Does implementation of a environmental protection tax reduce energy consumption: evidence from China

Environmental friendliness and energy conservation are good guarantees and driving forces for the sustainable development. How to coordinate the relationship between the two is crucial for building a "resource saving" and "environmentally friendly" society. This article uses the data from Chinese cities from 2010 to 2021 to explore whether environmental protection tax (EPT) could reduce energy consumption. Baseline regression found that EPT significantly reduced China's energy consumption and achieved a "resource saving" society. The EPT shows obvious heterogeneity characteristics, significantly reducing energy consumption in the central and western regions and the two-controlled areas, while the policy effect on the eastern region and non two-controlled areas is not significant. In addition, EPT has effectively reduced China's energy consumption by enhancing investment in urban research and development innovation, optimizing industrial structure, and strengthening tax collection intensity. The conclusion is helpful in achieving the construction of an "environmentally friendly" society.