Revealing the effectiveness of environmental policy stringency and environmental law on environmental performance: does asymmetry matter?

Abstract

Environmental stringency policy shocks and environmental tax have become fundamental policy tools for mitigating the degradation of the environment. The study explores the effects of environmental tax and environmental stringency policy shocks in the reduction of pollution emissions in China for the time 1993 to 2019. This study is a pioneer in assessing the simultaneous impact of these two policy instruments on pollution emissions in China. For empirical investigation, the study employed NARDL estimation techniques. The NARDL results show that positive shocks in environmental tax reduce N2O emissions by 0.03%, PM2.5 emissions by 0.13%, CO₂ emissions by 0.18%, and GHGs emissions by 0.01%, however, negative shocks in environmental tax increase N₂O emissions by 0.01%, PM2.5 emissions by 0.07%, CO₂ emissions by 0.28%, GHGs emissions by 0.17% in the long run. The long-run results also show that positive shocks in environmental policy stringency reduced CO₂ emissions by 0.94%, GHGs emissions by 0.77%, while negative shocks in environmental policy stringency increased N₂O emissions by 0.17%, PM2.5 emissions by 0.50%, CO₂ emissions by 0.63%. The findings suggest vigorous policy implications.

Keywords: Environmental pollution; Environmental regulation; Environmental stringency policies.