The spatial spillover effect of higher SO₂ emission tax rates on PM_2.5 concentration in China

In this paper, the adoption of SO₂ 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 SO₂ 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 SO₂ 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 SO₂ 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 SO₂ emission tax rates. The results of the mediation effect analysis show that the higher SO₂ emission tax rate can aggravate the surrounding PM_2.5 pollution by promoting the aggregation level of industrial production factors and the industrial SO₂ emission intensity in the surrounding areas, which can support the existence of the pollution heaven effect.