Fending off waste from the west: The impact of China's Operation Green Fence on the international waste trade

• Date: 01 October 2020
• Published date: 01 October 2020
• DOI: http://doi.org/10.1111/twec.12949
• Author: Mark Sanctuary,Adomas Balkevicius,Sigita Zvirblyte

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wileyonlinelibrary.com/journal/twec World Econ. 2020;43:2742–2761.

© 2020 John Wiley & Sons Ltd

Received: 21 November 2019

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Revised: 21 February 2020

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Accepted: 4 March 2020

DOI: 10.1111/twec.12949

ORIGINAL ARTICLE

Fending off waste from the west: The impact of

China's Operation Green Fence on the international

waste trade

AdomasBalkevicius

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MarkSanctuary

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SigitaZvirblyte

Department of Economics, Stockholm School of Economics, Stockholm, Sweden

KEYWORDS

China, environmental policy, international waste trade, recycling

1

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INTRODUCTION

The global trade of waste and scrap is becoming increasingly a flow of waste from developed to de-

veloping countries, growing 500% over the two decades since 1992 (Kellenberg, 2015). Proponents

of the waste trade maintain that importers can benefit by gaining access to cheap, recycled input ma-

terials. Opponents claim that waste importers lack the capacity to effectively manage waste imports.

By exporting to these countries, the costs of proper disposal are avoided resulting in "waste havens",

which are a special case of the pollution haven.

China is by far the world's largest importer of non-hazardous waste, accounting for 22% of the

global waste imports in 2014 (UN Comtrade, 2016). This type of waste import is slated for recycling

and/or recovery and thereby serves as an input to production. Hence, this type of trade should be in

principle no different from trade in intermediate inputs. However, poor quality (e.g., contaminated)

waste shipments and waste smuggling were a problem. A concern was the cost of sorting imposed on

domestic manufacturing, and the associated environmental impact of the unwanted wastes (Flower,

2016).

In response to the problem of poor quality wastes and smuggling, China adopted policies that

target the flow of unwanted, poor quality wastes that are costly to recover or dispose. As part of the

response, China launched Operation Green Fence (OGF) from 1 February to 31 November 2013. The

main objective of the 10-month-long policy intervention was to enforce waste trade policies already

adopted by China and thereby restrict illegal hazardous waste imports. In practice, this entailed a

marked increase in inspection efforts and policing activity at the border.

This paper assesses the impact of OGF on the global, non-hazardous waste trade.1 We study the

non-hazardous waste trade because China has a ban on all hazardous waste imports. We focus on two

1The international trade of hazardous waste is of course also an important and related issue; see Baggs (2009) and Kellenberg

(2015) for a description of this type of waste trade.

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BALKEVICIUS Et AL.

empirical issues. First, we examine the extent to which waste exports from developed countries to

China were affected by the intervention.2 We are particularly interested in identifying the types of

waste that were affected by OGF.

Second, we seek to identify the extent to which OGF resulted in an increase in waste exports from

developed countries to developing countries excluding China.3 As part of this second line of inquiry,

we test the waste haven hypothesis: OGF resulted in an increase in wastes imported by developing

countries (excluding China) with weak environmental regulation.

To assess the impact of OGF, we make use of the international trade panel data available from UN

Comtrade and US Census Bureau, which yields annual observations of the net weight (kg) and value

(US$) of non-hazardous wastes shipped at the 6-digit level Harmonised System (HS) code between

developing countries and developed countries over the 6-year period of 2010-15.

If OGF had an impact on the international waste trade, it would be on those waste shipments clas-

sified as ‘illegal’. Non-hazardous waste imports by China are classified as illegal if contamination

levels surpass a threshold, or if other criteria are not met such as faulty declarations of waste type, or

if the waste is too damp or wet. We focus our analysis on 54 product categories described as waste at

the HS6 level—following the method deployed by Kellenberg and Levinson (2014) who studied the

impact of the Basel Convention on the international waste trade.

We posit that low-quality waste is more likely to be contaminated, and rejected under OGF.

However, we do not directly observe the quality of the waste export. To address this, we use the aver-

age unit value of the waste as a proxy for waste quality. Low-quality waste exports are defined as waste

exports with the lowest unit value within a given HS 6-digit category across all countries exporting

that waste category. The effects of OGF should be most pronounced for low-quality waste shipments.

Identification of the impact of OGF is achieved using the within-HS6×country-pair deviation in net

weight from the 5-year trend. We estimate the effect using a gravity model of trade with exporter–im-

porter–HS6 waste type fixed effects.

We find that OGF reduced the flow of low-quality waste from developed countries to China by 26%,

equivalent to 3.93 metric megatons over the period OGF was in effect. We do not find evidence that OGF

resulted in significant spillover effects to other developing countries: we do not find that OGF resulted in a

statistically significant increase in low-quality waste exports from developed countries to developing coun-

tries (excluding China). Moreover, we do not find any evidence of a waste haven effect: OGF did not have

a significant impact on waste exports to developing countries with the weakest environmental regulation.

To the best of our knowledge, this is the first econometric analysis of the impact of OGF on the

international waste trade. More generally, there are few studies that examine the international waste

trade specifically; Kellenberg (2015) reviews the literature. Kellenberg and Levinson (2014) study

the impact on countries ratifying a multilateral agreement seeking to regulate the international waste

trade, ‘The Basel Convention on the Control of Transboundary Movements of Hazardous Waste and

their Disposal’. Our study is similar in terms of methodology and data sources. They find no evidence

that the Convention affected exports of waste from developed countries, although they did find some

evidence that developing countries restricted waste imports. A distinction is that our study considers

the impact of enforcing policy, whereas Kellenberg and Levinson (2014) study policy ratification.

Kellenberg (2012) tests the waste haven hypothesis, which states that the differences in domestic

environmental laws might result in the exports of waste streaming to less regulated countries. The author

found the effects to be statistically significant and substantial, concluding that more stringent domestic

2EU and/or OECD countries are referred to as developed. China includes mainland China and Hong Kong, but not Macao.

3Developing countries are identified as countries that are not part of EU or OECD.