Can higher SO2 emission tax rates reduce PM2.5 concentration in China's cities? A quasi-natural experiment from the perspective of spatial spillover

Abstract

In this paper, the adoption of SO2 emission tax rates higher than the legal minimum standard is regarded as a noteworthy policy reform in China's cities (quasi-natural experiment), and a spatial Difference-in-Differences (Spatial-DID) model is constructed to test the direct effects (local effects) and indirect effects (spatial spillover effects) of SO2 emission tax policy reform on PM2.5 concentrations in the atmosphere of 285 China's cities. The estimation and calculation results of the Spatial-DID model show that the SO2 emission tax policy reform can significantly suppress local PM2.5 pollution and significantly promote PM2.5 pollution in surrounding areas. The results of heterogeneity analysis show that the SO2 emission tax policy reform can produce a relatively more beneficial spatial spillover effect in cities in the eastern region, higher administrative level cities, and pollutant emission rights trade pilot cities. The results of the mediation effect analysis show that the higher SO2 emission tax rate can aggravate the surrounding PM2.5 pollution by promoting the aggregation level of industrial production factors and the industrial SO2 emission intensity in the surrounding areas, which can support the existence of the pollution heaven effect.