The emissions reduction effect and technical progress effect of environmental regulation policy tools

Abstract How to set out the provisions that ensure emissions reduction and technical progress in environmental regulation is very important for both China’s future emissions reduction and sustainable development. The paper uses statistical data from 30 Chinese provinces from 1997 to 2014 and empirically tests the effects of different types of environmental policies and regulations on emissions reduction and technical progress by using dynamic spatial panel models. The results of spatial autocorrelation tests show that there are both significant positive global autocorrelation and local spatial agglomeration effects relating to pollutant emissions and technical progress. Dynamic spatial panel models indicate that command and control regulations (CCR) are conducive to emissions reduction, but their effects on technical progress are not significant. Market based regulations (MBR) are conducive to technical progress, but their effects on the reduction of emissions are relatively weak. There is a significant inverted-U relationship between economic development level and carbon emissions, validating the EKC hypothesis in China, but the effects of foreign direct investment on carbon reduction and technical progress are not significant. The paper recommends that China should optimize a combination of environmental regulations so as to achieve the win-win outcome of both emissions reduction and technical progress.

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