Evidence of the "Green Paradox" in China--Based on the Impact of the New Environmental Protection Law on Carbon Emissions of Heavy Polluting Enterprises

Abstract

Environmental regulation is widely considered effective for environmental governance; however, the "green paradox" challenges this assumption. Does stringent environmental regulation truly provoke the "green paradox" effect? China's enactment of the New China Environmental Protection Law (CNEPL) in 2015 offers an opportunity to explore this issue. This study employs panel data from heavy polluters in China spanning 2011 to 2019 and employs a double-difference (DID) model to analyze the impact of the new law on carbon emissions from these entities. The findings indicate that the CNEPL not only increases carbon emissions among heavy polluters but also influences emissions through various channels, including heterogeneity in compliance costs, energy consumption patterns, and governmental fiscal decentralization, thereby triggering the "green paradox" effect. This paper's results provide empirical evidence of the "green paradox" phenomenon in China and offer valuable policy insights into harnessing the "green welfare" benefits of environmental regulation while mitigating the associated paradoxical outcomes.

Keywords: Green paradox, New China Environmental Protection Law, Carbon emissions, Compliance cost heterogeneity