Can Environmental Protection Tax Decrease Urban Ozone Pollution? A Quasi-Natural Experiment Based on Cities in China

Abstract

The air pollution control in China has gradually transitioned from single pollutant control to multi-pollutant collaborative governance. Among the relevant factors, the control of ozone (O3) pollution has received widespread attention. Among the numerous air pollution regulations, environmental protection tax (EPT) is highly valued, as it can effectively control the emissions of O3 precursors. The objective of this study is to investigate whether the implementation of an EPT can reduce urban O3 pollution in China. Based on this, we used the difference-in-differences (DID) method, combined with the panel data from 221 cities in China from 2015 to 2020, to conduct an empirical analysis of the impacts of EPT reform policy on O3 pollution. The econometrics results indicate that the EPT reform policy can effectively inhibit urban near-surface O3 pollution by approximately 2.1%, and this result was confirmed to be accurate by multiple robustness tests. Additionally, significant spatial heterogeneities of this control effect are captured in this paper. Due to urban development levels and geographical factors, the better pollution reduction effects were national-model environmental protection, and efforts based on inland cities and high-level financial cities. Furthermore, three potential mechanisms, including cutting energy consumption, industrial structure optimization, and technological advance, were verified as being relevant to the impact path of EPT reform policy as to O3 pollution. This paper can provide empirical evidence for O3 pollution control in China, and also contribute to the further improvement of environmental protection policies.