The Impact Of Environmental Regulations On Total-factor Energy Efficiency

With the rapid development of China’s economy, energy and environmental issue has become a challenge for china’s sustainable economic development. Improving energy efficiency is an effective way to solve the problem of energy and environment issue in China. In this context, the study on how environmental regulation impact the total factor energy efficiency, exploring the balanced development model in energy efficiency and environmental protection, has a very important theoretical and practical significance. However, the environmental pollution as a "harmful" public product, has a very strong external negative effect, the market failure of environmental quality control has spawned the intervention of government regulation policy. But in the background of China’s fiscal decentralization and performance assessment, the local government will have a motivation to violate the existing environmental regulations, which will greatly reduce the effects of environmental regulation. Therefore, based on the Chinese reality, the paper use China’s provincial panel data to analyze the transmission mechanism and the role of environmental regulation on the energy efficiency, and puts forward some suggestions on how to improve the energy efficiency.Firstly, we analyze the mechanism of environmental regulation on the total factor energy efficiency from two aspects, the structure and technology. Environmental regulation, will promote the industrial structure adjustments and energy consumption structure optimization to reduce the energy consumption. On the one hand technological progress can reduce energy consumption through advanced technology equipment and scientific production methods, which will improve energy efficiency and economic output, but on the other hand, the "rebound effect" of technological progress will reduce energy efficiency.Secondly, we use the method of DEA to estimate the total factor energy efficiency of the whole country and the three major regions. The study found that China’s total energy efficiency is lower, and there is a downward trend. In addition, the energy efficiency is significant imbalance in the regions of East, central and West, which is relatively high in eastern, followed by the central, the lowest is the west. However, from the view of energy efficiency decline, the central is the largest, which indicates that central is the key areas of energy saving and emission reduction in China.Finally, using the Tobit model analyze the impact of environmental regulation on the total factor energy efficiency, and further study the impacts of environmental regulation and government intervention in consideration of China’s fiscal decentralization and performance assessment. Empirical test results are as follows: 1) whether in the short-term or long-term, environmental regulation is conducive to energy efficiency. But it has significant differences in the three major regions. The impact of environmental regulation is significantly positive at the 1% level in central, which indicates that the improvement of energy efficiency is beneficial. For the eastern part, the current environmental regulations impact on energy efficiency is positive, but in the long term, the impact is negative. As the western part, the current environmental regulations impact on energy efficiency is positive, In the long term, the impacts were not significant, and in the three regions, the impacts is minimal, indicating that the impacts of environmental regulation on energy efficiency is very limited.2) In the short term, technological progress will inhibit the increase of energy efficiency due to the "rebound effect", but in the long term, the impacts will be positive.3) In the short term, an increase proportion of secondary industry will significantly inhibit the energy efficiency. However, with the transformation of industrial structure, the update of the technological equipment, the industrial structure will have a positive impact on energy efficiency.4) Government intervention, whether in the short term or long term, the impact on energy efficiency is negative, which indicates that the government’s intervention will suppress energy efficiency. However, the government intervention will have an impact on the effect of other factors in a certain extent, it will inhibit the promotion of environmental regulation, but will reverse the impacts of technology progress and industrial structure. At the same time, the impacts of government intervention in the three major regional are differences, the negative impact of government’s market intervention in the eastern part is the largest, but for the central, the government intervention will guide industrial upgrading. Which will also have a promotion in the technological progress and industrial structure in the west.