Air pollution control or economic development? Empirical evidence from enterprises with production restrictions

• Published in: Journal of environmental management 2023-06, Vol.336, p.117611-117611, Article 117611
• Main Authors: Feng, Tong, Chen, Xinyu, Ma, Jie, Sun, Yuechi, Du, Huibin, Yao, Ye, Chen, Zhenni, Wang, Shidong, Mi, Zhifu
• Format: Article
• Language: English
• Subjects: Air Pollutants; Air pollution; Air Pollution - prevention & control; air pollution control; business enterprises; China; Conservation of Natural Resources; Economic Development; Economic performance; environmental law; Environmental Pollution; income; Industrial enterprise; Investments; Production restrictions
• ISSN: 0301-4797; 1095-8630
• DOI: 10.1016/j.jenvman.2023.117611

Production restriction is an environmental regulation adopted in China to curb the air pollution of industrial enterprises. Frequent production restrictions may cause economic losses for enterprises and further hinder their green transformation. Polluting enterprises are faced with the dilemma of choosing environmental protection or economic development. Using panel data on industrial enterprises in China from 2016 to 2019, this paper evaluates the impact of production restrictions on both enterprises' environmental and economic performance with regression models. The results show that production restrictions significantly drop the concentrations of SO2 and NOx emitted from polluting enterprises. Meanwhile, production restrictions have significant negative effects on operating income, financial expenses, net profit, and environmental protection investment. The mechanism analysis reveals that production restrictions mitigate air pollutant concentrations by increasing the number of green patents and improving total factor productivity, which also verifies the Porter hypothesis. However, there is a masking mediating effect of environmental investment, which indicates that the reduction of environmental investment hinders the enterprise's efforts to control air pollution. In addition, heterogeneous analysis shows that the economic shock on microenterprises is larger than that on small enterprises. Implementing production restrictions for microenterprises may be a way to eliminate their backwards production capacity. •Production restriction dropped air pollutants of polluting enterprises.•Production restriction has negative effects on business performance of enterprises.•TFP and green innovation are the mediating variables of pollution reduction.•The reduction of environmental investment hinders the pollution control.•The shocks to the business performance of microenterprises are larger.