Study On The Mechanism Of Environmental Regulation To Environmental Protection Industry

As the fast development of China's economics China has paid huge price of energy and environment. The problem of the way of sacrificing the environment to gain the economic development is becoming increasingly serious. Under this background China has made the decision of developing the strategic new industries. As one of the seven important strategic new industries, the healthy development of environmental protection industry is directly related to solving the contradiction between sustaining the economic growth and protecting the environment efficiently in the future years in China. Therefore, the effect of the environmental regulation to environmental protection industry becomes an urgent problem.In order to comprehensively understand the development condition of the environmental protection industry this paper analyses China's current situation of the environmental protection industry. Based on the analysis of the total amount of the environmental protection industry we introduce the relative competition index according to the method of revealed comparative advantage index in the international trade field to calculate the development level of environmental protection industry in different areas, the result of which shows that the level of environmental protection industry of the central area is the highest, the eastern area is the second and the western aero is the lowest.The nature of environmental protection industry is particular and the conclusion of analyzing the model shows that the environmental protection industry has positive externality, while the pollution has negative externality. Therefore, the problem of market failure demands that the development of environmental protection industry needs government intervention. Through the theoretical analysis we know that the environmental regulation policy affects the environmental protection industry by three effects which are the subsidy effect, demand effect and innovation effect, and it works by four ways of environmental subsidy, pollution charge, environmental pollution control investment and research funding.Furthermore, this paper introduces variables of environment quality, population quality and environment awareness as control variables. In order to clarify how does each factor of the environmental protection industry play its role this paper choose panel data from 2001 to 2007 to do the empirical analysis, the result of which shows that in the short time the subsidy effect and demand effect of environmental regulation to the environmental protection industry is significant while the innovation effect is not significant. So the government environmental subsidy, pollution charge, environmental pollution control investment play a positive role on the competitiveness of the environmental protection industry. And both the innovation effect and population quality have an effect on the development of environmental protection industry in the long run. The empirical result of each area shows that the factors affecting the environmental protection industry is different in the eastern, central and western area, and the influence degree of each factor could explain the differences of environmental protection industry of each region at the same time.At last we put forward some suggestions to improve the development of our country's environmental protection industry according to the conclusion and put forward the specific suggestion on different region.