Accepted Manuscript

The effect of environmental regulation on air quality: A study of new ambient air
quality standards in China

Kunlun Wang, Hongchun Yin, Yiwen Chen

PII: S0959-6526(19)30072-1
DOI: https://doi.org/10.1016/j.jclepro.2019.01.061
Reference: JCLP 15448

To appear in: Journal of Cleaner Production

Received Date: 2 October 2018

Revised Date: 13 December 2018
Accepted Date: 7 January 2019

Please cite this article as: Wang K, Yin H, Chen Y, The effect of environmental regulation on air quality:
A study of new ambient air quality standards in China, Journal of Cleaner Production (2019), doi: https://
doi.org/10.1016/j.jclepro.2019.01.061.

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Title : The effect of environmental regulation on air quality：A study of new Ambient
Air Quality Standards in China

Authors & Affiliations:

Kunlun Wang, College of Management and Economics, Tianjin University, Tianjin
300072, China(Corresponding Author), E-mail:shawn0513@tju.edu.cn
Hongchun Yin, College of Management and Economics, Tianjin University, Tianjin
300072, China, E-mail: tjuachun@163.com

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Yiwen Chen, School of public affairs, Xiamen University, Xiamen 361005, China,
E-mail: 33420161150556@stu.xmu.edu.cn

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1 The effect of environmental regulation on air quality: A study

2 of new Ambient Air Quality Standards in China

3 This paper has not been submitted elsewhere in identical or similar form, nor will it be

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4 during the first three months after its submission to the Publisher.

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5 Abstract: Fine particulate matter is becoming a primary component of air

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6 pollution in China, damaging public health and economic growth. Although

7 environmental regulation is an important instrument to control air pollution,

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8 studies on the effect of environmental regulation are mixed. Do environmental

9 regulations help improve the air quality in urban centers, and what mechanism
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10 explains their effects in China? In order to explore the causal relationship

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11 between environmental regulations and air quality, the effectiveness of the New

12 Ambient Air Quality Standards—primarily the monitoring of PM2.5—was

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13 evaluated using the Difference-in-Differences (DID) method to weaken the

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14 endogeneity problems. Our results suggest that the New Standards reduce the

15 concentration of PM2.5 and emissions of SO2 in pilot cities in neither the

16 short-term nor the long-term. Our heterogeneous analyses show that the

17 monitoring efforts, pollution control efforts, and ownership structures can affect

18 outcomes of New Standards significantly, and that they have different influences
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19 on various categories of pollutants. Our paper implies that the Chinese

20 government should make more efforts beyond setting up environmental

21 regulations.

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22

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23 Keywords: air pollution; environmental regulations; natural experiment; air

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24 quality standards; Difference-in-Differences (DID)

25

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26 1. Introduction
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27 In recent years, environmental pollution has become a major concern in

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28 China, with far-reaching adverse effects on public health and economic

29 development. The entire compliance rates of all prefecture-level cities’ air quality
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30 were 51.69% and 89% in 2005 1 and 2011 2, respectively. After updating the
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31 Ambient Air Quality Standards, only 73 of all 338 prefecture-level cities in China

32 met the national ambient air quality standards in 2015 3 . The average

1.The 2005 China Environmental Bulletin is available at:

http://www.mee.gov.cn/hjzl/zghjzkgb/lnzghjzkgb/201605/P020160526558688821300.pdf
2.The 2011 China Environmental Bulletin is available at:
http://www.mee.gov.cn/hjzl/zghjzkgb/lnzghjzkgb/201605/P020160526563389164206.pdf
3. The 2015 China Environmental Bulletin is available at:
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33 concentration of fine particulate matter (PM2.5) is over 80ug/m3 in eastern China

34 (Van Donkelaar et al., 2010). The Chinese population-weighted average PM2.5

35 concentration was 52ug/m3 in 2015, which contributed to roughly 17% of all

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36 deaths in China (Rohde & Muller, 2015). Ebenstein et al. (2017) suggested that a

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37 person’s life expectancy in North China declined by 0.64 years after a PM10

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38 concentration increase of 10ug/m3. High concentrations of PM2.5 increase the

39 frequency of stroke, heart disease, lung cancer, and mental health issues (Zhang

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40 et al., 2017). Other studies have shown that air pollution hurts economic activities

41 badly. Xia et al. (2016) utilized a developed input-output model to estimate the
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42 monetary value of total losses caused by severe air pollution in China, the results
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43 of which suggested that air pollution in 30 provinces affects 72 million

44 employees and cause 346.26 billion CNY in losses—approximately 1.1% of the

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45 national GDP—in 2007. From 2000 to 2010, the losses of health and productivity
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46 caused by air pollution amounted to 6.5% of the GDP in China (Crane & Mao,

47 2015). Gao et al. (2015) estimated that the severe haze event in January 2013

48 caused economic consequences of up to 253.8 million US dollars.

http://211.81.63.2/cache/8/03/www.mee.gov.cn/6be585d7d4386618f922616dd8fcec87/P0201606
02333160471955.pdf
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49 Grossman and Krueger (1991) found that the relationship between

50 economic development and pollution is an inverted-U curve, which shows that

51 pollution will decline as per capita income rises. A critical review of the

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52 Environmental Kuznets Curve (EKC) stated that its shape is not fixed (Dasgupta

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53 et al., 2002; Özokcu, & Özdemir, 2017). The shape of an EKC is influenced by

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54 the environmental regulation of the region. Some literature states that regulation

55 is the dominant factor in explaining the decline in pollution. Shapiro and Walker

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56 (2015) used U.S. manufacturing data to examine the role of several factors in

57 reducing the air pollution from 1990 to 2008. Their results showed that
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58 environmental regulation contributes more to the reduction of pollution emissions

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59 than do changes in trade or productivity.

60 Fine particulate matter is attracting more and more public attention. The
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61 Chinese government revised the national ambient air quality standards, which set
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62 the concentration standards of air pollutants, and introduced PM2.5 into the

63 monitoring system for the first time. Much of the literature focuses on

64 command-and-control environmental regulations (CACs). Theoretically, the roles

65 and effects of these environmental regulations are evident and can improve air

66 quality significantly. However, their actual effects are ambiguous in both

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67 developed and developing countries. Greenstone (2004) tested the effectiveness

68 of the Clean Air Act in reducing the concentration of sulfur dioxide (SO2

69 hereafter), concluding that it played a minor role in the reduction of the

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70 concentration of SO2 from the 1970s to the 1990s in the U.S.A. Greenstone and

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71 Hanna (2014) found that Supreme Court Action Plans (SCAPs) improved the air

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72 quality in India. However, Blackman and Kildegaard (2010) found no evidence

73 that stricter regulation increased the adoption of cleaner technology when

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74 studying plant-level data. The effects of driving restrictions on air pollution are

75 also debatable (Davis, 2008; Gallego et al., 2013; Sun et al., 2014; Viard & Fu,
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76 2015; Lu, 2016; Zhong et al., 2017).

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77 Scholars have done further studies to analyze and summarize the factors
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78 influencing the outcomes of environmental regulation. Duflo et al. (2013)

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79 performed a randomized controlled trial of audits, with results suggesting that

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80 assuring the accuracy of audit reports could improve regulatory compliance and

81 reduce emissions. In line with previous studies, this experiment emphasized the

82 importance of monitoring. The enforcement of environmental regulations is an

83 essential determinant of their effectiveness (Bao et al. 2013; Li & Weng, 2014;

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84 Carrillo et al. 2016). Shi et al. (2016) found that regulatory policies had a more

85 significant effect in cities, which have more state-owned thermal power plants.

86 However, Wang and Jin (2007) and Jiang et al. (2014) concluded that state-owned

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87 enterprises could reduce their payment of emissions charges due to their stronger

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88 bargaining power, leading to higher levels of pollution. The introduction of

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89 ecological and environmental performance into local bureaucrats’ performance

90 evaluation systems can enhance the effectiveness of environmental regulations

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91 (Kahn et al., 2015; Tang et al., 2016; Tang et al., 2018; Chen et al., 2018). In

92 summary, these factors may provide some explanation as to the mixed effects of
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93 environmental regulations.
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94 Another reason that the actual effects of policies are unclear is

95 endogeneity, which increases the difficulty of measuring and analyzing the causal
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96 relationships between regulations and environmental quality improvements

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97 within observational studies. The selection of samples biases the estimate of the

98 causal relationship, which makes it difficult to match the treated and control

99 groups correctly. Further biases are caused by key omitted variables that correlate

100 with both regulations and environmental quality. Also, cities with more severe

101 pollution are more likely to formulate more stringent environmental regulations.
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102 This bilateral causality increases the difficulty of analyzing the effects of

103 regulations. Finally, as it is challenging to determine the strictness of

104 environmental regulations, measurement error causes more biases in estimation.

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105 Local policy experiments have been used when conducting reform in

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106 China since the 1980s. They are regarded as a factor behind the success of

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107 China’s rapid development since 1978 (Xu, 2011). The experience from pilot

108 areas is beneficial to the adjustment or further implementation of a policy in a

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109 broader scope. According to the experimental method of econometrics, the local

110 policy experiment—when regarded as a natural experiment—is an effective tool

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111 to weaken the threat of endogeneity in observational studies (Li et al., 2017). For
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112 example, Chen and Cheng (2017) used the difference-in-differences (DID)

113 method to assess the effectiveness of Chinese Two Control Zones (TCZ) policy,
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114 which is regarded as a quasi-natural experiment, and found that stricter

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115 environmental regulation led to a lower level of pollution due to industrial

116 activities in TCZ prefectures. Qiu and He (2017) applied the DID method to

117 investigate the effectiveness of the Green Traffic Pilot Cities Program, with

118 results suggesting that green traffic reduced air pollution significantly in pilot

119 cities.
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120 The Chinese government implemented the New Standards as a pilot policy.

121 Its implementation can be considered as a natural experiment, which allows us to

122 observe the causal interactions of the regulations and air quality throughout a

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123 counterfactual framework. The regulations are called the New Ambient Air

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124 Quality Standards, enacted by The Ministry of Environmental Protection of

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125 China (MEPC) in 2012. With China’s rapid economic development, PM2.5 has

126 become a major component of air pollution, especially haze. Therefore, the New

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127 Standards, as the first environmental regulation monitoring PM2.5, is meant to be

128 explored and studied in depth. However, there is little current research focusing
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129 on the outcomes of the New Standards (Wang et al., 2015; Lu et al., 2017).
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130 As for our main conclusions, we found that the implementation of the New

131 Standards had no positive effects on air quality in 2012, or in the longer term. We
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132 examined three dimensions (monitoring effect, pollution control efforts, and
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133 ownership structure) to explore their mechanisms.

134 Our research has some advantages over previous studies. It is the first

135 paper to perform an empirical ex-post evaluation of the New Standards. In order

136 to examine the effect of the New Standards on PM2.5, we acquired the

137 concentration of PM2.5 from the annual global PM2.5 grid data map. Few studies
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138 use PM2.5 concentration data from almost all of China’s prefecture-level cities.

139 In particular, we explored how CAC regulations work on various mechanisms as

140 useful instruments to control air pollution, based on an effective identification

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141 strategy.

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142 This paper contributes to the discussion surrounding environmental

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143 regulation by capturing the causal relationship between air quality and

144 environmental regulations. The policy pilot of the New Standards in China

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145 provides an attractive natural experiment that overcomes the endogeneity

146 problems of observational studies. Moreover, we found that the New Standards
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147 imposed heterogeneous effects on two air pollutants, which means that the
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148 mismatch between objectives and outcomes needs to be further considered in the

149 policy design.

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150 The remaining sections of our paper are organized as follows: Section 2
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151 introduces the history and background information of the Ambient Air Quality

152 Standards. The two prefecture-city datasets, the methods, and the model setting

153 are laid out in Section 3. The empirical analysis is shown in Section 4. Section 5

154 presents the analysis of heterogeneous effects. Finally, Sections 6 and 7 present a

155 complete discussion and conclusion.

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156 2. Background

157 Since the mid-1980s, China’s government has implemented a variety of

158 regulations to resolve environmental issues. SO2 is a primary pollutant, which has

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159 been monitored and controlled by the APPCL (the law about prevention and

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160 treatment of air pollution) and Two-Control-Zone policy (Acid Rain Control

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161 Areas and SO2 Pollution Control Areas) since 1998. However, these two policies

162
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did not change the trend of rising SO2 emissions in China. Faced with a serious
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163 situation, the Chinese central government took more action to control the
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164 emission of SO2 with the 10th Five-Year-Plan, which stated that the emissions
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165 should be reduced by around 10% compared to emission levels in 2000. Under
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166 the period of the 11th Five-Year Plan, the central government supervised local
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167 governments to improve their environmental performance by setting up the

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168 Mandatory Target Performance Evaluation System (Chen et al., 2018).

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169 Rapid economic development not only increased the emission of

170 pollutants; it also changed the composition of air pollution in the past decades. In

171 recent years, fine particulate matter has become a more serious problem (Wu et

172 al., 2016). Chan and Yao (2008) showed that most regions had high

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173 concentrations of PM2.5, including the Beijing-Tianjin-Hebei region and the

174 Yangtze River Delta region. However, the official reports and regulations

175 regarding air quality did not include fine particulate matter before 2012. The gap

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176 between the official reports and what the public sees every day regarding air

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177 quality was great, which jeopardized the credibility of the government.

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178 To rectify this, the MEPC revised and implemented the Ambient Air

179 Quality Standards in 2012, which introduced fine particulate matter into the new

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180 air quality monitoring system for the first time. The air quality standards were

181 first published in 1982 and notably revised in 1996 and 2000. The main
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182 differences between the new and old regulations are: (1) An adjustment of the air
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183 environmental function areas, (2) the imposition of Class standards on both

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184 zone and zone , (3) the addition of limitations on PM2.5 and the average
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2. In the context of the Ambient Air Quality Standards (GB3095-1996), the Class I standards are
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imposed on zone , the Class standards are imposed on zone , etc. The annual average

concentration of SO2 is different in different classes. The Class I standards for SO2 are lower

than 20 µ g/m3 ; standards for Class II are higher than 20 µ g/m3, but no more than 60 µ g/m3; and

Class III standards range from 60 µ g/m3 to 100 µ g/m3.

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185 ozone concentration, and (4) stricter emissions limitations on other pollutants,

186 such as PM10, NO2, and PB. Moreover, stricter regulations were introduced for

187 monitoring data statistics and updating technical and analytical standards for

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188 some pollutants to make monitoring data more easily understood by the public.

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189 The New Standards were implemented step-by-step. In 2012, the policy

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190 was carried out in municipalities and provincial capitals in developed regions

191 such as the Beijing-Tianjin-Hebei Metropolitan Region, the Pearl River Region,

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192 and the Yangtze River Delta Region. In total, there were 74 pilot cities in the first

193 stage. In 2013, the policy was enacted in 113 key environmental protection cities;
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194 in 2015, it was implemented in all prefecture-level cities, and in 2016, it was
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195 implemented nationwide. Before 2012, the rate of failure to meet PM10, SO2, and

196 NO2 standards was 93.55%, 41.94%, and 74.19% across 31 cities. After 2012, the
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197 rate of failure declined to 86.84%, 13.16%, and 71.05%, respectively, across 38
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198 cities. The policy has now been in effect for five years in the first pilot regions,

199 but its effects have remained unexplored.

200 Atmospheric SO2 emissions are a major contributor to PM2.5 in China

201 (Schreifels et al., 2012). In several major Chinese cities, sulfates constitute 20–35%

202 of the ambient PM2.5 (Li et al., 2009; Pathak et al., 2009; Tan et al., 2009). The
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203 high levels and spreading trend of PM2.5 and O3 are the result of an expanding

204 secondary particle production atmospheric chemical reaction process, rather than

205 direct emissions (Jin et al., 2016). Furthermore, SO2 is a primary pollutant that

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206 can be controlled at the source, and which induces some of this secondary

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207 pollution. Because SO2 emission detection has a long history, the recorded data

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208 are detailed and easily accessible. With these reasons in mind, we selected the

209 concentration of PM2.5 and SO2 emissions as our indicators of air quality.

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210 3. Materials and Methods
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211 3.1 Data and descriptive statistics

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212 For the first stage, the 74 pilot cities were selected as key environmental

213 protection cities. All were located in densely populated metropolitan areas with
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214 high economic activity. In 2011, the industrial SO2 emissions of 113 key
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215 environmental protection cities reached 10.3 million tons, accounting for 46.4%

216 of the total emissions in the country. In these cities, the MEPC established 700

217 automatic air checkpoints and a complete environmental monitoring system,

218 which enriches the data by providing historical information. To improve the

219 quality of the environmental data, the department also conducts cross-validation
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220 through various approaches such as material balance calculations and formula

221 calculations. To ensure the high quality of the data, the first dataset (Dataset 1)

222 was based on the key environmental protection cities. After data matching, 104

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223 key cities were selected from all 113 cities in Dataset 1. Among them were 50

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224 pilot cities and 54 non-pilot cities, which were divided between the treated and

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225 the control groups. The air quality of the key environmental protection cities is

226 shown in appendix A. (From Map I to Map in appendix)

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227 Following the implementation of the New Standards, 113 key

228 environmental protection cities became pilot cities in 2013. Therefore, in order to
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229 test the long-term effect of the New Standards, we established a second dataset
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230 (Dataset 2) which included all of the prefecture-level cities in China. We regarded

231 the first-stage cities as the pilot cities and the other prefecture-level cities
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232 (excluding the 113 key environmental protection cities) as the non-pilot cities.
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233 After data matching, there were 73 pilot cities and 150 non-pilot cities in Dataset

234 2.

235 Our data mainly came from the China City Statistical Yearbook, China

236 Environment Yearbook, CEInet Statistics Database, and China City Data in EPS

237 Database from 2006 to 2014. The first dataset contained 728 sample data points
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238 (104*7), and the second dataset contained 2007 data points (223*9). If missing

239 values existed at the beginning or end of the time series (2006 or 2014), the

240 extrapolated time-trend method was used; otherwise, linear interpolation was

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241 used to fill the missing values in the sequence.

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242 The MEPC did not monitor and record the concentration of PM2.5 in the

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243 annual Ecological Environment Bulletin before 2012. While implementing the

244 New Air Quality Standards, the Chinese government introduced PM2.5 as a major

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245 pollutant into the air quality monitoring system for the first time. Some more

246 recent studies have used limited PM2.5 data from specific cities to do some
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247 research on haze in China, while other studies have employed remote sensing
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248 technology to revert the PM2.5 concentration from Aerosol Optical Depth (AOD)

249 released by NASA. In our study, we followed the above instructions to get the
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250 PM2.5 concentrations of Chinese sample cities from the Global Annual PM2.5
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251 Grids at the Socioeconomic Data and Application Center at Columbia University.

252 We downloaded the annual PM2.5 grids from their homepage and used the

253 administrative boundaries of Chinese cities to match the PM2.5 concentration in

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254 every city . After matching and calculating, we retrieved the PM2.5

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255 concentrations of 95 cities from Dataset 1 and 219 cities from Dataset 2. That is

256 another advantage of this study; there are few papers on haze in China that

257 include almost all prefecture-level cities with their PM2.5 concentration data.

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258 Furthermore, the factors influencing haze can be classified into three

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259 clusters, which determine the formation of PM2.5 in a given city. The first cluster

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260 is economic development, including the GDP, industrial structure and energy

261 consumption, etc. The second cluster is social determinants, such as

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262 transportation, urbanization, heating and so on. The third cluster contains the

263 natural conditions—temperature, humidity, and wind speed all affect the
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264 formation and spread of pollutants.

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265 In order to study the effects of the New Standards, we need to control

266 other factors contributing to the air quality. We selected some control variables
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267 from among the economic, social, and natural factors (Ma et al., 2016; Cheng et
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268 al., 2017; Chong et al., 2017; Wu et al., 2018). The main source of air pollution is

269 industrial emissions, and these emissions will increase as economic activities

270 grow. Therefore, we controlled for the economic development and industrial

http://sedac.ciesin.columbia.edu/data/set/sdei-global-annual-gwr-pm2-5-modis-misr-seawifs-aod/data-dow
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271 structure, measured by economic growth rate and the ratio of secondary

272 industries’ added values. Regarding social factors, transportation is one of the

273 most critical drivers of air pollution. Public transportation can reduce the use of

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274 private cars, and good traffic conditions can decrease congestion in a city. We

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275 selected for the number of people riding public transportation and per capita road

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276 area to use in measuring the traffic conditions in each city. As far as natural

277 conditions, green plants can purify the air and change the meteorological factors

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278 in a city, so we used the green plant's coverage rate in a city’s built-up area as a

279 control variable. These five control variables were labeled as rindus2, index,
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280 trans, proad, and rgreen, respectively. In order to deal with potential
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281 heteroscedasticity and the dependence on the regression model setting, we took

282 some continuous variable as their natural logarithm. Table 1 shows the
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283 descriptive statistics of variables.

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284 Table 1

285 We regarded the implementation of the New Standards as a natural

286 experiment. Due to its application at different times to different cities, we could

287 split these cities into two groups: the treated group and the control group. The

288 treatment group contained the pilot cities, and the control group contained the
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289 non-pilot cities. This natural experiment allowed us to adopt the

290 difference-in-differences (DID) method to explore the effects of the New

291 Standards. The standard DID equation is outlined in equation (1). The logic

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292 behind the DID method is that the control group could present a suitable

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293 counterfactual outcome of the treated group, so by comparing the changes of the

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294 two groups over the same period, you can get a net policy effect. The overall

295 methodolody of this paper is presented in Graph A.

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DDD Model
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DID Model
Monitoring

Effect of the New

Common Trend The Main The Main Pollution
297 Standards on air Assumption Regression Results Regression Results Control
quality

Ownership

298

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299

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300 Capturing causal Eliminating the endogeneity
relationship between problems caused by the Exploring the channels and
air quality and measurement errors, key mechanisms of

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environmental omitted variables and environmental regulation
301 bilateral causality
regulation

302 Graph A. Logical framework

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303 In this paper, we added some control variables into equation (1) as

304 covariates so that we could get the DID estimation specification in equation (2).
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Pollution = α + jiaohu2012 + β policy + β year2012 + ε (1)

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Pollution = α + jiaohu2012 + λ ! " + ω + ϕ + ε (2)

305 Where Pollution is the concentration of PM2.5 or SO2 emissions per ten
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306 thousand people in city i at year t, jiaohu2012 is the interaction term, and
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jiaohu2012 = policy ∗ year2012 . policy = 1 if a city carried out the new

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308 standards in 2012 and = 0 if a city was not a pilot city. year2012 =1 if

309 year >=2012, otherwise = 0. ω are city-fixed effects, capturing time-invariant

310 characteristics in different cities; ϕ are year-fixed effects, capturing yearly

311 factors common to all cities. For example, the tendency toward reducing
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312 industrial SO2 emissions. " represents the covariates, like industrial structure,

313 and ε is the error term. To relieve potential heteroscedasticity and serial

314 correlation, we clustered the standard errors at the city level. Most important was

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315 the coefficient of jiaohu2012 , which revealed the impacts of the New Standards.

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316 3.2 Common Trend Assumption

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317 According to the logic of the DID method, the key to finding a causal

318 relationship is that the treated group would have the same trend as the control

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319 group over the same period if it did not carry out the New Standards. If the

320 common trend assumption is violated, the DID method does not give a satisfying
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321 result. We compared the pre-existing time trend of outcome variables to confirm
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322 whether the assumption was valid or not.

323 Figure 1 and Figure 2 show the trend in the average annual PM2.5
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324 concentration and the annual per capita SO2 emissions of the pilot cities and
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325 non-pilot cities from 2006 to 2012, respectively. As shown in these figures,

326 before the treatment periods, the concentration of PM2.5 of two groups increased

327 in 2007, and then the concentration of PM2.5 fell between 2007 and 2012. The

328 two groups had the same time trend. The emissions of SO2 in both the treated

329 group and the control group fell between 2006 and 2009 before increasing, which
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330 meets the common trend assumption. The two groups having the same annual

331 average PM2.5 concentration and annual average SO2 emission before 2012

332 might suggest that they would have had the same post-trend if there were no

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333 policy in the treated group. However, the evidence from the two figures cannot

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334 provide a solid conclusion about the common trend. Therefore, we will explore

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335 the common trend assumption in depth within the robustness check section.

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Fig. 1. Trends in concentration of PM2.5

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Fig. 2. Trends in per capita sulfur dioxide emissions
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336
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337 4. Empirical framework

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338 4.1 Main Results

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339 Table 2
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340 Our main estimation results are presented in Table 2. The dependent
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341 variable is lnpm in columns (1) and (2). In the last two columns, the dependent

342 variable is pso2. Column (1) represents the result from equation (2)—controlling

343 the pollution control efforts, the city-fixed effects, and year-fixed effects—but the

344 coefficient of the interaction term is not significant. Column (2) controls for other

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345 control variables. Its estimation coefficient is robust when compared to column

346 (1), but it remains insignificant. The dependent variable is pso2 in columns (3)

347 and (4). In column (3), the coefficient of the interaction term is negative, but it is

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348 not significantly different from zero. After controlling for additional variables,

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349 the coefficient of the interaction term is still not significant, but it becomes

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350 positive. In Table 2, we find that all four interaction terms are insignificant,

351 indicating that the cities where the New Standards had been implemented did not

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352 improve in air quality.

353 There are two possible reasons why the New Standards might not have
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354 improved the air quality in pilot cities. First, there may be leading or lagging
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355 effects of the New Standards, so we could not capture the effect in 2012. Second,

356 the average treatment effect of the New standards—represented by the coefficient
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357 of the DID model—is zero. A useful policy requires appropriate conditions. The
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358 New Standards did not meet their overall requirements, resulting in a mixed

359 effect in all pilot cities, though they were effective in some cities.

360 4.2 Robustness Checks

361 Lags, leads, and time trends: Since the MEPC began asking for suggestions from

362 many institutions and experts in 2010 and then took two years to publish the final
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363 edition of the Ambient Air Quality Standards, there may have been an expectation

364 effect; that is, the effects of the New Standards may have appeared before 2012.

365 Meanwhile, the New Standards may also have lagging effects on pilot cities. We

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366 followed instructions from Laporte & Windmeijer (2005) and Cai et al. (2016) to

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367 accommodate leading and lagging effects, estimating all leading and lagging

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368 effects in one equation. The estimation equation is as follows:

( )

Pollution = α + ! δ' jiaohu' + λ ! " + ω + ϕ + ε (3)

'*( +
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369 Where jiaohu' is the interaction term for 2006-2014, and the omitted year is
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370 2006. We care the most about δ' , which represents the effects of the New
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371 Standards every year from 2007 to 2014. The other variables are the same as in
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372 equation (2). As the key environmental protection cities dataset, the Dataset 2 is
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373 limited in 2012, we conducted this exercise by using an alternative dataset,

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374 Dataset 2 (Data source: China Cities Statistics Yearbook).

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375 In Figure 4 we find that these coefficients have a clear upward trend, but

376 their 95% confidence interval includes zero before 2012. Right after the New

377 Standards were implemented in 2012, these estimates fall slightly, but their 95%

378 confidence interval also includes zero. In Figure 3 and Figure 4, the 95%

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379 confidence interval of these estimated coefficients includes zero from 2007 to

380 2014, and the coefficients of lnpm (Figure 3) fluctuate more severely than those

381 of pso2 (Figure 4). These results demonstrate that the implementation of the New

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382 Standards did not have any leading or lagging effects on air quality. The two

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383 figures test the common trend assumption thoroughly, showing that the treated

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384 group and the control group share the same trend during the pre-treatment period.

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Fig. 3. Leading and lagging effects of PM2.5

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Fig. 4. Leading and lagging effects of pso2
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385 Placebo test: In this section, we will analyze the effect of omitted variables.
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386 Specifically, let jiaohu ≡ policy ∗ year and ε = ./ + ε0 , such that

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387 E2jiaohu34 , ε34 6 ≠ 0 and E2jiaohu34 , ε034 6 = 0. In other words, / is related to both
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388 the environmental regulations and outcome variables. Hence, our estimator δ98 is:
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: lim < = (" = ")> (" = ?) = + .(" = ")> (" = /) @AB < ≠ CD .(" = ")> (" = /)
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≠ 0 (4)
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389 In order to know whether our estimation equation is correct in this paper,

390 we performed the same placebo test as many other papers, randomly selecting a

391 pilot city from our sample cities as the virtual treated group (Chetty et al., 2009;

392 Cai et al., 2016; Li et al., 2016; Fu and Gu, 2017). We randomly selected 50 cities

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393 from all 104 cities and then let their policyF = 1, and the other cities’ policyF =

394 0 . In addition, we set up a new interactive term as jiaohuF = policyF ∗

395 GHIJ2012 . Because of the random generation process, the coefficient of jiaohuF

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396 will be zero when our equation has no omitted variables. We repeated the random

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397 generation process 500 times for each dependent variable in our paper to increase

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398 the power of the placebo test.

399 We plotted the 500 coefficients and p-values of jiaohuF and presented

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400 their kernel density distribution in Figure 5 and Figure 7 (Figure 5 for lnpm,

401 Figure 7 for pso2). In addition, our estimates from column 2 and column 4 of
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402 Table 2 are around the center of both distributions, which means that the effects
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403 of the New Standards do not differ significantly from zero. Furthermore, we

404 plotted the 500 coefficients and presented their fitted mean value line in Figure 6
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405 and Figure 8 (Figure 6 for lnpm, Figure 8 for pso2). We find that the mean values
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406 are -0.0006308 (S.E:0.000668, T-test: -0.9443) for lnpm as the dependent variable

407 and 0.0047076 (S.E:0.0038374, T-test: 1.2268) for lnpso2 as the dependent

408 variable. The 95% confidence intervals of two fitted mean value lines include

409 zero, which means that the mean value of the 500 random estimates is zero. These

410 results suggest that our DID equations are not severely biased by omitted
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411 variables. Meanwhile, our main results in Table 2 are robust.

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Fig. 5. The kernel density of 500 estimates of lnpm6
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6.Notes: X axis represents the coefficients of false interaction term from 500 random regression, the left y
axis shows the p-values of each false interaction term, and the right y axis indicates that kdensity
coefficients from each random regression. The red curve is the kernel density distribution of all 500
estimates, whereas the blue dots are corresponding p-values. The red vertical line in the true coefficient of
interaction term from column 2 in Table 2.
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Fig. 7. The kernel density of 500 estimates of lnpso27
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Fig. 8. Plotting coefficients and the fitted mean-values of lnpso2

7.Notes: X axis represents the coefficients of false interaction term from 500 random regression, the left y
axis shows the p-values of each false interaction term, and the right y axis indicates that kdensity
coefficients from each random regression. The red curve is the kernel density distribution of all 500
estimates, whereas the blue dots are corresponding p-values. The red vertical line in the true coefficient of
interaction term from column 4 in Table 2.
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412 5. Heterogeneity in the regulation effects

413 Much of the literature shows that the effects of environmental regulations

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414 are mixed because of tax evasion, the shadow economy, and limited monitoring

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415 and enforcement efforts (Liu et al., 2013; Chen et al., 2018; Bento et al., 2018).

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416 In this section, we explored how some of these characteristics affect the

417 effectiveness of the New Standards by testing the different effects of the New

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418 Standards across cities with different characteristics. If the New Standards

419 improve air quality in cities with specific features, we will accept the explanation
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420 that only the mixed average treatment effect is zero. Furthermore, we can know
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421 which types of cities the New Standards affect most strongly through

422 heterogeneous analysis.

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423 We divided the whole sample into three subsamples based on number of
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424 monitoring points, as well as pollution control efforts, and ownership structure.

425 First, we tested whether monitoring air pollution more carefully could reduce air

426 pollution or not. Knowing the air quality can let Bureaucrats of Environmental

427 Protection (BEPs) strengthen the enforcement of environmental regulations or

428 implement more specific policies. Most current studies show that monitoring
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429 pollution or compliance can reduce emissions (Duflo et al., 2013; Escobar &

430 Chavez, 2013). In our paper, we collected the numbers of air quality monitoring

431 points in each province from 2006 to 2012. To deal with the endogeneity problem,

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432 we employed a difference-in-differences-in-differences (DDD) method to find out

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433 how the numbers of monitoring points in a region affected the outcomes of the

New Standards. We constructed sanlnpoint = lnpoint ∗ policy ∗ year2012 ,

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434

435 and we expanded model (2). The expanded model is as follows:

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Pollution = α + sanlnpoint + βjiaohu2012 + γlnpoint + λ ! " + ω

+ ϕ + ε （5）
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436 We restricted our regression to the treated group and the control group,
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437 respectively. The results are represented in Table 3 (the control group regression

438 results can be found in columns (5) and (6)). The coefficients of the triple
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439 interaction term were most important. If its coefficients are not significantly
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440 different from zero in the treated group, it shows that the monitoring efforts did

441 not affect the New Standards, which means that increasing the understanding of

442 the air pollution through the addition of monitoring stations did not improve air

443 quality in the context of the New Standards.

444 As shown in Table 3, the triple interaction terms are significant in the
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445 middle two columns, while in the others they are not significantly different from

446 zero. The results in the first two columns mean that adding monitoring points did

447 not reduce the concentration of PM2.5 in the treated group. In the middle two

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448 columns, the triple interaction terms are both significantly negative at 0.01,

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449 which means that cities with more monitoring stations had lower SO2 emissions

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450 in the treated group compared to those cities with fewer monitoring stations

451 facing the same environmental regulations. Specifically, when the number of

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452 monitoring points was increased by 1%, the SO2 emissions per ten thousand

453 people decreased by around 28%, which means SO2 emissions per ten thousand
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454 people decreased by about 113 tons. The coefficients of the triple interaction
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455 terms in the last two columns are not significant, which further shows that our

456 results are robust because the control group did not implement the New
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457 Standards.
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458 Table 3

459 Next, we wondered if cities with differing levels of pollution control

460 efforts exhibited divergent average treatment effects. The impact of

461 environmental regulations is not only related to the number of policies formulated.

462 The enforcement of environmental regulations is also a critical factor that affects
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463 their effectiveness (Shimizu, 2017; Shen & Lin, 2017). For our empirical strategy,

464 we used the completed industrial pollution treatment investment to measure the

465 pollution control efforts. Therefore, in order to test whether the effect of the New

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466 Standards varies depending on pollution control efforts, we expanded equation (2)

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467 and constructed sanlninvest = lninvest ∗ policy ∗ year2012 . The expanded

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468 model is as follows:

Pollution = α + sanlninvest + βjiaohu2012 + γlninvest + λ ! " + ω

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+ ϕ + ε (7)

469 In order to examine this assumption, we restricted our sample to the

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470 treated group and the control group in Dataset 1. The coefficients of the triple
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471 interaction terms were most important. When the coefficient in the treated group

472 sample is significant, and the coefficient in the control group sample is not
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473 significant, we can verify that the assumption is valid. Otherwise, the New
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474 Standards have no effects in any pilot cities. The treated group regression results

475 are shown in Table 4 (the control group regression results can be found in

476 columns (5) and (6)).

477 From the results in Table 4, we know that the triple interaction terms are

478 not significantly different from zero, and these results are robust after adding the
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479 control variables in the first two columns. The results show that investing in

480 industrial pollution treatment programs did not reduce the concentration of

481 PM2.5 in the treated group. In the middle two columns, the triple interaction

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482 terms are both significantly negative at 0.05, which means that investing in

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483 industrial pollution treatment programs did indeed reduce the SO2 emissions

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484 when a city faced the same environmental regulations. When the amount invested

485 increases by 1%, the SO2 emissions per ten thousand people decrease by between

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486 12.2% and 13.1%, which means that the SO2 emissions per ten thousand people

487 decrease by between 48.92 tons and 52.53 tons. In the last two columns, the triple
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488 interaction terms are both not significant, which further strengthens our
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489 conclusion.

490 Table 4
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491 There are differing impacts in cities where different proportions of the
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492 economy are state-owned. Some studies have examined the influence of different

493 economic ownership structures on the effects of environmental regulations (Wang

494 and Jin, 2007; Meyer and Pac, 2013). In this research, we constructed sansoe =

495 soe ∗ policy ∗ year2012 and established a model (8):

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Pollution

= α + sansoe + βjiaohu2012 + γsoe + λ ! " + ω

+ ϕ + ε (8)

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496 We chose the share of employment in the state-owned sectors to measure

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497 the share of the state-owned economy in one city. The regression results are

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498 shown in Table 5 (the control group regression results can be found in columns (5)

499 and (6)).

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500 From the results in Table 5, we know that the triple interaction terms are

501 significantly different from zero at 0.05, and these results are strengthened after
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502 adding the control variables in the first two columns. The results show that
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503 compared to regions where a low proportion of the economy is state-owned, the

504 effects of the New Standards declined in areas where a higher proportion of the
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505 economy was owned by the state. Specifically, when the share of the state-owned
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506 economy increased by 1%, the concentration of PM2.5 in the treated group

507 increased by between 0.129% (0.056 µ g/m3) and 0.148% (0.064 µ g/m3). In the

508 middle two columns, the triple interaction terms are both significantly negative at

509 0.01, which means that compared to regions where a lower proportion of the

510 economy is state-owned, cities with a higher proportion of state-owned economy

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511 facing the same environmental regulations will have more SO2 emissions.

512 Specifically, when the share of the state-owned economy increased by 1%, the

513 SO2 emissions per ten thousand people increased by between 0.966% and

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514 0.988%, which means SO2 emissions per ten thousand people increased by

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515 between 3.87 tons and 3.96 tons.

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516 Table 5

517 6. Discussion
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518 In conclusion, our paper was based on a natural experiment approach and
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519 employed the DID method to make an empirical ex-post evaluation of the New
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520 Standards. Our results show that the concentrations of PM2.5 and the SO2

521 emissions in pilot cities were not significantly lower than that in non-pilot cities
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522 in 2012. In other words, the average treatment effect of the New Standards was
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523 zero in pilot cities. Moreover, we verify that the regulation had no long-term

524 effects. Our heterogeneity analysis of the New Standards found that adding

525 monitoring stations, increasing investment in industrial pollution treatments, and

526 decreasing the proportion of the economy owned by the state could improve air

527 quality in pilot cities. In addition, the effects of those factors vary depending on
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528 the types of pollutants.

529 Our research aims to increase the discussion about the effects of CAC

530 environmental regulations, taking the New Standards as an example. Unlike many

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531 previous studies which criticized its costs, its incentives to firms, and so on, our

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532 paper focused on discovering under what conditions CAC regulations are

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533 practical tools to control air pollution. Our results show that the SO2 emissions

534 per ten thousand people decreased by around 28% as the number of air quality

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535 monitoring points increased by 1%. In line with Duflo et al. (2013) and Escobar

536 and Chavez (2013), our results show that inspections can strengthen the impact of
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537 environmental regulations by spurring regulatory compliance.

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538 Some studies suggest that Chinese laws and regulations have limited

539 effects and meager implementation rates (Allen et al., 2005; Dam, 2006). In
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540 particular, some papers show that China’s environmental laws and regulations
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541 have been incompletely implemented in the actual operation process (Wang et al.,

542 2003). Many studies indicate that pollution control efforts are one of the most

543 indispensable aspects of environmental regulation enforcement (Shimizu, 2017;

544 Shen & Lin, 2017). Similar to the above studies, we documented that an increase

545 of 1% in the completed industrial pollution treatment investment leads to a

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546 decrease in SO2 emissions per ten thousand people of 13.1%.

547 Why do ownership structures affect the performance of environmental

548 regulations in a region? Ownership can alter air pollution at least through two

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549 channels: (1) Since state-owned enterprises have more social responsibilities and

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550 the government has more influence over state-owned enterprises, emission

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551 reduction is stronger in regions where the state-owned portion of the economy is

552 higher (Shi et al., 2016). Moreover, (2) the relationship between state-owned

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553 enterprises and local governments is closer, leading to state-owned enterprises

554 having more bargaining power with BEPs, which decreases the effects of
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555 environmental regulations (Wang & Jin, 2007; Jiang et al., 2014). Our results
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556 verify that the second explanation suits the New standards. They show that when

557 the share of state-owned employment increases by 1%, the concentration of

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558 PM2.5 and SO2 emissions per ten thousand people in the treated group increases
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by 0.064 µ g/m3 and 3.96 tons, respectively. In other words, because these large
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559

560 state-owned enterprises are essential sources of local employment, they are

561 inspected more flexibly (Wang & Wheeler, 2005).

562 7. Conclusions and Recommendations

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563 China is increasingly concerned about environmental issues, and

564 environmental regulations are the most common instruments to control air

565 pollution. Although China has set up a series of policies to protect the

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566 environment, the effectiveness of environmental regulations is still unclear,

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567 especially CAC regulations. Thus far, previous studies have mainly criticized

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568 CAC regulations about their costs and incentive problems, but the effect of CAC

569 regulations as instruments needs to be further explored, particularly their

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570 heterogeneity effects. This paper fills these gaps by employing a natural

571 experiment to examine the causal relationship between air quality and the New
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572 Standard to weaken endogeneity problems and discovering under what conditions
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573 the New Standards can improve air quality in pilot cities.

574 Given these results, we can provide the following policy recommendations.
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575 Our findings show that increasing monitoring effects and investing more money
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576 into pollution treatment can reinforce the impacts of environmental regulations.

577 Also, ownership structures can alter the effects of environmental regulations by

578 altering the bargaining capacity of the local government. Therefore, creating

579 independent BEPs should strengthen the effects of environmental regulations. For

580 instance, China’s central government is promoting vertical reforms of local BEPs,
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581 and we should pay attention to the uniformity of the authority and responsibility

582 of these institutions. We found that the effects of the New Standards on SO2

583 emissions and the concentration of PM2.5 are not the same. Our study suggests

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584 that there are some cases where the outcomes and policy objectives may be

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585 mismatched. Therefore, in the process of formulating environmental regulations,

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586 policy-makers should consider the nature of different air pollutants, such as their

587 sources and different chemical generation processes.

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588 There are some limitations to our research. Firstly, we acquired PM2.5

589 concentration data from the global annual PM2.5 grid map released by Columbia
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590 University’s SEDAC, which has been widely used in recent research. The
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591 SEDAC PM2.5 concentration data comes from the AOD, and is detected by

592 multiple satellite instruments. However, the AOD has trouble distinguishing
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593 water vapor from fine particles, and it was unavailable in all cities and at all
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594 times. Though the two measures have a strong positive relationship, the

595 ground-based instruments are more accurate at a given point over an extended

596 period. With more PM2.5 monitoring stations being set up, we can more easily

597 get enough information to properly reflect changes in air quality.

598 Secondly, our research object is air quality in the pilot area. Our treated
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599 group and control group are key environmental protection cities, so it is not a

600 random sample of all prefecture-level cities. Our natural experiment method has

601 robust internal validity, but the results in this paper may not reflect the net effect

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602 of the New Standards nationwide. This problem will be addressed in our future

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603 research.

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604 Thirdly, some factors weaken the regulatory pressure of environmental

605 regulations, including weak regulatory institution, incomplete enforcement of

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606 regulations, a shortage of pollution treatment facilities, the economic structure

607 and economic ownership, and the difficulties of inspecting regulated objects. In
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608 this paper, we confirm that monitoring effects, investment in pollution abatement,
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609 and changes in economic ownership could change the effects of the New

610 Standards across different cities. In the future, the scope of this study could be
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611 extended to examine how other factors affect the outcomes of environmental
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612 regulations—for example, the target-setting programs and environmental

613 performance of local governments.

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614 Notes

615 1. The 2005 China Environmental Bulletin is available at:

616 http://www.mee.gov.cn/hjzl/zghjzkgb/lnzghjzkgb/201605/P020160526558688821

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617 300.pdf

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618 2. The 2011 China Environmental Bulletin is available at:

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619 http://www.mee.gov.cn/hjzl/zghjzkgb/lnzghjzkgb/201605/P020160526563389164

620 206.pdf
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621 3. The 2015 China Environmental Bulletin is available at: http://
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622 www.mee.gov.cn/6be585d7d4386618f922616dd8fcec87/P0201606023331604719
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623 55.pdf
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624 4. In the context of the Ambient Air Quality Standards (GB3095-1996), the Class
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625 I standards are imposed on zone , the Class standards are imposed on zone ,
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626 etc. The annual average concentration of SO2 is different in different classes. The
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627 Class I standards for SO2 are lower than 20 µ g/m3, standards for Class II are

628 higher than 20 µ g/m3 but no more than 60 µ g/m3, and Class III standards range

629 from 60 µ g/m3 to 100 µ g/m3.

630 5. The SEDAC homepage is

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631 http://sedac.ciesin.columbia.edu/data/set/sdei-global-annual-gwr-pm2-5-modis-m

632 isr-seawifs-aod/data-download.

633 6.Notes: X axis represents the coefficients of false interaction term from 500

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634 random regression, the left y axis shows the p-values of each false interaction

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635 term, and the right y axis indicates that kdensity coefficients from each random

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636 regression. The red curve is the kernel density distribution of all 500 estimates,

637 whereas the blue dots are corresponding p-values. The red vertical line in the true

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638 coefficient of interaction term from column 2 in Table 2.

639 7.Notes: X axis represents the coefficients of false interaction term from 500
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640 random regression, the left y axis shows the p-values of each false interaction
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641 term, and the right y axis indicates that kdensity coefficients from each random

642 regression. The red curve is the kernel density distribution of all 500 estimates,
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643 whereas the blue dots are corresponding p-values. The red vertical line in the true
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644 coefficient of interaction term from column 4 in Table 2.

645

646

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828 In Chinese.

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844 67. Zhong, N., Cao, J., & Wang, Y. (2017). Traffic Congestion, Ambient Air

845 Pollution, and Health: Evidence from Driving Restrictions in Beijing.

846 Journal of the Association of Environmental and Resource Economists, 4(3),

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847 821-856.

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848

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849 Figure legends

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850 Fig. 1. Trends in concentration of PM2.5

851 Fig. 2. Trends in pso2

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852 Fig. 3. Leading and lagging effects of PM2.5

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853 Fig. 4. Leading and lagging effects of pso2

854 Fig. 5. The kernel density of 500 estimates of lnpm

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855 Fig. 6. Plotting coefficients and the fitted mean-values of lnpm

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856 Fig. 7. The kernel density of 500 estimates of lnpso2

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857 Fig. 8. Plotting coefficients and the fitted mean-values of lnpso2.

858

859

860
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861

862

863 Tables

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864 Table 1 Descriptive Statistics

SC
Vars OBS Mean S.D Min Max Units

pm25 665 39.60 16.67 8.11 82.85 µ g/m3

lnpm 665 3.57 0.49 2.09 4.42 --

U
DV
pso2 728 625.37 571.13 0.57 5030.78 Ton per ten thousand persons
AN
lnpso2 728 6.06 0.98 -0.56 8.50 --

policy 728 0.48 0.50 0 1 --

KV year2012 728 0.14 0.35 0 1 --

M

jiaohu2012 728 0.07 0.25 0 1 --

project 712 19.38 24.58 0 205 item

D

lnproject 684 2.43 1.12 0 5.32 --

TE

RV tletter 728 18696.47 22334.84 50 115392 items

lntletter 728 9.15 1.35 3.91 11.66 --

soer 715 48.92 17.91 7.66 94.13 %

EP

index 728 13.25 3.33 -1.20 29.02 %

EV
rindus2 728 52.27 11.99 17.71 90.97 %
C

invest 728 55.02 54.51 1.38 361.26 100 million yuan

lninvest 728 3.60 0.94 0.32 5.89 --

AC

SV trans 728 45071.05 67918.05 90 516517 ten thousand persons

lntrans 728 9.96 1.28 4.50 13.15 --

proad 728 11.79 6.04 0.31 64 m2

lnproad 728 2.35 0.48 -1.17 4.16 --

rgreen 728 39.32 6.75 5.55 70.30 %

865 Note: DV denotes the dependent variables, including PM2.5 and so2 emissions per capita. KV denotes the key variables,

866 including policy, year2012, and the interaction term jiaohu2012. RV denotes regional factors influencing the effect of

867 the New Standards, like enforcement, public participation, and economic ownership; what’s more, EV and SV are

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868 control variables, which represent some variables in economic development and other variables in social factors. To

869 weaken the heteroscedasticity during model formation, we took a continuous variable to its natural logarithm.

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M
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870 Table 2 Main Results

(1) (2) (3) (4)

VARIABLES
lnpm lnpm lnpso2 lnpso2

policy*year2012 -0.0152 -0.0151 -0.0712 -0.0732

(0.0145) (0.0139) (0.0869) (0.0861)

PT
lnproject 0.00589 0.00592 -0.0292 -0.0280

(0.00481) (0.00487) (0.0201) (0.0201)

RI
index -0.000554 0.00610

(0.00185) (0.00485)

rindus2 0.00181* -0.00145

SC
(0.000947) (0.00507)

rgreen -0.00123 0.00423

U
(0.000753) (0.00383)
AN
lntrans 0.000844

(0.0219)

lnproad -0.000361
M

(0.0109)

Constant 3.617*** 3.567*** 6.338*** 6.169***

D

(0.0158) (0.224) (0.0663) (0.309)

City-Fixed Effect Y Y Y Y
TE

Year-Fixed Effect Y Y Y Y

Observations 624 624 684 684

EP

R-squared 0.410 0.414 0.082 0.089

Number of ID 95 95 104 104

C

871 Notes: Robust Standard Errors, clustered at the city level. ***significant at p < 0.01, **significant at p < 0.05,
AC

872 *significant at p < 0.1

873

874

875

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876 Table 3 Regulation effects of different numbers of monitoring points

(1) (2) (3) (4) (5) (6)

VARIABLES
lnpm lnpm lnpso2 lnpso2 lnpm lnpso2

lnpoint*policy*year2012 0.0103 0.00784 -0.287*** -0.286*** 0.00626 -0.116

(0.0140) (0.0147) (0.0886) (0.0871) (0.0196) (0.104)

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lnpoint -0.0157 -0.00942 0.0820 0.0826 -0.0492* -0.210

(0.0158) (0.0175) (0.0677) (0.0704) (0.0238) (0.140)

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lnproject 0.00770 0.00461 -0.0366 -0.0357 0.000626 0.0106

(0.00587) (0.00553) (0.0286) (0.0278) (0.00549) (0.0373)

index -0.00246 -0.000245 0.00124 0.00669

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(0.00342) (0.0107) (0.00244) (0.00732)

rindus2 -0.000105 0.00204 0.00349** -0.00991

U
(0.00142) (0.0113) (0.00146) (0.00797)
AN
rgreen -0.000818 0.000496 -0.000991 0.000758

(0.00132) (0.00468) (0.00137) (0.00483)

lntrans 0.0325* 0.000664

M

(0.0189) (0.0253)

lnproad -0.00362 -0.0198*

D

(0.0421) (0.0102)
TE

Constant 3.812*** 3.527*** 5.597*** 5.478*** 3.669*** 7.912***

(0.0785) (0.273) (0.330) (0.735) (0.258) (0.979)

City-Fixed Effect Y Y Y Y Y Y
EP

Year-Fixed Effect Y Y Y Y Y Y

Observations 242 242 277 277 278 294

C

R-squared 0.539 0.547 0.168 0.168 0.421 0.088

Number of ID 44 44 50 50 51 54
AC

877 Notes: Robust Standard Errors, clustered at the Province level. *** significant at p < 0.01, **significant at p < 0.05,

878 *significant at p < 0.1

879

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880

881 Table 4 Regulation effects on pollution control efforts

(1) (2) (3) (4) (5) (6)

VARIABLES
lnpm lnpm lnpso2 lnpso2 lnpm lnpso2

PT
lnyanshouzhilitouzi*year2012*policy 0.00562 0.00414 -0.131** -0.122** -0.000182 0.103

(0.0178) (0.0180) (0.0633) (0.0562) (0.0161) (0.0958)

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lnyanshouzhilitouzi -0.00244 -0.00337 0.0792 0.0816 -0.0350 -0.00400

(0.0209) (0.0211) (0.0640) (0.0661) (0.0248) (0.0775)

lnproject 0.0123* 0.0112* -0.0381 -0.0344 0.000520 -0.0147

SC
(0.00613) (0.00587) (0.0287) (0.0285) (0.00409) (0.0300)

index -0.00276 0.00390 0.000346 0.00757

U
(0.00389) (0.00844) (0.00199) (0.00630)
AN
rindus2 0.000680 0.00517 0.00267** -0.00839

(0.00123) (0.00788) (0.00113) (0.00648)

rgreen -0.000956 0.00317 -0.00136 0.00510

M

(0.000802) (0.00408) (0.00106) (0.00587)

lntrans 0.00388 -0.0108

D

(0.0336) (0.0214)
TE

lnproad -0.00498 -0.00222

(0.0276) (0.0117)

Constant 3.697*** 3.718*** 5.817*** 5.377*** 3.636*** 6.789***

EP

(0.0771) (0.371) (0.252) (0.470) (0.198) (0.466)

City-Fixed Effect Y Y Y Y Y Y
C

Year-Fixed Effect Y Y Y Y Y Y

Observations 292 292 333 333 332 351

AC

R-squared 0.479 0.483 0.176 0.181 0.398 0.067

Number of ID 44 44 50 50 51 54

882 Notes: Robust Standard Errors, clustered at the Province level. ***significant at p < 0.01, **significant at p < 0.05,

883 *significant at p < 0.1

884

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885 Table 5 Regulation effects of ownership

(1) (2) (3) (4) (5) (6)

VARIABLES lnpm lnpm lnpso2 lnpso2 lnpm lnpso2

soer*policy*year2012 0.00129** 0.00148** 0.00988*** 0.00966*** -0.000918 -0.00566

(0.000627) (0.000695) (0.00366) (0.00355) (0.000840) (0.00416)

PT
soer 0.000596 0.000562 -0.00590 -0.00597 8.18e-05 0.00147

(0.000611) (0.000645) (0.00437) (0.00432) (0.000673) (0.00312)

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lnproject 0.0154** 0.0135* -0.0318 -0.0276 8.74e-05 -0.0190

(0.00732) (0.00724) (0.0301) (0.0306) (0.00692) (0.0263)

index -0.00346 0.00140 0.000220 0.00571

SC
(0.00355) (0.0101) (0.00219) (0.00568)

rindus2 0.000236 0.00652 0.00259* -0.0106

U
(0.00134) (0.00820) (0.00151) (0.00687)
AN
rgreen -0.000659 0.00327 -0.00124 0.00468

(0.000766) (0.00447) (0.00125) (0.00597)

lntrans 0.0115 -0.00711

M

(0.0327) (0.0225)

lnproad -0.0166 -0.000804

D

(0.0262) (0.0129)
TE

Constant 3.654*** 3.643*** 6.307*** 5.843*** 3.492*** 6.888***

(0.0408) (0.375) (0.216) (0.421) (0.221) (0.433)

City-Fixed Effect Y Y Y Y Y Y
EP

Year-Fixed Effect Y Y Y Y Y Y

Observations 288 288 327 327 325 344

C

R-squared 0.470 0.475 0.187 0.194 0.380 0.070

Number of ID 44 44 50 50 50 53
AC

886 Notes: Robust Standard Errors, clustered at the city level. ***significant at p < 0.01, **significant at p < 0.05,

887 *significant at p < 0.1

888

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Highlights:
1. The average treatment effects in treated group of New Ambient Air Quality
Standards on SO2 emissions and concentration of PM2.5 are zero.
2. Monitoring efforts and pollution investments can significantly reduce sulfur
dioxide emissions in pilot areas, but will not affect the pilot areas
3. The effect of environmental regulation will be weakened in areas with a high
proportion of state-owned economy, both for sulfur dioxide emissions and fine
particulate matter concentrations.

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4. A possible reason for an ineffective environmental regulation is that the effect of
the environmental regulation is heterogeneous because of different characteristics.

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