School of Earth, Environmental, and Marine Sciences Faculty Publications and Presentations
Document Type
Article
Publication Date
2024
Abstract
Recent studies suggest that while environmental policies yield positive environmental effects, they also incur costs for various entities. However, there is a gap in research regarding these policies’ financial impact from the government's perspective. To investigate the extent to which government tax revenue is affected by environmental policies, we employ the Difference-inDifferences (DID) method to estimate the impact of a regional air pollution control policy in China known as the Channel City Policy on the tax revenue of city governments. Our findings indicate that the Channel City Policy (CCP) enhances air quality by reducing PM2.5, SO2, and NOx concentrations by more than 6%. However, it also results in significant tax revenue loss for regulated local governments of around 12%, approximately 1,282.7 billion CNY (equivalent to 189 billion USD). Furthermore, this policy leads to a 12% decrease in the number of new manufacturing entrants in the targeted industrial sectors and a 25% reduction in the profits of existing ones. These results highlight the need for additional fiscal support from the central government to regulate cities under regional environmental policies. Local governments need to find their bottom line to impose regulations without harming their fiscal health.
Recommended Citation
Yang, Yongwen, and Juhee Lee. "Assessing Tax Revenue Implications of Environmental Policy: A Case Study of China’s Channel City Policy." (2024).
Comments
Copyright 2024 by Yongwen Yang and Juhee Lee. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies