The Effects of Environmental Regulation on Industrial Pollution and Industrial Activities: Evidence from China
39 Pages Posted: 18 Mar 2014 Last revised: 6 May 2016
Date Written: December 18, 2013
Despite the increasing adoption of environmental regulations in emerging economies, their socioeconomic impact has not been fully explored. This study evaluates the effects of a sulfur dioxide (SO2) control policy in China on industrial emission and production activities. The “Two Control Zone” policy, which was introduced in 1998, urges cities designated as regulated zones to reduce SO2 emission by a certain target level. This enables us to identify the direct and spillover policy effects by exploiting quasi-experimental feature of the policy treatment. We estimate that the policy has reduced industrial SO2 emissions by about 13 percent, which is in fact an aggregate estimate combining a direct effect (-21 percent) on treated cities and an indirect spillover effect (8 percent) running from treated cities to nearby cities. We also find that the positive effect of the policy on production scale of heavy pollution industries is mostly due to spillover impact of the treatment in neighbor cities. There is some suggestive evidence that the spillover effects are more likely to be realized through migration of polluting plants.
Keywords: air pollution, two-regulated zones
JEL Classification: Q58, Q53, Q52
Suggested Citation: Suggested Citation