Does environmental regulation affect CO2 emissions? Analysis based on threshold effect model

Abstract

With the increasing pressure on China to reduce carbon dioxide (CO2) emissions, it is crucial to clarify the effect of implementing environmental regulations and their impact on the region. Many studies have focused on the linear, rather than nonlinear, relationship between environmental regulation and CO2 emissions. The exploration of nonlinear relations is conducive to the in-depth study of policy effects and regional differences of environmental regulations in China. To ensure effective CO2 emission reductions, regional differences in CO2 emissions in China should also be considered. In this study 30 provinces of China were divided into three different regions according to their level of economic development from 2004 to 2015. Taking the energy intensity and foreign direct investment (FDI) as threshold variables, a threshold model was used to examine the relationship between environmental regulation and CO2 emissions. It was found that environmental regulation has a threshold effect on CO2 emissions, with significant differences among the eastern, central, and western regions. Environmental regulations in the eastern region were ineffective for curbing CO2 emissions, while the energy intensity was in the middle and low threshold range. However, FDI had a promotional effect on CO2 emissions. In the central region, environmental regulations reduced CO2 emissions under the influence of energy intensity and FDI. In the western region, environmental regulations could not mitigate CO2 emissions when the energy intensity and FDI were used as the threshold variables. It was concluded that a diverse range of measures for CO2 reduction should be adopted according to the local economic situation.