The relationship between pollution abatement costs and environmental regulation: Evidence from the Chinese industrial sector

Since the 2000s, China has been trying to strengthen emission controls in response to increasing pollution problems. However, strict implementation of emission controls generates pollution abatement costs. Using regional data for 29 provinces in the Chinese industrial sector from 1995 to 2010, this study estimated the pollution abatement costs for each province through the measurement of environmental efficiency, by applying a directional distance function approach. Moreover, using panel data analysis, this study clarified whether there is a nonlinear relationship between pollution abatement costs and environmental regulations. The empirical results are as follows. The study confirmed that the burden of abatement costs tended not only to occur in the central and western regions but also to increase in the eastern region. Moreover, the nonlinear relationship is inverted U-shaped; thus, pollution abatement costs increase, as a negative effect of environmental regulations, until a certain inflection point, after which they decrease.