East China's Shandong Province is incentivizing cities to improve air quality by giving cash rewards to those that make progress and fining those that don't.

In the first quarter of this year, the province awarded a combined 39.37 million yuan (6.09 million U.S. dollars) to 15 cities under its jurisdiction in which the air quality had improved year on year.

Another two cities, Jining and Zaozhuang, were fined a combined 5.52 million yuan after their air quality worsened in the same time frame.

The carrot-and-stick approach was introduced this year as the central government makes environmental protection, in addition to economic performance, a binding criterion for evaluating local officials.

A new law also promises harsher penalties for bureaucratic inertia on pollution.

Shandong said it has seen major pollutants including small particulate matter, sulfur dioxide and nitrogen dioxide reduced, but added that the reduction has been uneven among cities.

Provincial fiscal authorities said the cash rewards given to cities were proportionate to the progress they made in improving air quality. The three best-performing cities got 40 percent of the money.