Abstract
This paper explores the determinants of atmospheric environmental quality in China. It estimates the emission factor and energy functions of mining and industrial sectors for the period 1991-1999.
I postulate the hypothesis that local governments have incentives to internalize the local external diseconomies arising from the S0₂ emissions, while they have little incentive to cut the use of energy as it is likely to work against the activities of local industries. I also hypothesize that the governments have little interest in reducing the C0₂ emissions, as the external diseconomies due to the different nature of the externalities. In order to substantiate these hypotheses, we decompose emissions of S0₂ and C0₂ into two factors: the emission factor and the energy consumption. We then examine the determinants of each factor of the emissions of the two air-pollutants.
The results show that the share of heavy industry in provincial GDP and the value-added share of state-owned enterprises are the two main factors to reduce the emission factor of S0₂ , and the structural difference between urban and non-urban areas is verified. The empirical evidence implies that even though the S0₂ emissions have kept increasing, there is little evidence to show the local government to reduce the S0₂ pollution problem in the urban area. This finding is not applicable to the cases of C0₂ and energy consumption, and the outcome has profound policy implications. In order to reduce the greenhouse-effect gases, China needs to improve the efficiency of energy-use further in accordance with a new international treaty in which China is expected to participate.
