Economic Policy Uncertainty and Co-Control of Air Pollutants and CO2: Evidence from 282 Cities in China

Abstract

China is currently focusing on the cooperative control of air pollution and CO2 emissions, as well as the mitigation of economic policy uncertainty (EPU). By using panel data from 282 cities spanning from 2003 to 2017 and a newly constructed city-level EPU index, a spatial Durbin, two-way fixed-effects model is employed, with the aim of estimating the impact of EPU on the synergistic emissions intensity (SEI) of air pollutants and CO2. Additionally, this paper investigates the potential channels through which EPU influences SEI. It also explores how pressures related to environmental protection and economic development affect the impact of EPU on SEI. The results indicate that a unit increase in EPU will result in a rise in the SEI of local cities, adjacent cities, and total cities by 930.9%, 69,162.7%, and 70,093.6%, respectively. Moreover, the channel analysis suggests that EPU exacerbates SEI by undermining the upgrading of the industrial structure, augmenting industrial structure distortion, and escalating labor market distortion. Furthermore, the effect of EPU on SEI may be lessened by an increase in environmental protection pressure, while an increase in economic development pressure may exert a positive influence. Finally, this paper concludes by recommending that policymakers should prioritize the maintenance and stability of economic policies, facilitate the advancement of the industrial structure, enhance the efficiency of labor resource allocation, and underscore the significance of managing urban air pollution and CO2 emissions.