The effects of environmental tax reform on urban air pollution: A quasi-natural experiment based on the Environmental Protection Tax Law

Abstract

Air pollution significantly impacts sustainable development and public health. Taking the implementation of China's Environmental Protection Tax Law in China as a quasi-natural experiment, this paper employs the difference-in-differences (DID) and spatial DID models to evaluate the effects of environmental tax reform on urban air pollution. The findings are as follows. (1) Environmental tax reform can significantly reduce urban air pollution, and a series of robustness tests have also been conducted to provide further evidence. (2) Green technology innovation and industrial structure upgrading from a vital transmission mechanism for environmental tax reform to improve air quality. (3) Environmental tax reform significantly inhibits urban air pollution in cities located north of the Qinling-Huaihe line and big cities. (4) Moreover, environmental tax reform not only promotes the improvement of local air quality but also has a significant negative spatial spillover effect, reducing air pollution in neighboring cities. The research conclusions provide theoretical support and policy suggestions for promoting sustainable economic development, rationally optimizing environmental protection tax policies and improving urban air quality.