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Productivity Effect Evaluation on Market-Type Environmental Regulation: A Case Study of SO 2 Emission Trading Pilot in China

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  • Yanhong Feng

    (School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China)

  • Shuanglian Chen

    (Guangzhou International Institute of Finance and Guangzhou University, Guangzhou 510006, China)

  • Pierre Failler

    (Economics and Finance Group, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK)

Abstract

Taking China’s SO 2 emissions trading pilot (ETP) in 2007, a large-scale market-based environmental regulation as its target, this paper reexamines the strong Porter hypothesis by adopting the method of propensity score matching-differences-in-differences. Research shows the following results: first, SO 2 ETP which provides high flexibility for enterprises in the process of emission reduction, improves total factor productivity (TFP) significantly on the whole. Second, the productivity effect of market-based environmental regulation varies from the productivity level of enterprise. For example, the SO 2 ETP has a significant effect on TFP only at 40–80 percent quantile of TFP, and the effect increases at first and then decreases. Third, the financing constraints and bargaining power of enterprises have significant negative moderating effects on the impact of SO 2 ETP on TFP, and the moderating effects between state-owned and non-state-owned enterprises exist heterogeneity. In conclusion, it provides reference for the formulation of market-type environmental regulations and the realization of high-quality development for developing countries.

Suggested Citation

  • Yanhong Feng & Shuanglian Chen & Pierre Failler, 2020. "Productivity Effect Evaluation on Market-Type Environmental Regulation: A Case Study of SO 2 Emission Trading Pilot in China," IJERPH, MDPI, vol. 17(21), pages 1-27, October.
    • Handle: RePEc:gam:jijerp:v:17:y:2020:i:21:p:8027-:d:438137
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