Recently, the Center for International Finance and Economics Research (CIFER) of the National Institute of Financial Research at Tsinghua University hosted...Academic Symposium on "2022 International Trade Disputes and the Restructuring of Globalization"The event was successfully held.Professor of the School of Economics, Xiamen UniversityChen YongbingAttendDepend onCIFER Part-time ResearcherAssociate Research Fellow, China Institute of World Trade Organization, University of International Business and EconomicsDu YingxinHostEnvironment and TradeSub-forum 5Sharing with collaborators on the topic《A Dilemma: How Increased Pollution Discharge Fees Affect Enterprise Exports》(Fish and Bears Paws: How Does the Increase of Discharge Fees Affect Firm Exports?）The article.
Chen Yongbing Professor at the School of Economics, Xiamen University, specializing in international trade and applied microeconometrics. Chief expert of a major National Social Science Fund project and a Category A high-level talent in Fujian Province. First author of over ten papers published in journals such as *Economic Research Journal*, *World Economy*, and *Economics Quarterly*. Has led and completed several projects funded by the National Natural Science Foundation of China, the Fok Ying-tung Young Teachers' Basic Research Project, and the Ministry of Education's Humanities and Social Sciences Program. Recipient of the An Zijie International Trade Research Award and the Fujian Provincial Social Science Outstanding Achievement Award.
Chen Yongbing
As environmental pollution problems accumulated from my country's rapid economic development have become increasingly apparent, since the 18th National Congress of the Communist Party of my country, the country has intensified its environmental governance efforts to create a better ecological environment, resulting in significant improvements in environmental conditions. However, my country's economic development faces triple pressures: shrinking demand, supply shocks, and weakening expectations. The slow recovery of consumption and investment under the pandemic has increased the difficulty of stabilizing exports. Previous research on the impact of environmental regulations on corporate exports has yielded different perspectives, primarily the "Pollution Haven Hypothesis (PHH)" and the "Porter Hypothesis Effect (PHE)." The former argues that strict environmental regulations increase production costs and weaken corporate competitiveness, while the latter argues that strict environmental regulations stimulate corporate innovation, and the benefits of innovation offset cost losses, thereby promoting exports. Unfortunately, empirical research has not provided a consistent answer. Therefore, this paper focuses on exploring whether, in the context of my country, strengthening environmental regulations will inhibit exports—a question of whether both can be achieved—and further investigates the mechanism by which environmental regulations affect corporate exports.Answering the question of the relationship between environmental regulations and corporate exports scientifically presents numerous challenges, one of which is the endogeneity problem prevalent in existing literature. Regarding the environmental control policy of increasing pollution discharge fees, a direct approach is to utilize the differences in the impact of this fee increase across provinces and timeframes in my country, employing difference-in-differences estimation based on a sample of enterprises from all provinces and municipalities. This approach faces three main problems: 1) There are inherent differences in corporate exports and growth across different provinces, making it impossible to achieve the random distribution requirement for the control and experimental groups (Wang Min and Huang Ying, 2015); 2) Different provinces have different industrial structures and levels of environmental pollution, facing varying pressures for environmental protection and emission reduction (Bao Qun and Peng Shuijun, 2006); 3) Different provinces place varying degrees of emphasis on environmental protection, resulting in different levels of enthusiasm for responding to the national strategy of increasing pollution discharge fees. These three problems simultaneously affect both corporate exports and whether a province increases pollution discharge fees, and the unobservable factors that change over time are difficult to control directly, thus biasing the estimation results.This paper's identification design utilizes a quasi-natural experiment—the 2009 increase in sulfur dioxide emission fees in some Chinese provinces and cities—and employs geographical discontinuity design regression using boundary region samples to address the aforementioned endogeneity issue. To obtain clean identification results, this paper focuses only on provinces and cities where sulfur dioxide emission fees were increased in 2009 and their neighboring provinces and cities that had not yet increased them. A local linear regression method is used for nonparametric discontinuity regression estimation. In the baseline regression equation, boundary region fixed effects and industry fixed effects are controlled to mitigate the impact of boundary region and industry characteristics on enterprise exports. To alleviate concerns about the identification strategy, this paper further eliminates potential interference from enterprise migration, concurrent policy interference, and spillover effects through three robustness tests: First, the authors, drawing on the approach of Cattaneo et al. (2018, 2019), compared the distribution of enterprises on both sides of the breakpoint and statistically analyzed the proportion of enterprises that relocated across provinces, finding that the impact of enterprise migration was not significant. Second, the authors reviewed the relevant policies implemented in my country from 2005 to 2013 that affected enterprise pollution emissions, providing breakpoint estimates for the boundary samples for each year. Following the approach of Grembi et al. (2016) and Giambona & Ribas (2018), a differential breakpoint design was implemented, while further controlling for region-year and industry-year fixed effects to eliminate interference from concurrent policies, finding that the baseline results still exist. Finally, drawing on the approach of Miguel & Kremer (2004), the paper gradually eliminated control group samples within 1 to 5 kilometers of adjacent provinces and performed a series of breakpoint estimates, finding that the spillover effect was also not significant.This paper found that higher pollution fees reduced the export propensity of polluting companies by 12.45%–13.50%, thus validating the "pollution refuge hypothesis" effect in the short term. Regarding the "pollution refuge" hypothesis, the paper discussed how environmental regulations ultimately affect companies' exports by influencing their cost decisions. It found that, on the one hand, polluting companies reduced their annual production time by 34–41 days; on the other hand, companies faced increased production costs due to the need for cleaner production and the purchase of emission reduction equipment, thus suppressing exports. This was accompanied by a 58.23%–61.40% decrease in sulfur dioxide production and a 49.89%–53.74% decrease in emissions. However, the "Porter innovation hypothesis" effect was not verified during the sample period, meaning that the increased pollution fees did not incentivize companies to engage in green innovation activities. To measure the export losses caused to polluting enterprises by reducing sulfur dioxide emissions per unit, this study adopted the approach of He at. (2020) to conduct a cost-benefit analysis and constructed a boundary index MRS. The results show that if sulfur dioxide emissions are reduced by 1% during the sample period, the export losses of Chinese enterprises will be approximately RMB 542 million to RMB 651 million.This paper examines the export effects of my country's pollution discharge fee policy on enterprises, explores how enterprises can cope with higher pollution discharge fees, and verifies the "pollution refuge hypothesis" and the "Porter innovation hypothesis" in the Chinese context. By focusing on enterprises on both sides of a common provincial boundary and conducting a geographical discontinuity regression design to alleviate potential endogeneity issues, it provides a cleaner causal identification strategy, analyzes the costs of the pollution discharge fee policy, provides micro-level evidence for the export effects of pollution discharge fee policies on enterprises in an open economy, and offers policy references for the further rational design of environmental regulatory policies.
Du Yingxin
Associate Research Fellow, Institute of World Trade Organization Studies, University of International Business and EconomicsDu YingxinThis paper summarizes its main contributions and highlights, arguing that its empirical methods are innovative. Through geographical discontinuity design and thorough robustness testing, it effectively addresses many challenges related to endogeneity, ensuring that the effect of provincial boundaries stems entirely from the increase in sulfur dioxide emission fees. This provides a valuable reference for research in this field. Furthermore, the paper provides empirical evidence at the micro-enterprise level and offers in-depth analysis and empirical verification of the impact mechanism.Following this, Professor Du Yingxin raised some questions and reflections. Regarding the validity test, the pseudo-breakpoints constructed by shifting the breakpoint upwards or downwards are still within the province. Therefore, this test may not completely rule out the possibility that differences between enterprises at the precise boundary are influenced by province-specific differences. Regarding the phenomenon that no significant impact was found in the first two years of policy implementation, Professor Du Yingxin believes the reason might be that provinces that increased pollution discharge fees simultaneously introduced supplementary measures to reduce enterprise production costs, such as tax breaks or exemptions for investments in desulfurization equipment or corresponding environmental protection technologies, to buffer the ex-post impact of the policy on enterprise exports in the short term. For the mechanism analysis section, Professor Du Yingxin believes that the increase in enterprise assets, besides purchasing clean equipment, may also be due to investments in intangible assets such as intellectual property and R&D.Furthermore, in light of the pollution paradise theory, the decline in exports caused by the increase in pollution discharge fees may only be a short-term adjustment pain, and in the long run, it may achieve the effect of optimizing the industrial structure and realizing green growth. At the same time, the policy of changing pollution discharge fees to environmental protection taxes implemented in 2018 may provide greater incentives for enterprises to improve their clean production capabilities and carry out green innovation.
