Stimulate or inhibit? Multiple environmental regulations and pollution-intensive Industries' Transfer in China

Abstract

Given the degradation of the environment, balancing economic development with environmental protection is key to a green China. Therefore, it is of great significance to study the impacts of different environmental policies on China's pollution-intensive industries (PIIs). We look at the main types of environmental policies tools of China in areas of legal, economic and informal regulations, and select typical policies of each type for research. Based on the theoretical model about how environmental regulations affect the transfer decision of polluting enterprises, quantitative empirical tests are conducted in this paper to study the influences of environmental regulations on the transfer of PIIs by using provincial panel data from 2003 to 2016. It is found that: (1) All three types of environmental regulations have significant yet heterogeneous impacts on the transfer of PIIs. (2) With an emphasis on the nonlinear impact of environmental regulations on PIIs' transfer, we find that all the three types of environmental regulations exert inverted-N shaped nonlinear influences. The findings indicate that regions with ultra-stringent or excessively loose regulations are not attractive to polluting industries. However, appropriate environmental regulations stimulate enterprises to innovate, enhance market competitiveness, and increase production. (3) Between regions, spatially heterogeneous influences on PII's transfer are also found. Currently, levels of all types of environmental regulations are relatively low in China, which induce an initial negative correlation between policies and polluting enterprises. As a result, governments should continue to improve environmental regulations to promote a state of positive correlation, realizing a win-win result for environmental protection and economic development.