Impact of China’s National Sword Policy on Waste Import Margins: A Difference-in-Differences Approach

Abstract

As a major destination of waste products, China implemented the National Sword Policy (NSP) to regulate the high pollution of waste imports. The existing literature primarily focuses on the motivations behind China’s waste imports and the policy implications of the NSP on China’s waste imports and the global recycling market. This study innovatively focuses on the extensive, intensive, price, and quantity marginal effects of the NSP on China’s waste imports using a difference-in-differences (DID) approach with 26 categories of waste products for 150 countries and regions from 2007 to 2021. The findings indicate that: (1) The NSP has led to declines in the intensive and quantity margins of regulated waste imports, while the price margin has increased. (2) In the years following the implementation of the NSP, the impacts continued to intensify. (3) The NSP has reduced the motivation for exporters to export highly polluting waste to China in search of a “Pollution Haven”. (4) Orientations implementing policies that place the responsibility for products’ environmental impact and encourage waste sorting can effectively alleviate the inhibitory effects of the NSP. These results suggest that the Chinese government needs to strengthen the control of high-polluting and low-value product imports. Waste-exporting countries should encourage enterprises to take responsibility for the entire lifecycle of products and promote waste sorting and treatment facilities. Enterprises should strengthen the environmental impact assessment of the entire product lifecycle and consider materials that are easy to sort and recycle.