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Can the Environmental Protection Tax Promote the Improvement of Energy Efficiency? Evidence from Prefecture-Level City Data in China

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  • Yuxin Ning

    (School of Economics and Management, Xi’an Shiyou University, Xi’an 710065, China)

  • Jifeng Duan

    (School of Economics and Management, Xi’an Shiyou University, Xi’an 710065, China)

Abstract

The environmental protection tax (EPT) implemented in 2018 is a significant measure in China’s tax system reform, providing a valuable opportunity to encourage green development, promote resource conservation, and advance sustainable growth. This study, based on panel data from Chinese prefecture-level cities between 2006 and 2021, uses the 2018 EPT as a quasi-natural experiment and applies the difference-in-differences (DID) model to empirically examine the impact of the EPT on urban energy efficiency. The results show that the EPT effectively enhances urban energy efficiency. Strengthening environmental law enforcement and promoting technological innovation are identified as key pathways to improving energy efficiency. Heterogeneity analysis reveals that the reform has a more significant impact on energy efficiency in southern cities compared to northern cities, and the effect is more pronounced in large cities than in smaller ones. This study enriches the existing literature on EPT and the application of institutional theory, providing empirical evidence for the effectiveness of the reform, highlighting the importance of enhancing local government environmental enforcement, and promoting technological innovation in improving energy efficiency. It offers valuable theoretical and practical guidance for policymakers, contributing to the low-carbon transition and the achievement of sustainable economic growth.

Suggested Citation

  • Yuxin Ning & Jifeng Duan, 2024. "Can the Environmental Protection Tax Promote the Improvement of Energy Efficiency? Evidence from Prefecture-Level City Data in China," Sustainability, MDPI, vol. 16(23), pages 1-24, November.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:23:p:10457-:d:1532362
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    References listed on IDEAS

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