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Going Green in China: Firms’ Responses to Stricter Environmental Regulations

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  • Fan, Haichao
  • Graff Zivin, Joshua
  • Kou, Zonglai
  • Liu, Xueyue
  • Wang, Huanhuan

Abstract

This paper finds that major 2006 Chinese environmental reforms creating mandatory emission reduction targets led firms to significantly reduce emissions, especially for firms in more polluting industries. A decomposition of the overall effect shows that firms relied primarily on technology upgrading (75.3%) rather than output cuts (24.7%) in meeting the regulatory changes. The driving forces for this “technique effect” are more water recycling and abatement device adoption. While polluting firms did not increase their green innovation, local equipment manufacturers—likely suppliers—did significantly increase green water patent applications, indicating an expanded environmental service market effect. Tests on firms' economic responses provide more evidence for an “internal” variant of the pollution haven hypothesis because firms' profit, capital, employment, market shares, and entry were all negatively affected by the more stringent regulation. Virage vert en Chine : les réponses des entreprises aux règlements environnementaux stricts Cet article constate que les importantes réformes environnementales de 2006 en Chine, qui ont créé des cibles obligatoires de réduction d'émissions, poussent les entreprises à diminuer considérablement leurs émissions, en particulier dans les industries les plus polluantes. Une décomposition de l'effet global montre que les entreprises se sont principalement appuyées sur des améliorations technologiques (75,3 %) plutôt que sur des coupes de production (24,7 %) pour respecter les changements réglementaires. Les forces motrices de cet « effet technique » sont une hausse du recyclage de l'eau et l'adoption de dispositifs de réduction de la pollution. Alors que les entreprises polluantes n'ont pas poussé leur innovation écologique, les fabricants d'équipements locaux – probablement des fournisseurs – ont considérablement augmenté le nombre de demandes de brevet concernant le cycle écologique de l'eau, indiquant une augmentation de l'effet d
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Fan, Haichao & Graff Zivin, Joshua & Kou, Zonglai & Liu, Xueyue & Wang, Huanhuan, 2019. "Going Green in China: Firms’ Responses to Stricter Environmental Regulations," University of California at San Diego, Economics Working Paper Series qt7tt8g4s3, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt7tt8g4s3
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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