Can policy achieve environmental improvement? Evidence from the whole county photovoltaic project in China

Abstract

To facilitate the transition to clean energy and promote sustainable development, China's National Energy Administration issued the “Notice on the Publication of the County Wide Rooftop Distributed Solar Photovoltaic Development Pilot Project List” (also known as China's Whole County Photovoltaic Project). Using county-level panel data spanning May 2014 to September 2022, this study treats the initiative as an exogenous policy shock and employs a Difference-in-Differences (DID) design to assess its impact on environmental pollution. Empirical results indicate that the pilot policy significantly mitigates environmental pollution; this finding is further confirmed by a battery of robustness tests. Additionally, the mechanism analysis indicates that the project mitigates environmental pollution by facilitating public investment and driving green technological innovation. Furthermore, the heterogeneity analysis reveals that the pollution reduction effect is more pronounced in non-provincial capital, non-resource-based and western counties. Finally, we assess the heterogeneous effects using unconditional quantile regression (UQR). The results demonstrate that the significant impact is driven entirely by counties at the highest quantiles of pollution. Our findings offer valuable insights for policymakers in other countries aiming to advance energy transitions and mitigate environmental pollution.