## The Developmental Trajectory of ETP in China
### Phase 5: Environmental Targets Banded with Large Industrial Enterprises, After 2013  
Problem streamThe chief problem in this phase is the failure of the transfer payment policy in the previous phase. During 2013-2016, about 200 billion RMB had been allocated from the central fiscal to local eco-industrial areas [25]. However, such a large number of central fiscal transfer payments did not achieve their environmental objective. On the one hand, it has been reported by the National  
Figure 6: An event sequence graph of phase 4. Audit Office (NAO) that in 2011 and 2012, 348 local authorities misappropriated the special funds on environmental protection [26]. On the other, the industrial enterprises in the national key eco-industrial areas are usually large state-owned enterprises; they are under direct control of the central government, and they have higher bureaucratic status than local authorities. As a result, these enterprises refused the local EPBs to monitor their environmental behavior [21]. Until 2016, 11 serious water pollution crises occurred in the eco-industrial parks. According to the annual environmental status reports by the MEP, China's air condition was also deteriorating. In 2014, 16 out of 161 cities that signed air contracts (9.9%) accomplished the air targets, in 2015, 338 cities signed air contracts, and only 73 of them (21.6%) met the air targets. In 2016 the proportion achieved 24.9% [27; 28; 29]. In addition, heavy weather haze emerged more frequently, which even caused schools to close, and factories to shut down. _Politics stream._ In 2013, [PERSON] became the president of China and has given much of his commitment to market-based approaches instead of direct government subsidies of environmental protection, which led to the generation of environmental targets directly banded with the industrial enterprises. After one year of [PERSON] in the central office, the Fourth Plenary Session of the 18 th CPC Central Committee was convened. In the Plenary Session, more than 3000 local cadres were removed from their positions because of their illegal behavior of protecting polluting enterprises. Moreover, the Session highlighted that the construction of ecological civilization is the basic national policy, and that more efforts will be put into building beautiful China and realize the sustainable development of the country. More specifically, the Session brought about the idea of linking market instruments with environmental protection so that the enterprises with illegal environmental behavior can no longer survive in the market, and those environmentally-friendly enterprises will gain substantial supports from both government and market. _Policy stream._ Encouraged by the new ideas in the politics stream, a combination of market-based instruments is brought forward by multiple actors in China. First, the MF and the State Administration of Tax (SAT) worked together on a number of \"green tax\" policies: the enterprises that sign environmental responsibility contracts with the MEP and accomplish the formulated environmental targets will enjoy a tax reduction on their revenue. Second, the Ministry of Commerce (MC) and the Ministry of Industry and Information Technology (MIIT) launched the \"green government purchase\" policy. The Chinese governments at all levels will only purchase products from those enterprises that are environmental friendly and achieve their environmental targets. Third, the MEP and the China Securities Regulatory Commission (CSRC) jointly published \"green securities\" policy. Only those enterprises that reach the environmental targets are able to apply for listing on the market and issue shares. Fourth, the MEP, the China Banking Regulatory Commission (CBRC) and the People's Bank of China (PBC) released \"green credit\" policies: the enterprises that have illegal environmental behavior records cannot obtain loans from any bank of China.