A study of the influence of regional environmental expenditure on air quality in China: the effectiveness of environmental policy

Based on the panel data model, data on environmental expenditures, the air quality index, economic aggregates, industrial structures, etc., of seven seriously polluted cities in China, from the period 2007–2015, were collected, and this paper estimates the general relationship between environmental expenditures and the air quality index. Besides, the impact of the fuel tax policy on air quality as well as on the relationship between environmental expenditure and the air quality index is tested using the method of regression discontinuity. We find that there is a long-term equilibrium relationship between environmental expenditure and air quality index as well as a 0.0507% positive effect of the former on the latter. Second, for Beijing, Taiyuan, Chongqing, and Lanzhou, a 1% increase in environmental expenditure leads to 0.0773, 0.0125, 0.0965, and 0.0912% decreases in the air quality index, respectively; however, for Shijiazhuang, Ji’nan, and Urumqi, effect of environmental expenditure on air quality is insignificant. Third, both economic growth and optimization of the industrial structure can lead to an improvement of air quality. Fourth, since the implementation of the fuel tax policy in 2009, the air quality of the sample cities has improved, and the pulling effect of environmental expenditure on the air quality index has decreased from 0.0507 to 0.0048%. Our findings cannot only clarify the effect of environmental expenditures on air quality but can also objectively judge the effectiveness of environmental policies of China to a certain extent. It may benefit Chinese government to effectively govern air pollution with fiscal tools in conjunction with economic and environmental characteristics.