Impact of Environmental Protection Tax on carbon intensity in China

Abstract

In the context of increasingly severe global climate change, finding effective carbon emission reduction strategies has become key to mitigating climate change. Environmental Protection Tax (EPT), as a widely recognized method, effectively promotes climate change mitigation by encouraging emission reduction behaviors and promoting the application of clean technologies. Based on data from 282 cities in China, this paper takes the official implementation of the EPT in 2018 as the policy impact and the cities with increased tax rates for air taxable pollutants as the treatment group and uses DID model to systematically demonstrate the relationship between the implementation of the EPT and carbon intensity (CI) and further explores the possible pollutant emissions and green innovation mediating effects. The findings show that (1) the implementation of EPT can effectively reduce CI by about 4.75%, and this conclusion still holds after considering the robustness of variable selection bias, elimination of other normal effects, policy setting time bias, and self-selection bias. (2) The implementation of EPT can reduce CI by reducing pollutant emissions and improving the level of green innovation. (3) There is obvious regional heterogeneity in the carbon reduction effect of EPT, and the implementation of EPT has a more significant effect on CI in medium-tax areas, low environmental concern areas, general cities, and eastern regions. This paper not only provides a new analytical perspective for systematically understanding the carbon emission reduction effect of EPT but also provides policy insights for promoting regional green transformation and advancing carbon peak carbon neutralization.

Keywords: Carbon intensity; Difference-in-differences model; Environmental Protection Tax; Environmental regulation; Green innovation; Quasi-natural experiment.