Synergistic effects of environmental regulations on carbon productivity growth in China's major industrial sectors

It is crucial that the implementation of environmental regulations have a positive synergistic effect on carbon productivity growth (i.e., environmentally adjusted productivity growth with the consideration of carbon emissions) for China to realize its sustainable development goals because the country is currently under tripartite pressures of economic growth, carbon emissions control, and environmental pollution reduction. This paper investigates the impact of changes in environmental regulation stringency on industrial-level carbon productivity growth in China. Through utilizing the information entropy method, a new index of environmental regulation stringency is established by taking into account the effects of both pollution reduction consequences and pollution reduction measures. In addition, based on the data envelopment analysis method, a Malmquist carbon productivity index is proposed to estimate the industrial carbon productivity growth of 21 major industrial sectors in China's 30 provinces over 2004-2014. Finally, an econometric regression model is applied to test the synergistic effects of environmental regulations on carbon productivity in China's major industrial sectors. The results show that (1) a stringent environmental regulation is associated with an increase in overall industrial carbon productivity growth in China; (2) there exist significant pass-through effects in China's major industrial sectors that technology can transmit effectively from leader to follower; (3) there also exist obvious follow-up effects in China's major industrial sectors, i.e., the industrial sectors that have larger technological gaps with the leaders catch up faster than others; and (4) the environmental regulations have different effects on industrial sectors with different polluting levels, i.e., there is a positive linear relationship between environmental regulation stringency and industrial-level carbon productivity growth in low-polluting industrial sectors, a parabolic nonlinear relationship between them in high-polluting industrial sectors, and an inverted U-shaped relationship between them in moderate-polluting industrial sectors.