The Spatial Spillover Effects of Environmental Regulation and Regional Energy Efficiency and Their Interactions under Local Government Competition in China

Abstract

Under the pressure of serious environmental pollution and energy shortage, China needs to improve its energy efficiency to alleviate these problems. Environmental regulation is an important constraint on economic development, which has an impact on energy efficiency. Meanwhile, energy efficiency is a reference factor for adjusting environmental policies, which has an impact on environmental regulation. Therefore, the relationship between environmental regulation and energy efficiency needs to be further studied under a unified framework. Based on Chinese provincial panel data, we first use a stochastic frontier model to estimate the energy efficiency of China’s 30 provinces from 2004 to 2019, and then employ a spatial simultaneous equation model to study the spatial spillover effects of environmental regulation and energy efficiency and their interactions. The results show that: (1) Both energy efficiency and environmental regulation have significantly positive spatial spillover effects. Specifically, an overall increase of 1% in energy efficiency in the surrounding areas can promote an improvement in the local energy efficiency by about 1.0404%, and an overall increase of 1% in environmental regulation in the surrounding areas can lead to an increase of about 0.6075% in the local environmental regulation. (2) The impact of environmental regulation on energy efficiency is significantly positive; i.e., under the current situation in China, an increase of 1% in environmental regulation can promote local energy efficiency by about 0.2777%. (3) The impact of energy efficiency on environmental regulation is significantly positive; i.e., a 1% increase in energy efficiency may stimulate local governments to strengthen their environmental regulation by 1.5981%. Accordingly, some targeted policy suggestions are given.