Heterogeneous effects of environmental regulation on air pollution: evidence from China’s prefecture-level cities

Using environmental regulation to control air pollution is one of the essential means to resolve economic growth bottlenecks and ecological environment constraints. We construct a theoretical framework to analyse the impact of environmental regulation on air pollution by using balanced panel data from 2003 to 2016 of 248 Chinese cities. The results show that both formal and informal environmental regulations can significantly reduce air pollution in prefecture-level cities. Formal environmental regulation indirectly improves air pollution level by promoting technological innovation and formal environmental regulation indirectly reduces local air pollution by promoting the pollution industry transfer. In addition, informal environmental regulation indirectly reduces air pollution by improving formal environmental regulation. Moreover, formal and informal environmental regulations have inhibitory effects on air pollution in high administrative-level cities and low administrative-level cities, with both the regulations having significantly stronger inhibitory effects on air pollution in low administrative-level cities than in high administrative-level cities. Furthermore, the environmental Kuznets curve is established at the level of prefecture cities in China, and the upgrading of the industrial structure will reduce air pollution, while foreign direct investment and fiscal decentralisation will worsen air pollution.