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Alternatives for Emissions Reduction Other Than Regulation: Evidence for Emissions Reduction Driven by Opening up to Foreign Investment

【Authors】
HAN Chao, WANG Zhen
【WorkUnit】
Dongbei University of Finance and Economics, 116025.
【Abstract】

Pollution has become a problem that cannot be ignored as China embarks on the road to high-quality development. It is imperative for China to effectively reduce pollution. Pollutant emissions are closely related to the input of factors, the production process, and pollution control measures. Are there alternatives for emissions reduction other than regulation? Based on the impact of opening up to foreign investment, this paper studies the possible mechanism of pollution reduction by taking sulfur dioxide emissions as an example. The study finds that the opening up to foreign investment significantly reduced the firms' pollutant emissions. At the same time, it is found that after opening up to foreign investment, state-owned firms, large-scale firms and export firms reduced more emissions than firms in pollution-intensive industries and firms in the less regulated areas. The observation of firms' reaction found that opening up to foreign investment can reduce firms' emissions by improving the technical efficiency rather than by increasing the emission reduction investment. The analysis on the aggregate level shows that the emission reduction effect of foreign investment mainly reflects the improvement in emission reduction capacity of firms, rather than the process of resource reallocation between firms. This paper finds that technical efficiency is an important tool to reduce pollution, and in the future China needs to use other policies more flexibly to reduce emissions through technical efficiency to promote green and high-quality development.


JEL:Q53, F21, D21

【KeyWords】
Pollution Reduction, Opening up to Foreign Investment, Firm Behavior, Technical Efficiency