Environmental regulation and environmental productivity: The case of China

Yan Wang and Neng Shen

Renewable and Sustainable Energy Reviews, 2016, vol. 62, issue C, 758-766

Abstract: Constrained by the dual mission of supporting industrial growth and reducing emissions, China׳s traditional, emission reduction-oriented environmental policies unavoidably face a dilemma. This study adopts the GML index to calculate China׳s industrial productivity by considering environmental factors. In addition, based on the assumption of industry heterogeneity, the author examines the non-linear relationship between China׳s environmental regulation and environmental productivity and calculated the optimal regulation environment for industries. According to this study, when impact of undesirable outputs (pollutant emissions) is considered, environmental regulation and environmental productivity are positively correlated, which to some degree validates the Porter Hypothesis. At present, environmental regulation has significant positive effects on clean production industries but shows a lag effect on pollution-intensive industries. The degree of environmental regulation and environmental productivity show an “inverted U”-shaped relation and display three thresholds. It should be noted, however, that the relationship between regulation and productivity may vary across industries. These findings have clear policy implications: rather than continually increasing the level of environmental regulation, the government should establish standards for individual industries that emphasize flexibility.

Keywords: Environmental regulation; Environmental productivity; Global Malmquist Luenberge (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (91)

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DOI: 10.1016/j.rser.2016.05.048

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