first is through command and control regulation – in which specific rules and regulations control the amount and type of pollution each company is allowed to produce – and the second is through economic incentives – in which the government motivates companies to reduce pollution using their preferred methods, as long as the specific value is met the companies will not lose money. An article by Yingling Yui, titled “Analysis: Stronger Regulation Needed to Improve Corporate Pollution Record in China,” argues that more regulatory control is needed is China to manage the widespread water pollution which is occurring. In the article, it states that “weak supervision and lousy enforcement in China has been a major passive encouragement...” (Yui 2008) for the industry sector not to perform up to the standards. However, more regulation, detailing more specific environmental measures to be taken by individual companies, is not necessarily the most effective way to solve this problem.

Economic incentives, an important system of controlling industrial pollution, could be effectively used to control water pollution in China. The key to a successful economic incentive program is that the benefits of reducing pollution [by the desired amount] outweigh the costs of doing so. Taxation and the sale and trading of pollution permits are two good ways of creating such a situation. The government in China could ‘print’ and sell (or issue free of cost) a number of permits allowing a certain type and quantity of water pollution, which would be distributed in a fair way among companies. The industry would then have to decrease pollution to the amount specified by the total permits, though they could do it in whichever distribution they pleased – through the buying and selling of the permits. In this way, the most cost effective approach to reducing pollution by the specified amount would be found. This “free market” of pollution permits also removes restrictions on how the pollution is reduced, as opposed to demanding the companies use certain methods of pollution reduction, therefore encouraging the development of new technologies and processes to reduce pollution. Thus, by creating pollution permits, as opposed to regulatory control, China could effectively reduce water pollution.

In my opinion, the policy of economic incentives is the better solution. It is more efficient, effective, and promotes the development of new technologies and processes for environmental protection. While the two different policies have different merits in depending on the situation, in the broad field of Chinese water pollution control, it is improbable that the government will be able to reduce pollution in the most efficient and effective way. Allowing the industry to develop and decide itself on technology and processes, while the government is solely a regulatory body ensuring the pollution abatement occurs, is the best solution.

Thus, of the two major methods of pollution control – economic incentives and regulatory control – I believe that the situation of water pollution in China described by Yingling Yui would be addressed most successfully using economic incentives. The use of ‘pollution permits’ would allow companies to cost-effectively reduce pollution while simultaneously encouraging technological development.


Liu, Yingling. “Analysis: Stronger Regulation Needed to Improve Corporate Pollution Record in China.” Worldwatch Institute. 6 February 2008. Accessed on: 18 February 2009. Available at: http://www.worldwatch.org/node/5601