How does the fiscal pressure of local governments affect China's PM2.5 emissions?

Abstract

Affected by the epidemic and other factors, the global economy is in a downturn, and countries around the world are under unprecedented debt pressure. How will this affect environmental protection? Taking China as an example, this paper empirically studies the impact of changes in local government behavior on urban air quality under fiscal pressure. This paper uses the generalized method of moments (GMM) to find that fiscal pressure has significantly reduced PM2.5 emissions, with a unit increase in fiscal pressure will increase PM2.5 by about 2%. The mechanism verification shows that three channels affect PM2.5 emissions: (1) fiscal pressure has prompted local governments to relax the supervision of existing pollution-intensive enterprises. (2) Local governments reduce environmental regulations for attracting more pollution-intensive enterprises. (3) Local governments tend to reduce environmental protection investment to save fiscal expenses. The paper's conclusions provide new policy ideas for promoting environmental protection in China, as well as served as a case for analyzing current changes in environmental protection in other countries.