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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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    1. Bai, Chong-En & Xu, Lixin Colin, 2005. "Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 517-539, September.
    2. Meredith Fowlie & Mar Reguant, 2018. "Challenges in the Measurement of Leakage Risk," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 124-129, May.
    3. Chen, Yvonne Jie & Li, Pei & Lu, Yi, 2018. "Career concerns and multitasking local bureaucrats: Evidence of a target-based performance evaluation system in China," Journal of Development Economics, Elsevier, vol. 133(C), pages 84-101.
    4. Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, February.
    5. Fu, Shihe & Viard, V. Brian & Zhang, Peng, 2022. "Trans-boundary air pollution spillovers: Physical transport and economic costs by distance," Journal of Development Economics, Elsevier, vol. 155(C).
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    Cited by:

    1. 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).
    2. 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).
    3. 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.
    4. 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.
    5. Lee, Chien-Chiang & Wang, En-Ze, 2025. "Energy regulation and industrial robot adoption: The role of human capital," Energy Economics, Elsevier, vol. 146(C).
    6. 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).
    7. 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.

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    More about this item

    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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