Strategic interaction in environmental regulation and sulfur dioxide emissions: Evidence from China

Environmental regulation is the central government's main instrument for pollution control, but its actual implemen-tation effect directly depends on the level of enforcement by local governments. Using panel data of 30 regions in Mainland China from 2004 to 2020 and a spatial Durbin model, we investigated the effects of strategic interaction among local governments in environmental regulation on sulfur dioxide (SO2) emissions. We found a "race to the top" behavior in the enforcement of environmental regulation among China's local governments. The enhancement of environmental regulation in a region or in its adjacent regions can significantly reduce SO2 emissions in that region, indicating that joint environmental governance can achieve considerable pollution control effects. Furthermore, influ-ence mechanism analysis shows that the emission reduction effect of environmental regulation is primarily achieved through green innovation and finance. In addition, we found that environmental regulation has a significant negative impact on SO2 emissions in low-energy-consuming regions, but not in high-energy-consuming regions. Our findings indicate that China should continue to implement and deepen the green performance appraisal system for local gov-ernments and improve the efficiency of environmental regulations in high-energy-consuming regions.