Productivity Effect Evaluation on Market-Type Environmental Regulation: A Case Study of SO2 Emission Trading Pilot in China

Abstract

Taking China’s SO2 emissions trading pilot (ETP) in 2007, a large-scale market-based environmental regulation as its target, this paper reexamines the strong Porter hypothesis by adopting the method of propensity score matching-differences-in-differences. Research shows the following results: first, SO2 ETP which provides high flexibility for enterprises in the process of emission reduction, improves total factor productivity (TFP) significantly on the whole. Second, the productivity effect of market-based environmental regulation varies from the productivity level of enterprise. For example, the SO2 ETP has a significant effect on TFP only at 40–80 percent quantile of TFP, and the effect increases at first and then decreases. Third, the financing constraints and bargaining power of enterprises have significant negative moderating effects on the impact of SO2 ETP on TFP, and the moderating effects between state-owned and non-state-owned enterprises exist heterogeneity. In conclusion, it provides reference for the formulation of market-type environmental regulations and the realization of high-quality development for developing countries.

Can Mandatory Disclosure Policies Promote Corporate Environmental Responsibility?—Quasi-Natural Experimental Research on China

“…For the control variables, this paper refers to Feng et al [ 40 ], mainly considering the internal characteristics of the enterprise: (1) Corporate scale, which is expressed by the logarithm of total assets. Small enterprises have less incentive to reform and be green, thus have less advantage in technological innovation, while large ones have more advantage in technological innovation.…”

Environmental Regulation, Enterprises' Bargaining Power, and Enterprises' Total Factor Productivity: Evidence from China

“…Referring to Hou et al (2020), the region-level control variables mainly include GDP per capita (Pgdp), industrial structure (Indu), population density (Pden), foreign direct investment (FDI) and science expenditure scale (Sci) to control the effects of economic development level, industrial structure characteristics, human activity scale, foreign trade and R&D investment on enterprises' TFP. Referring to Ai et al (2020) and Feng et al (2020), this paper also incorporates rm size (Size), asset liability ratio (Lev), rm performance (Roa), capital labor density(CD), ratio of xed assets(FR), and corporate governance, respectively. Among them, the variables of corporate governance level include the shareholding ratio of the largest shareholder (Shrcr), the duality of chairman and general manager (Duality), and the proportion of independent directors (Bodind).…”

“…Taking the full model as an example, on average, environmental regulation increases enterprises' TFP by 4%, and Hypothesis 1 is veri ed. However, compared with the policy effect of SO2 emission trading pilot to improve the enterprises' TFP by 23% (Feng et al 2020), the magnitude of increase is far from adequate and provides greater space and room for improvement.…”

“…Therefore, local government possesses more discretion when implementing environmental regulation policies, which leads to the incomplete implementation of the central government's environmental regulation policies (Chang et al 2015). One of the most important reasons is that enterprises bargain with local governments by virtue of their contribution to local governments' tax, employment rate and economic growth, so as to exempt from environmental regulation to a certain extent (Feng et al 2020). As a typical example, in Jiaokou County, Lvliang City, Shanxi Province, Xinfa aluminum plant paid 85% of the local tax revenue at its peak, and by virtue of this strength the plant managed to escape three shutdown penalties from the Ministry of Environmental Protection.…”

“…This paper provides new evidence for the applicability of Porter hypothesis in developing countries from the perspective of micro enterprises. Second, unfortunately, enterprises' bargaining power has not been paid enough attention by the academic circles, or only measure the bargaining power from a single aspect such as the total output of enterprises (Feng et al 2020), which can't comprehensively re ect the bargaining behavior between enterprises and local government. This paper creatively measures enterprises' bargaining power from a more comprehensive perspective, and reveal the mystery of how enterprises' bargaining power affects the relationship between environmental regulation and enterprises' TFP.…”