Favorable Fiscal Self-Sufficiency Enables Local Governments to Better Improve the Environmental Governance—Evidence from China’s Lower-Pollution Areas

Abstract

With the rapid development of industrial economy, local governments in China have invested a large amount of financial funds in environmental protection. In the era of widespread use of clean energy, local governments have a greater responsibility to coordinate fiscal policies with industrial development policies to improve regional environment. Local governments with large fiscal surpluses would make more efforts to improve environmental efficiency, rather than attract heavily polluting industrial enterprises to develop their local economies, and more likely to promote the use of clean energy equipment and raise environmental awareness in government. This paper focuses on testing the impact of abundant fiscal revenue of local governments on the efficiency of regional environmental governance with the data in all prefecture-level cities of China’s Guangdong province from 2001 to 2020. We estimate local environmental governance efficiency score with super-efficiency SBM method, taking unexpected output into account. Then we find that fiscal affluence has significant positive effect on the efficiency of environmental governance and the environmental awareness of the government also has obvious help in improving local environmental efficiency. We hope that these findings will provide practical help for local governments to improve their fiscal policy agendas and the quality of environmental governance.