Could Environmental Regulations Reduce Energy Consumption: Evidence From China’s Implementation of an Environmental Pollution Tax

Abstract

This article investigates the impact of environmental regulations on energy consumption. As the main way for the government to protect the environment, the implementation of environmental pollution tax has played an important role in China’s energy consumption. This article uses data from the implementation of environmental pollution tax in Chinese cities to match with urban energy consumption data, and uses the difference-in-difference method (DID) to estimate the impact of environmental regulations on energy consumption. We find that the implementation of environmental pollution tax has reduced energy consumption, but this effect is mainly effective in the central and western regions and two-controlled areas. Further analysis shows that the reduction of energy consumption by environmental pollution tax is mainly attributed to improving technological innovation capabilities, optimizing industrial structure, and increasing tax collection intensity. The results in this study provide evidence for achieving an environmentally friendly society and sustainable development.