Can environmental tax curb air pollution: evidence from China

Zheng Li

Applied Economics Letters, 2023, vol. 30, issue 11, 1449-1452

Abstract: Using the environmental tax reform implemented in 2018 in China as a quasi-experiment, this paper employs PSM, DID, and DDD methods to investigate the causal impact of environmental tax on air pollution. Viewing those provinces that choose to set a higher tax rate than the original pollution fee rate as the treatment group and provinces that do not increase the tax rate as the control group, this paper provides robust evidence that the environmental tax reform is effective in reducing PM2.5 and SO2 concentration level, while the effect is smaller and inconsistent for NO2. A back-of-the-envelope welfare analysis suggests that a 1-unit increase in the environmental tax rate is associated with a reduction of 5,616 in total deaths and a welfare gain of $28.256 billion in 2005 USD for all Chinese households.

Date: 2023
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DOI: 10.1080/13504851.2022.2061703

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