Breaking the Boundary Haven: Vertical Environmental Reform and Industrial Wastewater Discharge in China

Under decentralized environmental governance, administrative boundaries tend to create systematic regulatory blind spots where local governments exploit jurisdictional fragmentation to shelter polluting enterprises, transferring pollution costs to neighboring regions while retaining fiscal benefits. Although this boundary pollution problem has attracted growing attention, direct micro-level evidence on whether vertical institutional reform can reshape enforcement dynamics in these areas remains scarce, particularly for water pollution. This study draws on the staggered rollout of China's sub-provincial environmental agency vertical management reform across provinces from 2016 onward to examine spatially heterogeneous reform effects on enterprise wastewater discharge, using A-share listed companies from 2010 to 2021. The reform significantly reduces wastewater discharge, with effects that decay systematically as enterprises move farther from county boundaries and attenuate to negligible magnitudes beyond approximately 9 kilometers. Regions where environmental regulation was weaker before the reform appear to experience larger gains in grassroots enforcement independence, while enterprises in non-provincial-capital cities benefit more visibly as provincial inspection reach extends into areas it had historically covered less intensively. Reform effects are further concentrated among enterprises in heavily polluting industries, high dual-carbon-pressure regions, and low media supervision contexts. These findings suggest that vertical integration of environmental authority may address structural weaknesses that horizontal coordination instruments find difficult to resolve on their own. Directing reform resources toward boundary areas and localities with weaker pre-existing regulatory capacity could amplify aggregate governance returns.