The role of governments in mitigating SO2 pollution in China: a perspective of fiscal expenditure.

ABSTRACT

China has suffered from extensive and serious SO2 pollution. The central and provincial governments have reinforced environmental awareness by increasing fiscal expenditure for environmental protection for years. This paper extended an environmental Kuznets curve (EKC) framework to evaluate the direct and indirect spillover effects of environmental awareness of provincial governments on SO2 emissions, applying spatial econometric models. The empirical findings are as follows. (1) There exists an inverted U-shaped curve. Of 30 Chinese provinces, only 9 provinces, namely, 8 eastern provinces and Inner Mongolia, have passed the turning point at about 53,000 Yuan while the rest 21 provinces have not yet. (2) Expenditure for environmental protection is negatively correlated with SO2 pollution. In other words, environmental awareness of governments contributes to substantially reducing SO2 emissions. Besides, significant and negative spillover effects of environmental awareness are found, implying that provinces follow suit if neighboring provinces enhance environmental awareness by increasing spending on environmental protection, thereby reducing SO2 emissions. (3) The SO2 reduction policy implemented by the central government is found to have a negative impact on SO2 emissions, implying that the policy effectively works. To conclude, the central and provincial governments play pivotal roles in addressing the problem of SO2 pollution in China. Hence, more expenditure for environmental protection cannot be overstated for China's environmental quality improvements and sustainable development.