Inverted-U curve for material consumption of China industrial system: a new implication from environmental regulation

Abstract

We review the research literature on relationship between environmental regulation and industrial development in three aspects of environmental regulation and investment, environmental regulation and efficiency, environmental regulation and trade. Indeed, the linkage between environmental regulation and material consumption of industrial system is absent. Environmental regulation is measured as the expenditure share for industrial pollutants abatement, and effluent charge intensity. Using panel-level data from 31 provinces, municipalities and autonomous regions in China, we build correlation models between material consumption and environmental regulation, results show that: (1) there are significant quadratic function relationship between material consumption and environmental regulation. And there is the fact that inflection point exists. (2) On basis of inflection points, we make two remarkable reflections. Firstly, the inflection points are the most important scale to judge reasonability and performance of regulations. Secondly, a Pareto improvement may occur when the regulations achieve a certain target. (3) Both intensities of industrial pollutants abatement expenditure and effluent charge have not yet achieved the expected target in most regions of mainland China at present. And most of regions of material consumption decreasing are distributed in western China. Main reasons lie in the impacts of industrial features as well as the regulations.