Heterogeneity of the Environmental Kuznets Curve across Chinese cities: How to dance with ‘shackles’?

Abstract

Although an ‘inverted U-shaped’ economy-environment nexus is proposed in the Environmental Kuznets Curve (EKC) hypothesis, this initial configuration is considered to be too restrictive. Considering the diversified pollution, regional heterogeneity and strong government intervention in China, this article investigates EKC's heterogeneity in a panel of 290 cities from 2001 to 2018. Through the investigation of the lag effect and spatial spillover effect of pollution emissions, the heterogeneity of EKC is examined among different pollutants and different regions. Moreover, such heterogeneity pattern also exists between pilot cities and non-pilot cities of three environmental policies (‘pollution rights trading (PRT)’, ‘low-carbon city’ and ‘SO2 emission trading’). The results show that different curve shapes and turning points are associated with EKC heterogeneity. Three regulations are considered effective to strike a balance between urban emission reduction and long-term economic growth. Pollution rights’ trading could contribute to the earlier ‘decoupling’ between urban pollution (both industrial pollution and haze pollution) and economic growth in the pilot cities significantly. The implementation of the ‘low-carbon city’ and ‘SO2 emission trading’ are considered conducive to reducing the emissions of industrial SO2, with the former also resulting in fewer industrial smog emissions. The main contributions of this study are to identify both the temporal and spatial effects of pollution, develop the multidimensional analysis framework on the heterogeneity of EKC and investigate the dual effects of institutional power upon EKC as well as EKC heterogeneity. The implications, nevertheless, are considered as 1) the coordinated environment prevention and control between different regions and 2) the strict inspection of existing policy implementation by respecting each of their heterogeneous effects between regions.