The effect of environmental regulation on air quality: A study of new ambient air quality standards in China

Abstract

Fine particulate matter is becoming a primary component of air pollution in China, damaging public health and economic growth. Although environmental regulation is an important instrument to control air pollution, studies on the effect of environmental regulation are mixed. Do environmental regulations help improve the air quality in urban centers, and what mechanism explains their effects in China? In order to explore the causal relationship between environmental regulations and air quality, the effectiveness of the New Ambient Air Quality Standards—primarily the monitoring of PM2.5—was evaluated using the Difference-in-Differences (DID) method to weaken the endogeneity problems. Our results suggest that the New Standards reduce the concentration of PM2.5 and emissions of SO2 in pilot cities in neither the short-term nor the long-term. Our heterogeneous analyses show that the monitoring efforts, pollution control efforts, and ownership structures can affect outcomes of New Standards significantly, and that they have different influences on various categories of pollutants. Our paper implies that the Chinese government should make more efforts beyond setting up environmental regulations.