Effect of Environmental Decentralization on Pollution Reduction: Positive or Negative?

Abstract This study investigates the impact of environmental decentralization on pollution mitigation based on the panel data across 30 Chinese provinces from 2004 to 2019. Different from previous studies, this study uses a spatial dynamic panel Durbin model and panel threshold model, considering both time and spatial lag factors of pollution mitigation and the possibility of non-linear impact of environmental decentralization on pollution mitigation. We conclude with four main findings. Firstly, environmental decentralization is not helpful to pollution mitigation at the national level. Secondly, the environmental decentralization shows a positive spatial spillover effect and non-linear effect, that is, the local environmental decentralization affects its neighbouring area’s pollution mitigation. In other words, when the environmental decentralization is at a low level, the negative impact on pollution mitigation is relatively large; while when the environmental decentralization is at a high level, the negative impact is relatively small. Thirdly, the impact of environmental decentralization on pollution mitigation appears regional heterogeneity, where the impact is positive to central and eastern regions, but negative to the western areas. Lastly, although the decentralization of environmental administration and supervision helps mitigate pollution, decentralized environmental monitoring negatively affects pollution reduction. Therefore, we suggest promoting the structural reform of environmental decentralization, setting a proper decentralization degree in different regions, and establishing a collaborative regulation mechanism across regions.