Does urban haze pollution inversely drive down the energy intensity? A perspective from environmental regulation

Abstract

Abstract Reducing energy intensity has consistently been advocated by the Chinese government in its effort to achieve sustainable development targets. Extant research suggests that energy consumption is often viewed as the primary cause of poor air quality. This paper investigates whether a certain threshold of environmental regulation causes the relationship to be reversed, that is, whether urban haze pollution could facilitate the reduction of energy intensity. On the basis of the city‐level panel data within the period of 2010–2015 in China, we systematically analyze the determinants of energy intensity and empirically investigate the dynamic threshold effects of environmental regulation on the association between urban haze pollution and energy intensity. The results suggest that serious haze pollution does reduce energy intensity, but it is dependent on environmental regulation. In particular, weak environmental regulation fails to optimize energy usage. With environmental regulation passing a critical threshold, urban haze pollution significantly decreases energy intensity. Therefore, the heterogeneous effect of environmental regulation across different regions should be considered. We find evidence that air pollution could inversely drive down energy intensity under a certain threshold level of environmental regulation. This result provides insights to policy makers and may help them design and implement more efficient urban environmental policies.