The spatial spillover effect of higher SO(2) emission tax rates on PM(2.5) concentration in China

In this paper, the adoption of SO(2) emission tax rates higher than the legal minimum standard is regarded as a noteworthy policy reform in China (quasi-natural experiment), and a spatial Difference-in-Differences (Spatial-DID) model is constructed to test the direct effects (local effects) and indirect effects (spatial spillover effects) of SO(2) emission tax policy reform on PM(2.5) concentrations in the atmosphere of 285 China’s cities. The estimation and calculation results of the Spatial-DID model show that the SO(2) emission tax policy reform can significantly reduce local PM(2.5) concentration and significantly promote PM(2.5) concentration in surrounding areas. The results of heterogeneity analysis show that the SO(2) emission tax policy reform can produce a relatively more beneficial spatial spillover effect in eastern cities and higher administrative level cities, while the pollutants emission rights trading and the reform of NO(x) emission tax rates can produce beneficial spatial spillover effects when cooperating with the reform of SO(2) emission tax rates. The results of the mediation effect analysis show that the higher SO(2) emission tax rate can aggravate the surrounding PM(2.5) pollution by promoting the aggregation level of industrial production factors and the industrial SO(2) emission intensity in the surrounding areas, which can support the existence of the pollution heaven effect.