Evaluation of the Effects of the Ecological Environmental Damage Compensation System on Air Quality

Abstract

This study constructs comprehensive panel data based on the China City Statistical Yearbook and environmental indicators disclosed by the Ministry of Ecology and Environment from 2013 to 2017, using a difference-in-difference (DID) model to empirically validate the effects of the ecological environmental damage compensation system on urban air quality, followed by a further analysis of the system’s effect mechanism, namely, how the system has generated effects on reducing environmental pollution. This study finds that: (1) the ecological environmental damage compensation system can significantly improve urban air quality, and small cities are more sensitive to the pilot policy; and (2) the main impact is that the pilot policy mechanism improved the urban pollutant treatment capacity and reduced the proportion of the secondary industry. After multiple robustness tests, this conclusion still holds. This study provides empirical evidence for fully implementing an ecological environmental damage compensation system.