The Impact of Heterogeneous Environmental Regulation Tools on Economic Growth: Can Environmental Protection and Economic Growth Be Win-Win?

Abstract

This paper explores the relationship between economic growth and environmental regulation using panel data for 30 provinces in China from 2009–2021 using the fixed effects model and the threshold model. First, the baseline regression results show that market-based environmental regulation promotes economic growth. However, command-and-control environmental regulation in China can not promote China’s economic growth. Second, further research has shown that environmental regulation’s role in promoting the economy is constrained by the intensity of environmental regulation. Market-based environmental regulation is only able to promote economic growth when the intensity is low. If the intensity of market-based environmental regulation is too high, market-based environmental regulation, on the contrary, can not promote economic growth. Third, The impact of market-based environmental regulation on economic growth also is found to be constrained by the level of economic development: market-based environmental regulation does not promote economic growth when the economy is less developed. It is only when the economy has reached a high level that market-based environmental regulation will contribute to economic growth. Finally, this paper finds that financial development and market-based environmental regulation can synergize to promote economic growth.