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Who will Spend more Pollution Abatement Costs: does Size Matter?

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Qianqian Wang
Qianqian Wang
Qianqian Wang
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Xun Fan
Xun Fan
Xun Fan
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Bing Zhang
Bing Zhang
Bing Zhang
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Abstract and Figures

This paper looks at the relationship between enterprise size and pollution abatement costs using firm-level datasets in China, where size-dependent distortions may exist in the distribution of enterprises of different sizes. We find that the pollution abatement costs decrease with enterprise size. Compared to the smallest size, the magnitudes of marginal decreases in pollution abatement costs per 1000 CNY of industrial output in the largest size are 3.29 CNY, 0.54 CNY and 2.60 CNY for gas, SO2 and dust, respectively. Moreover, we further explore the potential mechanisms for the decrease of pollution abatement costs from three perspectives: environmental protection-related investment, regulation intensity, and technological capability. Our findings suggest that the decrease in the intensity of environmental protection-related investment for large enterprises may be directly reduce the intensity of pollution abatement costs. Although large enterprises have low intensity of pollution abatement costs, this does not mean that they are subject to weaker environmental regulation. More importantly, we find that large enterprises may have more adoption of abatement technologies. For SO2 and dust, the pollutant removal efficiency of the largest enterprises is 4.92% and 1.82% higher than that of the smallest enterprises, respectively. Our results are robust to different specifications. These findings help us enact appropriate policies for enterprises based on their size, thereby improving the efficacy of pollution abatement and achieving the optimal level of pollution abatement for the entire society.
The pollution abatement costs per 1000 CNY of industrial output by four enterprise size: based on the industry output. Notes: Fig. 1a reports the average increment effects by enterprise size on the operating costs of gas treatment facilities per 1000 CNY of industrial output. Figure 1b reports the average increment effects by enterprise size on the operating costs of desulfurization treatment facilities per 1000 CNY of industrial output. Figure 1c reports the average increment effects by enterprise size on the operating costs of dust removal treatment facilities per 1000 CNY of industrial output
The pollution abatement costs per 1000 CNY of industrial output by four enterprise size: based on the industry output. Notes: Fig. 1a reports the average increment effects by enterprise size on the operating costs of gas treatment facilities per 1000 CNY of industrial output. Figure 1b reports the average increment effects by enterprise size on the operating costs of desulfurization treatment facilities per 1000 CNY of industrial output. Figure 1c reports the average increment effects by enterprise size on the operating costs of dust removal treatment facilities per 1000 CNY of industrial output
… 
Intensity of pollution abatement operating costs on waste gas: by the intensity of environmental investment, environmental subsidies and green credit at the firm-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for different groups. Panel a–c reports the heterogeneous effects of environmental investment, environmental subsidies and green credit, respectively. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
Intensity of pollution abatement operating costs on waste gas: by the intensity of environmental investment, environmental subsidies and green credit at the firm-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for different groups. Panel a–c reports the heterogeneous effects of environmental investment, environmental subsidies and green credit, respectively. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
… 
Intensity of pollution abatement operating costs on waste gas: by the emission intensity at the industry-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for emission intensity. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
Intensity of pollution abatement operating costs on waste gas: by the emission intensity at the industry-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for emission intensity. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
… 
Intensity of pollution abatement operating costs on waste gas: by regulation intensity, economic development and green finance development at the city-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for different groups. Panel a–c reports the heterogeneous effects of regulation intensity, economic development and green finance development, respectively. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
Intensity of pollution abatement operating costs on waste gas: by regulation intensity, economic development and green finance development at the city-level. Notes: Figure presents coefficients and 95% confidence intervals on the operating costs of gas treatment facilities per unit of industrial output for different groups. Panel a–c reports the heterogeneous effects of regulation intensity, economic development and green finance development, respectively. And we adopt IHS transformation of the outcome as an example. Regression models are estimated using Eq. (1) and include county-year fixed effects, industry-year fixed effects, county-industry fixed effects and control vars. Standard errors in parentheses are clustered at the province level
… 
The pollution abatement costs per 1000 CNY of industrial output by six enterprise size: based on the industry output. Notes: Panel a–c reports the average increment effects by enterprise size on the pollution abatement costs per 1000 CNY of industrial output for gas, SO2 and dust, respectively
+1
The pollution abatement costs per 1000 CNY of industrial output by six enterprise size: based on the industry output. Notes: Panel a–c reports the average increment effects by enterprise size on the pollution abatement costs per 1000 CNY of industrial output for gas, SO2 and dust, respectively
… 
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Environmental Management (2024) 73:985–1004
https://doi.org/10.1007/s00267-024-01937-x
Who will Spend more Pollution Abatement Costs: does Size Matter?
Qianqian Wang1●Xun Fan1●Bing Zhang1
Received: 5 September 2023 / Accepted: 7 January 2024 / Published online: 29 January 2024
© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024
Abstract
This paper looks at the relationship between enterprise size and pollution abatement costs using firm-level datasets in China,
where size-dependent distortions may exist in the distribution of enterprises of different sizes. We find that the pollution
abatement costs decrease with enterprise size. Compared to the smallest size, the magnitudes of marginal decreases in
pollution abatement costs per 1000 CNY of industrial output in the largest size are 3.29 CNY, 0.54 CNY and 2.60 CNY for
gas, SO2and dust, respectively. Moreover, we further explore the potential mechanisms for the decrease of pollution
abatement costs from three perspectives: environmental protection-related investment, regulation intensity, and technological
capability. Our findings suggest that the decrease in the intensity of environmental protection-related investment for large
enterprises may be directly reduce the intensity of pollution abatement costs. Although large enterprises have low intensity
of pollution abatement costs, this does not mean that they are subject to weaker environmental regulation. More importantly,
we find that large enterprises may have more adoption of abatement technologies. For SO2and dust, the pollutant removal
efficiency of the largest enterprises is 4.92% and 1.82% higher than that of the smallest enterprises, respectively. Our results
are robust to different specifications. These findings help us enact appropriate policies for enterprises based on their size,
thereby improving the efficacy of pollution abatement and achieving the optimal level of pollution abatement for the entire
society.
Keywords Environmental regulation ●Pollution abatement costs ●Air pollution ●Enterprise size ●Economies of scale
JEL classification Q52 ●Q53 ●Q58 ●L51
Introduction
Environmental economists believe that environmental pol-
lution is an external uneconomical behavior, and inter-
nalizing external costs through environmental policies can
encourage polluting enterprises to mitigate emissions
(González and Saarman 2014; Lucas et al. 1992; Pigou
1920). The costs of pollution abatement for enterprises
directly affects the environmental policy decision-making
and abatement effectiveness. Therefore, a thorough under-
standing of pollution abatement costs of enterprises is an
important prerequisite for formulating effective environ-
mental policies (Isaksson 2005). First, we can better
understand their actual needs and requirements, which
enhance the rationality and effectiveness of policies to
ensure the implementation of policies. More importantly,
exploring the abatement costs of enterprises helps to more
accurately evaluate the cost-effectiveness of environmental
policies (Goulder et al. 1999). By analyzing the actual
pollution abatement costs of enterprises, policy makers can
more accurately predict and evaluate the required fiscal
budgets and social costs, as well as the policy imple-
mentation effect (Dasgupta et al. 1996).
According to previous environmental economics litera-
ture, some studies have identified that there are two coun-
teracting effects that have heterogeneous effects on the
pollution abatement costs of enterprises by size, favoring
either large or small enterprises (Becker 2005; Becker et al.
2013; Coria and Kyriakopoulou 2018; Dean et al. 2000).
First, economies of scale on costs favors the large
*Bing Zhang
zhangb@nju.edu.cn
1State Key Laboratory of Pollution Control & Resource Reuse,
School of Environment, Nanjing University, 163 Xianlin Avenue,
Nanjing 210023, China
1234567890();,:
1234567890();,:
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