Environmental regulation and the growth of the total-factor carbon productivity of China's industries: Evidence from the implementation of action plan of air pollution prevention and control

Abstract To abate the severe air pollution, the Chinese government released the Action Plan of Air Pollution Prevention and Control (APAPPC) in 2013. This paper regards the APAPPC as a quasi-experiment and uses the DID method to investigate the impact of environmental regulation on the growth of green total-factor productivity of China's industries. This article employs the non-radial directional distance function (NDDF) and the global Malmquist index to measure the total-factor carbon productivity of China's industries. Further regressions suggest that the implementation of the APAPPC has significantly promoted the growth of the total-factor carbon productivity in the air pollution-intensive industries, and its marginal effect has steadily increased with time. This result is still valid after using a series of counterfactual tests and robustness tests. The further mechanism study shows that the APAPPC has significantly promoted R&D investment, especially in instruments and equipment, which has effectively promoted technical efficiency and technological advancement. It indicates that stringent and well-designed environmental regulations should lead to a “win-win” situation of environmental improvement and economic development by encouraging enterprises to upgrade their technology and equipment.