Research On The Emission Reduction Effect Of Local Fiscal Environmental Expenditure

China’s economy has developed rapidly and made remarkable achievements.However,extensive economic development has brought about environmental sacrifices.Acid rain,haze and sandstorms have emerged frequently,and the trend of global warming is becoming increasingly obvious.The environment has the attribute of public goods and has strong externalities.There will be "tragedy of the commons","free riding" and other market failures,if the government doesn’t involve in environmental problems.Based on the emission reduction effect of local financial environmental expenditure,this study discusses the complex effects of local financial environmental expenditure on pollution and carbon emission reduction through understanding and grasping macroeconomic theory,public goods theory and externality theory.This paper first reviews the research results and recent progress on local fiscal environmental expenditure at home and abroad through literature review.Secondly,the paper analyzes the mechanism of emission reduction effect of financial environmental expenditure from three aspects: source pollution control,ecological environment protection and social environmental protection investment,and puts forward four hypotheses on this basis.Thirdly,it analyzes the current situation of environmental expenditure,pollution emissions and carbon emissions.Then,this paper selects panel data from 30 provinces(autonomous regions,municipalities directly under the Central Government,except Tibet)in China from 2007 to 2017 for empirical analysis to explore the emission reduction effect of local financial environmental expenditure and its mechanism.At the same time,it analyzes the heterogeneity of regional division according to the degree of economic development and industrialization,and conducts a robustness test.Finally,draw conclusions and make policy recommendations.The results of this study show that:(1)Although the scale of environmental protection investment in China is expanding,the overall intensity of environmental protection investment is weakening.(2)The western region of China has the most serious pollution problem and needs to be solved urgently,while the eastern region has relatively optimistic environmental problems.(3)Local fiscal environmental expenditure has a significant emission reduction effect,which is significant in regions with more developed economy and higher industrialization,but not significant in regions with less developed economy and lower industrialization.(4)Local fiscal environmental expenditure can significantly improve the energy consumption structure and green space ratio.(5)Local fiscal environmental expenditure can significantly lead to social environmental protection investment,and the effect is most obvious in central China.(6)The local financial environmental expenditure controls the source pollution,protects the ecological environment and causes social environmental protection investment to achieve emission reduction.The innovation of this paper are as follows: First,in the empirical process,the use of instrumental variables to try to solve endogenous problems.There may be a two-way causal relationship between local fiscal environmental expenditure and environmental pollution,which leads to endogeneity.This paper chooses the average level of fiscal expenditure of other provinces in the same region as the tool variable,and uses the twostage least square method for empirical analysis to try to solve the endogenous problem.Second,construct a comprehensive pollution index covering a wider range of pollution.When studying the pollution reduction effect of local financial environmental expenditure,this paper uses the comprehensive environmental pollution index constructed from air,water and solid pollution as an explanatory variable,which can more comprehensively reflect the environmental pollution situation.At the same time,construct the overall environmental protection investment intensity,and analyze the expenditure intensity of China’s environmental protection undertakings by integrating the environmental expenditure of the government and society.Third,try to study the mechanism of the emission reduction effect of local fiscal environmental expenditure.This paper explores the mechanism of the emission reduction effect of local financial environmental expenditure by studying the three paths of local financial environmental expenditure to control the source pollution,protect the ecological environment and lead to social environmental investment.This paper also has some shortcomings: First,because this paper wants to explore the mechanism of the emission reduction effect of local fiscal environmental expenditure,consider the role of local fiscal environmental expenditure in social environmental protection investment.This process needs to use the variable of environmental governance investment.However,the prefecture level data of environmental governance investment has been missing since 2007,which makes it impossible to conduct empirical analysis,and the data of environmental governance investment has not been updated since 2017.Therefore,the entire empirical process can only select provincial panel data from 2007 to 2017,making the research sample of this paper small,with certain limitations.Second,due to the limitation of research methods,this paper explores the mechanism of the emission reduction effect of local financial environmental expenditure,only proving that the impact path does exist,but failed to measure and calculate the specific emission reduction effect value of each path.