The threshold effect of environmental regulation on the green transition of the industrial economy in China

Abstract

The goal of environmental regulation is to simultaneously achieve a win–win situation of economic growth and environmental quality. Based on the Porter hypothesis and panel data from 2001 to 2011, this study conducts empirical research on the intensity of environmental regulation and industrial green transformation in China. The results indicate that environmental regulation can effectively promote industrial green transformation by improving green total factor productivity (G.T.F.P.). But there is no simple linear relationship between the two. And there is a threshold effect, that is, the degree of influence of environmental regulation on industrial green transformation can change with the change of threshold value. Therefore, government policy should not focus only on the environmental regulation intensity, which cannot efficiently improve the G.T.F.P., or accelerate the green transition process. Instead, government should adopt different environmental policies in different industrial sectors.