Impact of environmental regulations on the efficiency and CO2 emissions of power plants in China

The power industry is the largest air polluter in China, contributing nearly 40% of CO2 emissions and 60% of SO2 emissions. Under mounting pressure to improve standards of environmental protection, it is imperative that the industry increases the efficiency and environmental performance of power plants in China. We investigate the impacts of three different environmental regulations on efficiency improvement and CO2 reduction: command and control regulations (CCR), market-based regulations (MBR), and government subsidies (GS). We find that MBR and GS have a positive impact on efficiency improvement and CO2 reduction. However, CCR have no significant impacts. This finding has important implications since CCR dominates China’s environmental policy. We discuss the policy implications of these findings, such as China should further release the potential of MBR in the power industry, instead of solely relying on CCR; and pay more attention to the coordination of different policy instruments.

[1]  Nuria E. Hurtado-Torres,et al.  Environmental strategy and performance in small firms: a resource-based perspective. , 2008, Journal of environmental management.

[2]  Adam B. Jaffe,et al.  Environmental Regulation and Innovation: A Panel Data Study , 1996, Review of Economics and Statistics.

[3]  Jun Dong,et al.  The strategic technology options for mitigating CO2 emissions in power sector: assessment of Shanghai electricity-generating system , 2004 .

[4]  Liu Jia.  Thinking on Achievements and Problems of Energy Conservation and Emissions Reduction for Power Industry in China during the 11th Five-year Plan , 2012 .

[5]  Richard O. Zerbe,et al.  THEORETICAL EFFICIENCY IN POLLUTION CONTROL , 1970 .

[6]  Ana Gargallo-Castel,et al.  Job satisfaction: empirical evidence of gender differences , 2005 .

[7]  Francesco Testa,et al.  Environmental regulation and competitive performance: new evidence from a sectoral study , 2011 .

[8]  L. Liang,et al.  Does environmental regulation affect energy efficiency in China's thermal power generation? Empirical evidence from a slacks-based DEA model , 2014 .

[9]  H. Bloch,et al.  Coal consumption, CO2 emission and economic growth in China: Empirical evidence and policy responses , 2012 .

[10]  Kwong Wing Chau,et al.  Improving the Environment with an Initial Government Subsidy , 2003 .

[11]  J. Bi,et al.  Why do firms engage in environmental management? An empirical study in China , 2008 .

[12]  Kjetil Telle,et al.  Do environmental regulations hamper productivity growth? How accounting for improvements of plants' environmental performance can change the conclusion , 2007 .

[13]  Mark Jaccard,et al.  A comparative assessment of economic-incentive and command-and-control instruments for air pollution and CO2 control in China's iron and steel sector. , 2014, Journal of environmental management.

[14]  B. W. Ang,et al.  Input–output analysis of CO2 emissions embodied in trade: A multi-region model for China , 2014 .

[15]  Yong Geng,et al.  Uncovering China’s transport CO2 emission patterns at the regional level , 2014 .

[16]  J. Tobin.  Estimation of Relationships for Limited Dependent Variables , 1958 .

[17]  Scott Milliman,et al.  Firm incentives to promote technological change in pollution control: Reply , 1992 .

[18]  Yong Liu.  Investigating external environmental pressure on firms and their behavior in Yangtze River Delta of China , 2009 .

[19]  R. Likert.  “Technique for the Measurement of Attitudes, A” , 2022, The SAGE Encyclopedia of Research Design.

[20]  Wesley A. Magat,et al.  The Effects of Environmental Regulation on Innovation , 1979 .

[21]  R. Färe,et al.  Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries , 1994 .

[22]  Knut Blind,et al.  The Influence of Regulations on Innovation: A Quantitative Assessment for OECD Countries , 2012 .

[23]  M. Telò,et al.  Politics and markets , 2012 .

[24]  Samarthia Thankappan,et al.  Competitiveness, Environmental Performance and Management of SMEs , 2003 .

[25]  Lei Zhu,et al.  How will the emissions trading scheme save cost for achieving China’s 2020 carbon intensity reduction target? , 2014 .

[26]  Li Li,et al.  Energy conservation and emission reduction policies for the electric power industry in China , 2011 .

[27]  Guohe Huang,et al.  Planning sustainable electric-power system with carbon emission abatement through CDM under uncertainty , 2015 .

[28]  Patrik Söderholm,et al.  Pricing environmental externalities in the power sector: ethical limits and implications for social choice , 2003 .

[29]  Shameek Konar,et al.  Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions , 1997 .

[30]  David Pearce,et al.  Environmentally damaging subsidies in the United Kingdom , 1997 .

[31]  Xingping Zhang,et al.  Energy consumption, carbon emissions, and economic growth in China , 2009 .

[32]  Richard G. Newell,et al.  Environmental and Technology Policies for Climate Mitigation , 2008 .

[33]  J. Bergh,et al.  Perseverance of perverse subsidies and their impact on trade and the environment , 2001 .

[34]  Lawrence J. White,et al.  Innovation in pollution control , 1986 .

[35]  Ying Fan,et al.  Energy consumption and CO2 emissions in China's cement industry: A perspective from LMDI decomposition analysis , 2012 .

[36]  D. L. Kelly,et al.  Trade and the environment with pre-existing subsidies: A dynamic general equilibrium analysis☆ , 2012 .

[37]  T. R. F. Oaster,et al.  Number of Alternatives per Choice Point and Stability of Likert-Type Scales , 1989 .

[38]  Ian W. H. Parry,et al.  A second-best evaluation of eight policy instruments to reduce carbon emissions , 1999 .

[39]  Paul L. Joskow,et al.  Digitized by the Internet Archive in 2011 with Funding from Working Paper Department of Economics the Performance of Coal-buruing Electric Generating Units in the United States: 1960-1980 , 2022 .

[40]  T. Zhao,et al.  Changes of energy-related GHG emissions in China: An empirical analysis from sectoral perspective , 2014 .

[41]  Roberton C. Williams.  Growing State-Federal Conflicts in Environmental Policy: The Role of Market-Based Regulation , 2010 .

[42]  R. Olsen,et al.  Note on the Uniqueness of the Maximum Likelihood Estimator for the Tobit Model , 1978 .

[43]  Jun Li,et al.  Economic instruments for mitigating carbon emissions: scaling up carbon finance in China’s buildings sector , 2011 .

[44]  Yi-Ming Wei,et al.  Potential impact of (CET) carbon emissions trading on China’s power sector: A perspective from different allowance allocation options , 2010 .

[45]  Wang Qi.  Clean Development Mechanism and Construction of Carbon Trading Market in China , 2011 .

[46]  William D'haeseleer,et al.  Impact of the economic recession on the European power sector's CO2 emissions , 2011 .

[47]  Ammon Salter,et al.  THE ELIXIR (OR BURDEN) OF YOUTH? EXPLORING DIFFERENCES IN INNOVATION BETWEEN START-UPS AND ESTABLISHED FIRMS. , 2008 .

[48]  Stephen G. Breyer,et al.  Regulation and its reform , 1982 .

[49]  M. Porter,et al.  Toward a New Conception of the Environment-Competitiveness Relationship , 1995 .

[50]  ZhongXiang Zhang,et al.  Decoupling China’s Carbon Emissions Increase from Economic Growth: An Economic Analysis and Policy Implications , 2000 .

[51]  Noan Walley,et al.  It's not easy being green , 1994 .

[52]  Zongguo Wen,et al.  Estimates of the potential for energy conservation and CO2 emissions mitigation based on Asian-Pacific Integrated Model (AIM): the case of the iron and steel industry in China , 2014 .

[53]  B. Shaffer.  Firm-level Responses to Government Regulation: Theoretical and Research Approaches , 1995 .

[54]  Francesco Testa,et al.  The effect of environmental regulation on firms' competitive performance: the case of the building & construction sector in some EU regions. , 2011, Journal of environmental management.

[55]  Qian Ma,et al.  Factors influencing CO2 emissions in China's power industry: Co-integration analysis , 2013 .