| Imbalanced relationship between environment and economic development brings about severe challenges to current human society. A series of important ecological issues not only restrict sustainability of social and economic development, but also put a threat to the survival of mankind. As far as China in development is concerned, Now it faces with two enormous pressures:one is from domestic pressures. Rapid industrialization and urbanization, with large-scale consumption of natural resources, have caused great domestic environmental pressures. Another is from international pressures. With heightening China's international status, the numbers and coverage of international environmental conventions that China signs, will be expanding, thus China will take on more international environmental obligations.Domestic and international environmental pressures push China to strengthen the stringency of environmental governance. At the same time, the international environment of China's development is complicated and variable. This would generate the worries on Chinese economic growth. Would environmental regulation affect China's economic growth, thereby weakening China's economic strength? In order to find the problem, it is of great theoretical and practical significance to research the impacts of environmental regulation on China's economic growth, and to explore a balanced development pattern, which can achieve compatible mode of economic growth and environmental protection.Environmental pollution is a "bad" public product, and it has strong negative external effects. On the basis of externality and economic growth theories, the paper analyzes the mechanism of environmental regulation. Environmental regulation doesn't eliminate pollution, and constraint economic growth, but will control pollution under the carrying limits of the ecosystem to achieve the coordinated development of environment and economy. According to the definition of the target, environmental regulation, from the enterprise's point of view, exerts the impacts on enterprise's economic performance through direct and indirect transitive (environmental performance) mechanism. Either transitive mechanism brings the cost to the enterprise, in the meantime it brings the potential benefits (business opportunities). These benefits and cost cause the net effects (i.e. change in output, productivity changes) to the enterprise. The sum of all enterprises'net effects in the same sector forms the sector's net impacts, further these constitute the country's or region's ultimate outcomes. From the perspectives of sector and region or country level, the net economic effect of environmental regulation can be represented as related indicators such as productivity, technological innovation and industrial competitiveness. These indicators not only reflect economic quality and efficiency of a sector and country (or region), but also are commonly used and most important economic indicators in the literature. Because of positive and negative impacts of environmental regulation on economy, only through comprehensive investigation of various factors, can we make the correct inference and explanation on the ultimate impacts of environmental regulation on sector's and regional or national performance.Basing on the background of the practices of China's environmental regulation, the paper attempt to answer the question, i.e. what are exactly the impacts of environmental regulation on China's economic growth?, by China's provincial panel data and empirical methods. Considering the complex of the net impacts of environmental regulation on economies and the flaws of single indicators, we measure the net effects of environmental regulation, by using various methods and from different points of view. As far as sector and region or country is concerned, the net effects are examined by using indicators such as productivity, technological innovation and industrial competitiveness. According empirical analytical results, we find the following main conclusions:First, China's environmental regulation doesn't hinder economic growth, instead the race-to-the-bottom of environmental standards will impede the sound economic development. Empirical results show that on average regulatory strength of sulphur dioxide is increased by1%, efficiency change and technological change are increased by0.021%and0.016%respectively, thus productivity will improve by0.03%. However enhancing regulatory intensity of industrial chemical oxygen demand (COD) will be not conducive to the efficiency of economic growth, which doesn't mean that the race to the bottom of COD environmental standards could bring about higher efficiency of economic growth, because the negative effects are not caused by environmental regulation itself, but done by the mismatches of environmental governance strategy. Quantile analysis further shows that the environmental regulation competition in sulphur dioxides generally isn't conducive to productivity growth and efficiency change, and its impact on technological change is relatively complicated and variable. When regulatory strength of sulfur dioxides moves towards high quantile points, negative impact on productivity growth tends to rise, and that on efficiency change gradually weakens. Regulatory competition in industrial chemical oxygen demand has positive impact on productivity growth and efficiency change, and loser regulation, larger the positive impact. The directions of impact on technological change vary with different quantile points.Second. China's environmental regulation significantly promotes environmental technology innovation, however it causes adverse effects on the overall technological innovation activities. When the number of three kinds of domestic patents granted is measured as the overall technological innovation, two-step generalized method of moments estimates show that in the period â… , i.e.1990-1999, the coefficient of current environmental variable on average is-0.011, the coefficient of lagged one on average is0.018, and these are not significant; in period â…¡ i.e.2000-2009, the coefficient of current environmental variable on average is0.269, the coefficient of lagged one on average is-0.046. The sum of these coefficients is greater than zero in the two periods, which indicates that although the application of market-oriented instruments is reinforced with the continuous innovation of Chinese environmental regulation system, it generally makes an adverse effect of environmental regulation to overall technological innovation activities because of severe flaws in environmental regulation system. As the environmental regulatory stringency is increased by one unit, the negative long-run marginal contribution of environmental regulation to the number of patent successful application is averagely about0.01unit in1990-1999, and approximately0.43unit in2000-2009. This shows that environmental regulation generates greater negative incentives to overall technological innovation in period â…¡. However considering that environmental regulation is directly toward environmental issues, the paper analyzes the environmental technology innovation activities, we find that environmental regulation creates strong incentives to the number of environmental patent successful application. This shows that environmental regulation provides strong incentives to enterprises's environmental innovation, which can not only bring an enormous innovation gains, but also promotes the development of green economy.Third. China's environmental regulation has a positive effect on industrial competitiveness, thus it promotes the quanlity of economic growth. Within a country, inter-region may be more directly contacted through environmental media, which creates a problem:how do environmental decision-making in one region affect another region's economic decision-making. In order to investigate the impacts of pollution spillover, after controlling regional characteristics, we isolate the "real" impact of environmental regulation on industrial competitiveness by introducing pollution spillover into competitive model. The estimated results demonstrate that the coefficient of environmental variable on industrial competitiveness is0.022-0.036, which is much less than the result of statistical analysis (0.193). These illustrate that if we ignore the factors such as pollution spillover, there is likely to overestimate the effect of environmental regulation, and further lead to incorrect inferences.Therefore, we suggest five main measures to be taken to improve the quality and level of Chinese environmental regulation, and to achieve the more balanced developmental targets between environment and economy, which need to effectively play the positive role of environmental regulation in realizing the developmental pattern. Firstly, Perfect integrated decision-making mechanism of environment and development; secondly, Heighten effectiveness and efficiency of environmental policy implementation; Thirdly, Effectively implement the polluter-pays principle; Fourthly, Clear powers and responsibilities of central and local governments'environmental protection; Finally, Perfect interest coordination mechanism of cross-sector and trans-region. |
