Can government environmental regulation promote low-carbon development in heavy polluting industries? Evidence from China's new environmental protection law

Abstract

In order to better combat environmental pollution, China promulgated the New China Environmental Protection Law (CNEPL) in 2015. Previous studies have focused more on the impact of CNEPL on the enterprise performance and green innovation, ignoring the relationship between CNEPL and industrial low-carbon development. This paper uses the implementation of CNEPL as a quasi-natural experiment and constructs a DID model to analyze whether and how government environmental regulation affect the carbon emissions intensity of heavy polluting industries. The results show that CNEPL implementation significantly reduces industrial carbon emissions intensity. Specifically, after the implementation of the CNEPL, the carbon emissions intensity of the heavy polluting industries decreased by 3.4% annually compared to non-heavily polluting industries. Heterogeneity analysis shows that the CNEPL has greater effects in industries with higher market competition degrees and larger average enterprises sizes. We further study influence mechanisms and find that re-allocation of resources, energy structure optimization, green technology innovation and energy efficiency improvement are significant influence mechanisms. Our findings provide policy insights for using government environmental regulation tools to achieve industrial carbon reduction target.