Environmental governance effects of local environmental protection expenditure in China

China’s economy is experiencing a rapid revival in the post Covid-19 era, while energy consumption is surging and environmental pressure is prominent. Environmental protection expenditure is an important means for local governments to improve environmental quality; it plays a crucial role in guiding market investment, providing environmental treatment funds and energy conservation and utilization. Based on a sample of 286 prefecture-level cities in China from 2007 to 2017, this study analyzes environmental governance effects of local environmental protection expenditure while considering the time duration, regional differences, and spatial spillover characteristics of industrial pollution emissions. The results reveal that local environmental protection expenditure could help reduce industrial pollution emissions in Chinese cities; however, the governance effects were heterogeneous in different clustering city groups. In addition, the effects of environmental protection expenditure at the neighborhood level varied greatly; the results showed that the stronger the spillover of pollutants, the more significant was the trans-regional governance effect of local environmental protection expenditure. Therefore, local governments should promote a cooperative mode of “joint prevention and control and cross-regional governance” when treating pollutants with strong spillover potential.