Does Environmental Regulation Affect Natural Gas Consumption? Evidence from China with Spatial Insights

Abstract

How environmental regulations affect natural gas consumption in China is an urgent issue that must be addressed to achieve the optimal allocation of natural gas resources. The nonspatial panel model and spatial Durbin model have been applied in this paper to explore the impact of environmental regulation on gas consumption and the influence mechanism of such regulation. The results show that there is a N-inverted curve between environmental regulation and gas consumption at the national level. Three main mechanisms (or paths) by which environmental regulation affects natural gas consumption are discovered: controlling the total amount of coal in the energy mix, reducing industrial coal consumption and adjusting energy market prices. The first and third paths positively and significantly affect gas consumption, while the second path negatively affects gas consumption. Second, the spillover effects of environmental regulation promote the growth of gas consumption and integration of the natural gas market at the national level. Considering the provincial level, however, some regions have high regulation-high gas consumption intensity (HH), while others have low regulation-low gas consumption intensity (LL). Based on the above conclusions, we give recommendations for improving energy regulations in different regions to promote the development of regional natural gas markets.

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“…CCCP is a kind of strict environmental regulation. It may encourage power generation companies to switch from coal consumption to natural gas consumption (Wang et al, 2020 ). However, due to the higher energy substitution costs, Chinese companies tend to follow the pollution mode of “pollution first and treatment later” and use its environmental investment to treat pollution (Yuan & Geng, 2010 ).…”