Effects of environmental regulation on CO2 emissions: An empirical analysis of 282 cities in China

Abstract This paper takes 282 cities in China from 2003 to 2016 as research samples, uses the system-generalised method of moments (GMM) and dynamic panel model to analyse the direct and indirect effects of environmental regulation on CO2 emissions, and subdivides the research sample to analyse the impact of urban heterogeneity on the emission-reduction effect of environmental regulation. The results show that the direct impact of environmental regulation on CO2 emissions presents an inverted U-shaped relationship. At present, environmental regulations effectively restrain CO2 emissions in Chinese cities. Overall, environmental regulation can effectively restrain CO2 emissions by forcing industrial structure upgrades and technological innovation. However, under the constraints of environmental regulation, foreign direct investment (FDI) shows a pollution–haven effect. From the subsample perspective, the impact of urban heterogeneity on the emission reduction effect of environmental regulation is quite different. This study helps policy-makers better understand the impact of environmental regulation on CO2 emissions and formulate effective policies to achieve emission reductions.