Can target-based environmental regulations effectively improve city air quality? Evidence from China's total emissions control policy

This paper uses city-planned air pollution reductions under China's Total Emissions Control (TEC) Policy between the 10th and the 12th Five-Year Plan (FYP) periods (2001-2015) to estimate the atmospheric effects of target-based environmental regulations. We hypothesize with a multi-task agency model that targeted-based regulation can reduce emissions of targeted air pollution but does not necessarily improve city air quality. Our difference-in-differences framework confirms that the TEC policy reduced the emissions of a targeted air pollutant, Sulfur Dioxide (SO2), but worsened the overall city air quality. We also document that in contrast to the persistent air quality worsening effect, the SO2 emission reduction effect decreased over FYP periods but is greater in late FYP periods and more marketized areas. Moreover, the adverse air quality effect is more pronounced in cities with top leader turnovers and northern cities. These results suggest that target-based environmental regulation shifts emissions from targeted pollutants to non-targeted ones.