Does Ecological Compensation Reduce Air Pollutant Emissions? - Evidence from Quasi-Natural Experiments in China

The concept and theory of ecological compensation (EC) have been widely studied in the past 20 years, but its practical effects have not yet been agreed upon. Based on a panel data from 281 prefecture-level cities in China from 2009 to 2018, this paper examines the impact of air ecological compensation (AEC) policy on air pollutant emissions and its mechanism with time-varying DID model. The study found that AEC will reduce the emissions of sulfur dioxide, PM2.5, industrial smoke and dust, which remained significant after a series of robustness test. Mechanism analysis concluded that AEC can reduce air pollutant emissions mainly by promoting green technology innovation, strengthening pollution treatment intensity and improving energy efficiency. The effect of AEC varied with city characteristics, in cities with high proportion of Industrial, low environmental regulation intensity and high fiscal pressure, AEC have significant or better policy effects, while, AEC does not have significant policy effects in cities with high environmental regulations intensity and low financial pressure. China should consider further promoting the pilot scope of AEC, but it also needs to improve the compensation standard and compensation mechanism to achieve better policy effects.