Does stringent environmental regulation lead to a carbon haven effect? Evidence from carbon-intensive industries in China

Abstract

This paper examines the pollution haven effect from the perspective of carbon emission. Based on a theoretical analysis of how stringent environmental regulation affects carbon emission transfer within regions, we put forward the concept of carbon heaven effect (CHE) and explore the mechanism that environmental regulation influences carbon emissions through investment. We employ a mediating effect model to empirically study the existence of CHE in terms of per capita carbon emission, carbon emission intensity, and the proportion of regional carbon emission to the national emission. Further, the impacts of environmental regulation on the scale expansion and employment of carbon-intensive industries (CIIs) are investigated. Our results indicate that: (1) The CHE does exist in China, i.e., different environmental regulation intensities among different areas have indeed caused carbon emission transfer within regions; (2) The impact of environmental regulation on carbon emissions includes the total effect of emission reduction and the indirect effect of carbon-intensive industrial investment transfer; (3) The scale and employment of CIIs in regions with stringent environmental regulation have been constrained, while the regions with weaker environmental regulation become the havens for CIIs development; (4) Giving that the emission reduction targets were assigned and implemented at the provincial level since 2006, we further examine the effects of this constrain policy on CHE, and find that the impacts of environmental regulation on local carbon emission has strengthened.