How Environmental Regulation Affects Industrial Green Total Factor Productivity in China: The Role of Internal and External Channels

Abstract

Many nations have enacted diverse environmental control regulations to address environmental and climate concerns. Analyzing how environmental regulation affects industrial green total factor productivity can aid in creating appropriate environmental regulation laws and realizing peaceful coexistence between man and nature. Based on the panel data of various provinces in China from 2011 to 2019, this paper used the data envelopment analysis method to measure the industrial green total factor productivity and then used the system generalized method of moments model to empirically study the differential effect of heterogeneous environmental regulation on China’s industrial green total factor productivity. In addition, this paper also conducted a test of internal and external mechanisms. The statistics show that environmental regulation can boost the growth of industrial green total factor productivity and pass the robustness test. Innovation ability is the external mechanism variable of environmental regulation acting on industrial green total factor productivity. Regulation can improve industrial productivity and significantly suppress industrial pollution emissions, but market-based environmental regulations do not have an effective impact on carbon emissions. Environmental regulations in economically developed regions can promote the growth of industrial green total factor productivity, but for financially backward areas, market-based environmental regulation inhibits the promotion of industrial green total factor productivity, while command-and-control environmental regulation is not helpful for industrial green total factor productivity.