Factors influencing the manufacturing industry's pollution emissions: Evidence from China

Using a calibrated quantitative trade-environment model, we examine how environmental regulation, productivity, trade liberalization, industrial structure, and foreign competitiveness impact air pollution emissions in China's manufacturing sector. We find that although the stringency of environmental regulations nearly tripled from 2003 to 2015, major air pollutant emissions decreased by only 6 %. The reasons for failing to achieve significant emissions reduction include soaring productivity, increased trade liberalization, and declining foreign competitiveness. Furthermore, China's environmental regulations remained less stringent than those of developed countries during this period. As trade barriers fell and foreign competitiveness weakened, China's relatively lenient environmental standards provided a competitive advantage to pollution-intensive industries, thereby boosting their exports and creating a domestic “pollution haven”. However, we observe that major air pollutant emissions plummeted by 76 % from 2016 to 2022, with strengthened environmental regulations being a key driver of this sharp decline.