The impact of environmental regulation on firms’ energy-environment efficiency: Concurrent discussion of policy tool heterogeneity

Abstract

Energy-environment efficiency can be used as a means of control to change the mode of economic development by considering the pollution reduction factor. Taking China as an example, this study uses a nonradial superefficiency data envelopment analysis method to measure microlevel energy-environment efficiency and investigates the relationship between environmental regulation and efficiency. The findings show that for every 1% increase in environmental regulation, firms’ energy-environment efficiency increases by approximately 0.04% and that environmental regulations have a greater impact on pollution-intensive firms and private firms compared to other types of firms. A median effect model shows that end treatment and source control are important channels through which environmental regulation can improve firms’ energy-environment efficiency. In addition, the influence of different environmental regulation policy tools on firm energy-environment efficiency is heterogeneous. With every 1% increase in a command-and-control and market-based incentive policy, energy-environment efficiency increases by 0.01–0.02%, while the effect of public participation policy tools is not significant. This study provides not only new micro empirical evidence for evaluating the effect of environmental regulation but also a reference for applying and coordinating different types of environmental policy tools.

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