An Empirical Study on Environmental Regulatory Costs &Environmental TFP

This paper examines the cost of environmental regulation and the environmental total factor productivity(TFP) with directional distance function and the Malmquist-Luenberger(ML) index respectively, using inputs and output data of 36 two-digit industries over the period 1998-2010. It finds that Chinese industries incur a relatively high environmental regulatory cost and that China has paid a high price fulfilling its promise to emissions mitigation. A comparison between conventional and environmental TFP shows that the two indicators for all industries declined on average, but a hypothesis test reveals insignificant difference between the two. In addition, the rise in environmental TFP is mainly due to technological progress, which is consistent with findings of many researches;analysis demonstrates signs of absolute convergence of environmental TFP.