Do environmental regulation policies increase urban boundary pollution? Micro evidence from Chinese industrial enterprises

Abstract

Industrial organizations frequently opt to relocate their activities to regions bordering administrative boundaries, where regulatory oversight is comparatively lax, to hinder adherence to environmental regulations, which leads to boundary pollution concerns. Using a staggered DID model to Assess the influence of governmental environmental regulations on pollution at administrative boundaries using microdata obtained from Chinese industrial enterprises, this research employs the low-carbon city pilot policy as a quasi-experiment. The following are the study's findings: (1) The low-carbon city pilot policy increase boundary pollution levels by 1.3 % at the industrial enterprise level, supporting the pollution haven hypothesis. A series of robustness tests, including boundary enterprise identification and boundary distance calculations, are used to validate this result. (2) The low-carbon city pilot policy's boundary pollution effect has a fluctuating, wave-like spatial pattern. The pollution effect is most noticeable at about 10 km from the administrative boundary. (3) There is no evidence that the low-carbon city pilot policy's impact on industrial enterprises is consistent with the Porter hypothesis. (4) Environmental regulations are like a two-edged sword. According to data obtained from the branches of financial institutions, environmental regulations not only contribute to boundary pollution but also influence the development of the boundary area to some degree. This research provides original empirical findings from the standpoint of micro-level enterprises, substantiating the presence of boundary pollution as a result of environmental regulation evasion, providing policy recommendations for the development of environmental regulatory policies and the management of urban boundary pollution.