Different types of environmental regulations and heterogeneous influence on energy efficiency in the industrial sector: Evidence from Chinese provincial data

Using China's provincial panel data during 2000-2017, this study attempts to research the impacts of different environmental regulatory instruments and relative stringency on total factor energy efficiency. A Super-SBM model with undesirable outputs is used to evaluate the energy efficiency of industrial sector for thirty provinces in China. The result indicates a relatively low energy efficiency of industrial sector and significant difference between provinces in China. The dynamic panel regression was employed to examine the heterogeneous effects and mechanisms on energy efficiency by different types of environmental regulations. We have two main findings: (1) At a certain stringency level, both command-and-control and market-based environmental regulations have positive effects on total factor energy efficiency. (2) There exist nonlinear relationships between environmental regulations and total factor energy efficiency. The current regulation level of command-and-control exceeds the optimal level, while the current regulation level of market-based is reasonable. Moreover, market-based environmental regulation is more effective based on China's reality. These findings provide new evidence in confirming the Porter effect and some policy implications for China to further improve energy efficiency.