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Vertical Structure, Public Environmental Awareness, and Overcapacity |
Pi Jiancai Li Zixin |
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Abstract Currently in China, environmental pollution and overcapacity are problems in urgent need of solutions on the path to high-quality economic development. There is an intrinsic link between environmental protection and overcapacity reduction, and a large number of studies using China’s data support the positive effect of environmental regulation on overcapacity reduction. However, the impact of autonomous environmental regulation, which is represented by public environmental awareness on overcapacity, is not clear yet. Since the Fifth Plenary Session of the 18th CPC Central Committee adopted “green development” as one of the five major development concepts, the Party and the government have paid much attention to the establishment of an environmental governance system involving all people, and with the rapid development of information technology, the role of the public in environmental regulation has been more and more important. To explore the impact of public environmental awareness on private firms’ overcapacity and environmental taxes, this paper constructs a vertical structure model and incorporates five parties: the central government, the local government, upstream state-owned enterprises, downstream private enterprises and the public. To measure the core variable “public environmental awareness”, this paper adopts the method of adding a relevant parameter in the residents’ utility function. Such treatment can reflect the direct influence of public environmental awareness on the behavior of individuals, further reflect the influence on the demand and price in the product market, and finally reflect the influence on the firms’ capacity and output decisions. The results show that the effect of public environmental awareness on downstream private enterprises’ overcapacity exhibits an inverted-U shape, where overcapacity will be aggravated with the enhancement of public environmental awareness before its level reaches the threshold; however, after the level of public environmental awareness crosses the threshold, its further enhancement will alleviate overcapacity. Under a specific level of public environmental awareness, the central government does not need to intervene, but until public environmental awareness reaches that level, the government should tax private firms on their polluting behaviors; otherwise, the government should provide subsidies to private firms. The optimal environmental tax rate decreases as public environmental awareness increases, while the optimal subsidy rate of local government increases as public environmental awareness increases. The government should promote environmental information disclosure, guide the public to legally express their environmental demands, and develop a pluralistic environmental governance system with government intervention as the mainstay and public participation as the supplement. Since there is uncertainty in the direction of the impact of public environmental awareness on the governance of overcapacity, it is necessary to regularly measure the level of public environmental awareness, determine the interval in which it locates, find out the direction of its effect on overcapacity, accordingly formulate reasonable and effective economic and environmental policies, and consequently make comprehensive use of different types of environmental regulation instruments to realize the double positive effects of environmental regulation in both eco-environmental protection and the governance of overcapacity.
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Published: 18 July 2023
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