Can environmental regulations facilitate total-factor efficiencies in OECD countries? Energy-saving target VS emission-reduction target

Abstract

ABSTRACT The heterogeneity of command-and-control and market-based environmental regulations has been fully discussed. However, the classification of environmental regulations based on target-oriented approaches have not been investigated, especially the differentiated impacts on green total-factor productivity (GTFP). To bridge this gap in the literature, this study divides environmental regulations into energy-saving target (EST) regulations and emission-reduction target (ERT) regulations based on the regulation target, and compares their heterogeneous impacts on GTFP. The GTFP is measured and further decomposed into total-factor economic output efficiency (TFYE), total-factor energy efficiency (TFEE), and total-factor emission efficiency (TFCE) using the extended SBM-DDF model. The empirical research using the panel data of 23 OECD countries from 2004 to 2010 reveals that: (1) The EST regulations have a spillover effect, which can positively affect GTFP and its decomposition terms in the long term. (2) The ERT regulations increase TFYE and TFCE, but reduce GTFP and TFEE. (3) Stricter regulations are more effective in energy conservation and emissions reduction. These findings provide policy implications for governments to effectively achieve environmental governance targets by adjusting and optimizing environmental regulatory instruments.