Overcapacity and Strategic Choice of Environmental Regulation:From the Perspective of Formal and Informal Environmental Regulations
Insufficient effective demand and overcapacity in certain industries have emerged as one of the challenges to economic recovery and improvement in China.The development of industries and the reduction of carbon emissions and pollution should be pursued synchronously,while implementing the industrial and environmental policies in tandem.Environmental regulation is one of the policy measures to address overcapacity and crucial tools for pollution control,and its potential impact to exacerbate overcapacity through excessive intervention should be wielded cautiously.In this context,taking the variations in capacity utilization across industries into account,the strategic combination of formal and informal environmental regulatory tools to achieve pollution control objectives with minimal economic costs is of significant importance.This approach is essential for facilitating quality enhancement and reasonable quantitative growth of the economy.This paper defines overcapacity(undercapacity)as an exogenous variable between environmental regulation and enterprise pollution emissions.It also constructs an output competition model based on overcapacity(undercapacity)and environmental regulation with the maximum capacity of enterprises as a constraint,then demonstrates the heterogeneous impact of formal and informal environmental regulation on enterprises'pollution emission reduction and economic performance between overcapacity and undercapacity industries.By employing data from the key surveys of industrial pollution sources in China from 1998 to 2014,this paper conducts a set of empirical analysis,and reveals that in the industries facing undercapacity factors,both formal and informal environmental regulations are effective in reducing enterprise pollution emissions,but simultaneously diminish economic performance.In industries with overcapacity,the environmental governance effects of formal and informal regulations are comparably significant,yet their effects on economic performance are uncertain.Moreover,in terms of environmental governance effectiveness,the marginal policy effect of formal environmental regulation is greater than that of informal regulation across industries with varying capacity utilization rates.By integrating the industry capacity utilization rate,and formal and informal environmental regulations within the same analytical framework,this paper derives following policy insights.Policymakers should utilize a combination of economic and non-economic environmental policies.For industries with different levels of capacity utilization,policymakers should be flexible in selecting and combining appropriate environmental regulations.In industries with undercapacity,policymakers should rely more on formal environmental regulations to ensure the effective promotion of enterprise emissions reduction.Conversely,in industries characterized by overcapacity,informal environmental regulation,by stimulating public scrutiny and participation,can effectively offset the shortcomings of formal regulation without excessively increasing the costs and financial constraints on enterprise emission reduction.
overcapacityrate of capacity utilizationenvironmental regulationinformal environmental regulation
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