Assessing the impact of the eco-environmental damage compensation system

The high-quality development path of ecological priority and green energy efficiency should be unswervingly followed. Therefore, exploring the ecological and environmental level (EEL) is an urgent and essential matter for sustainable development. This research aims to estimate how the eco-environmental damage compensation system (EDCS) affects the EEL in China. The framework is based on panel data collected from 284 cities at the prefecture level in China. The Differences-in-Differences (DID) method is employed to examine the influence and spillover effect. Findings provide evidence that the EDCS significantly improves the EEL. Therefore, this study primarily examines whether and how the EDCS impacts the EEL. Further, the ecological environment level of resource-based cities is drastically different from that of non-resource-based cities under the impact of the EDCS. Mechanistic analyses demonstrate that the EDCS is conducive to upgrading of industrial structure and technological innovation, which in turn promotes regional EEL. Based on the findings of the analyses, it can be argued that policymakers and market participants should work together to address environmental issues, combining top-down and bottom-up approaches. Ultimately, efficient markets and responsive governments work together. The policy should form a dynamic adjustment mechanism for different resource cities to realize the purpose of emissions reduction and enhance the EEL.