Environmental taxes promote the synergy between pollution and carbon reduction: Provincial evidence from China.

Abstract

Since its implementation in 2018, China's environmental tax has become a crucial mechanism in the nation's strategy for reducing environmental pollution. However, its synergistic effect between pollution and carbon reduction has not been adequately focused on and evaluated. This study employs the difference-in-differences (DID) model to analyze the impact of the environmental tax policy on the emissions of pollutant and CO₂ as well as the synergistic effect between them. The baseline results reveal that the implementation of environmental taxes significantly reduces the emissions of SO₂ and CO₂ and enhances the level of synergistic effects. This finding passed a series of robustness tests. Additional analysis reveals that the environmental tax promotes reductions in SO₂ and CO₂ emissions through adjustments in industrial and energy consumption structures. Furthermore, mechanism analysis from an econometric perspective provides theoretical support for the synergistic effect of pollution reduction and carbon mitigation. In the process of achieving CO₂ reduction, SO₂ plays a crucial mediating role. The heterogeneity effect suggests that in non-coastal areas and regions with larger governmental scales, the environmental tax exhibits significant emission reduction effects. It is advisable to strengthen the legal safeguard of environmental tax, dynamically adjust tax rates, and timely expand the tax scope to improve the environmental tax system and enhance its policy effects. This study provides empirical evidence and policy insights to optimize the environmental tax, offering valuable references for environmental tax reforms in developing countries.