How Does Environmental Protection Tax Affect Urban Energy Consumption in China? New Insights from the Intensity Difference-in-Differences Model

Abstract

Against the backdrop of accelerating environmental protection and resource conservation, it is of great significance to achieve energy conservation and sustainable growth. In this context, by collecting panel data from 284 cities in China from 2009 to 2021, this paper constructs an intensity difference-in-differences (I-DID) model, using the implementation of China’s environmental protection law in 2018 as an event shock, to explore the impact of environmental protection tax (EPT) on urban energy consumption. The results indicate that EPT significantly reduces urban energy consumption. After several robustness tests, the estimation results shown above still hold. The mechanism test reveals that EPT mainly reduces energy consumption by promoting urban industrial upgrading, economic openness, and technological innovation. In addition, the heterogeneity test shows that EPT has a greater impact on energy consumption in central and western cities, small and medium-sized cities, non-resource-based cities, and non-old industrial bases. Therefore, to fully improve the positive effect of EPT on urban energy consumption, we suggest increasing energy efficiency, promoting the green transformation of energy structures, enhancing the ability to open-up and innovate, and improving a differentiated regional EPT management system.