How effective is China’s SO2 emissions regulation?

Bu, Wenchao (2025) How effective is China’s SO2 emissions regulation? PhD thesis, University of Glasgow.

Abstract

China’s rapid industrialization has spurred severe environmental challenges, with sulfur dioxide (SO₂) emissions posing significant threats to public health and sustainable development. This thesis evaluates the effectiveness of China’s SO₂ emissions regulations, focusing on the 2006 Eleventh Five-Year Plan (FYP) policy as a quasi-natural experiment. Leveraging difference-in differences (DID) methods and comprehensive firm-level data, the study examines the policy’s causal impacts on firm pollution emissions, total factor productivity (TFP), two-way foreign direct investment (FDI), and export performance.

The analysis reveals that the SO₂ emissions regulation achieved measurable success in reducing firm SO2 emissions, particularly among state-owned and large-scale firms, though with heterogeneous effects across regions and industries. Strikingly, while stricter environmental mandates initially raised compliance costs, they stimulated total factor productivity gains by incentivizing technological innovation. The policy also reshaped China firms’ global engagement: stricter regulation reduced inward FDI in but encouraged outward FDI (OFDI) as firms sought cleaner technologies abroad. Meanwhile, export performance exhibited nuanced outcomes. Export value and export product quality improved as firms upgraded production processes to meet environmental standards.

Mechanism tests underscore the role of innovation offsets, reduction cost, and market reallocation in driving these outcomes. Heterogeneity analyses highlight divergent responses based on firm ownership, firm size, and industry intensity, offering insights into the uneven distribution of regulatory costs and benefits. By integrating environmental economics with firm-level dynamics, this research contributes empirical evidence on the trade-offs and synergies between environmental governance and economic performance in emerging economies.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HB Economic Theory; J Political Science > JA Political science (General); J Political Science > JC Political theory
• Colleges/Schools: College of Social Sciences > School of Social and Political Sciences > Politics
• Funder's Name: China Scholarship Council (CSC)
• Supervisor's Name: Munro, Dr. Neil and Subramanian, Dr. Arjunan
• Date of Award: 2025
• Depositing User: Theses Team
• Unique ID: glathesis:2025-85307
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 08 Jul 2025 10:40
• Last Modified: 08 Jul 2025 10:43
• Thesis DOI: 10.5525/gla.thesis.85307
• URI: https://theses.gla.ac.uk/id/eprint/85307