What comes after picking pollution intensive low-hanging fruits? Transfer direction of environmental regulation in China

Environmental regulation has played an important role in energy conservation and emissions reduction. In the context of a worsening environment, the Chinese government has realized the disadvantages of extensive development and has launched a full range of actions for energy-intensive and heavy-polluting industrial sectors, which are called "low-hanging fruits." However, this principle has challenges, such as bottlenecks in emissions reduction and development restrictions in certain sectors. To solve these problems, this paper divides 37 industries into heavy-, middle-, and low-polluting industrial sectors according to a pollution intensive index. Subsequently, three types of environmental regulation measurements (mandatory control environmental regulation, market incentive environmental regulation, and voluntary compliance environmental regulation) are applied to verify the heterogeneous effects of environmental regulations on the green total factor productivity. In this study, super-epsilon-based measure model and global Malmquist-Luenberger index are used to calculate the green total factor productivity of these industries. Thus, a better understanding of environmental regulations in regards to polluting industrial sectors is provided. The results show that different types of environmental regulations exhibit heterogeneous effects on the green total factor productivities of different polluting industrial sectors. The relationship between the mandatory control environmental regulation/market incentive environmental regulation and the green total factor productivity for heavy-polluting industries is shown to be an inverse U shape that crosses an inflection point, indicating that the environmental regulation intensity of heavy-polluting industry is sufficient, perhaps even excessive. Notably, the relationship between the three environmental regulations and the middle-polluting industries all present a U shape, and the environmental regulation intensities are far away from the inflection point. In that regard, excessive regulation may lead to high operating costs and may burden low-polluting industrial sectors. In such cases, strengthening the environmental regulations for middle-polluting industries should be an efficient and reasonable way to achieve a win-win direction for both environmental protection and economic development. (C) 2020 Elsevier Ltd. All rights reserved.