The spatial spillover effect of higher SO2 emission tax rates on PM2.5 concentration in China

Abstract

Abstract In this paper, the adoption of SO2 emission tax rates higher than the legal minimum standard is regarded as a noteworthy policy reform in China (quasi-natural experiment), and a spatial Difference-in-Differences (Spatial-DID) model is constructed to test the direct effects (local effects) and indirect effects (spatial spillover effects) of SO2 emission tax policy reform on PM2.5 concentrations in the atmosphere of 285 China’s cities. The estimation and calculation results of the Spatial-DID model show that the SO2 emission tax policy reform can significantly reduce local PM2.5 concentration and significantly promote PM2.5 concentration in surrounding areas. The results of heterogeneity analysis show that the SO2 emission tax policy reform can produce a relatively more beneficial spatial spillover effect in eastern cities and higher administrative level cities, while the pollutants emission rights trading and the reform of NOx emission tax rates can produce beneficial spatial spillover effects when cooperating with the reform of SO2 emission tax rates. The results of the mediation effect analysis show that the higher SO2 emission tax rate can aggravate the surrounding PM2.5 pollution by promoting the aggregation level of industrial production factors and the industrial SO2 emission intensity in the surrounding areas, which can support the existence of the pollution heaven effect.