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Emission leakage and the effectiveness of regional environmental regulation in China

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  • Zhang, Bing
  • Zhao, Daxuan

Abstract

This paper examines the emission leakage by the regional environmental regulation applied in Beijing and its surrounding area. Using the unique firm-level daily emission data, we develop a novel model to estimate the size of immediate leakage through the price mechanism. Our empirics find that leakage offsets about 60% of the total amount of emission reduction in the regulated region and the aggregate emission reduction is less than two percent. We also use the iron and steel industry as an example to show how the prices of input and output factors respond to the regulation.

Suggested Citation

  • Zhang, Bing & Zhao, Daxuan, 2023. "Emission leakage and the effectiveness of regional environmental regulation in China," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:jeeman:v:121:y:2023:i:c:s0095069623000876
    DOI: 10.1016/j.jeem.2023.102869
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    References listed on IDEAS

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    Cited by:

    1. Liu, C. & Wang, J & Reiner, D. M., 2025. "Evidence of Firm-level Pollution Leakage resulting from Clean Air Policy in China," Cambridge Working Papers in Economics 2533, Faculty of Economics, University of Cambridge.
    2. Lee, Chien-Chiang & Wang, En-Ze, 2025. "Energy regulation and industrial robot adoption: The role of human capital," Energy Economics, Elsevier, vol. 146(C).
    3. Zhang, Cong & Tao, Ran & Su, Fubing, 2025. "Legislative decentralization and regulatory dilution: Evidence from air pollution control in China," World Development, Elsevier, vol. 191(C).
    4. Chen, ShiYi & Liang, EnDong & Liu, ChaoLiang, 2025. "“Size-dependent” environmental regulations and spatial labor allocation," Journal of Environmental Economics and Management, Elsevier, vol. 132(C).
    5. Yang, Yongwen & Lee, Juhee, 2024. "Assessing Tax Revenue Implications of Environmental Policy: A Case Study of China’s Channel City Policy," 2024 Annual Meeting, July 28-30, New Orleans, LA 344021, Agricultural and Applied Economics Association.
    6. Zhenran Li & Yaru Cao & Aolin Lai & Qunwei Wang, 2025. "Geospatial Labor Reallocation: The Impact of China’s Clean Air Action on Inter-City Labor Distribution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(7), pages 1937-1969, July.
    7. Wang, Zhiwei & Zhang, Xianfeng & Ding, Chenxin & Sun, Hui, 2025. "Can digital environmental monitoring alleviate environmental inequality? Evidence from ambient air quality standards in China," Energy Policy, Elsevier, vol. 207(C).
    8. Hong, Hai & Huang, Yongbin, 2025. "Order! the border: Multitasking, air pollution regulation and local government responses," Journal of Environmental Economics and Management, Elsevier, vol. 131(C).
    9. Zhou, Kaiguo & Guan, Zihuan & Lian, Yujun, 2024. "Carbon mitigation effect of emission trading product: Perspective from intra-industry carbon leakage," Energy Economics, Elsevier, vol. 140(C).
    10. Chang Liu & Jingrong Wang & David M Reiner, 2025. "Evidence of firm-level pollution leakage resulting from clean air policy in China," Working Papers EPRG2511, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    11. Zihao Ma & Pingdan Zhang, 2025. "Heterogeneous outcomes and fairness issues in environmental governance: Compelling evidence from China’s low-carbon city pilots," Environment and Planning B, , vol. 52(9), pages 2235-2250, November.
    12. repec:ags:aaea22:344021 is not listed on IDEAS

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    Keywords

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    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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