Do raising environmental costs promote industrial green growth? A Quasi-natural experiment based on the policy of raising standard sewage charges

Abstract

In recent years, countries have actively promoted green economic transformation. Formulating reasonable and effective environmental regulation policies is an important way to realize this transformation. Based on a policy of raising standard sewage charges in China, this paper selects the panel data of 30 provinces from 2000 to 2018 and adopts the multi-time Differences-in-Differences (DID) method to empirically examine the effect of raising environmental costs on industrial green total factor productivity (GTFP). This paper finds that industrial GTFP is significantly increased by raising standard sewage charges. The conclusion is still valid after alleviating the endogenous problem and conducting robustness tests. The policy gives a boost to industrial GTFP in Eastern and Western regions, but not significantly in Central regions, according to the heterogeneity test. Further analyses of its transmission process reveal that raising environmental costs can promote industrial green growth, mostly via technological and structural effect. As a result, if all provinces can optimize and upgrade their industrial structures and improve their levels of technological innovation when faced with increasingly strict environmental regulations, they will be able to better change the model of economic growth and realize green industrial development.