| Abstract | We return to the theoretic research tradition of Nordhaus (1982) to explore impacts of greenhouse gases (GHGs) on the green development of economies. Our research results confirm two of the three major policy implications in Nordhaus's paper—externalities are at the core of environmental regulation behavior and different (optimal) environmental regulation methods lead to different (better) outcomes. The Kyoto Protocol (KP), the first global environmental governance program of the international community, rationally uses the externalities of the North-South cooperation on clean production technologies instead of implementing a more radical “Pigovian tax” on countries. This means that the Clean Development Mechanism (CDM), a relatively mitigating international environmental regulation method, has had more positive policy effects.
In this paper, we explore the strategic approach of developing countries to cope with the rise of international conservatism and the constant setbacks in global environmental governance. On June 1, 2017, US President Trump announced that the federal government would cease to implement the Paris Agreement (PA) and immediately stopped follow-up treaty payments. As the largest developing country, how should China respond to the major change? Should it implement the PA and continue to actively participate in (or even lead) global environmental governance?
The KP came into effect in 2005 before the conclusion of the PA. It undoubtedly provided a reference point for the design and operation of the PA, which was an improvement based on the experience with the KP. To some extent, the policy effects of the KP reflect the policy prospects of the PA for global energy conservation and green development.
We regard the only CDM connecting the North and the South under the KP as a public policy experiment of international environmental cooperation. We manually collected the spatial geographic information from 3,027 factory-level CDM projects in China and construct a spatial panel data covering 30,773 observation points from 2001 to 2012. The differences-in-differences method is used to empirically evaluate the KP and China's contribution to reducing emissions in international environmental cooperation.
We find that the KP as represented by CDM is effective in promoting GHG emission reductions. Given that GHG emissions have a sustained and far-reaching negative impact on the global climate and that China has undertaken nearly half of the global CDM projects, China has doubtlessly made important contributions to global climate governance. Despite the negative impacts of the Trump administration’s announcement of the withdrawal of the PA, the increasingly severe global climate change situation and the Chinese Communist Party’s national strategy of saving resources and protecting the environment require China to continuously participate in international environmental cooperation and to play an appropriate role inside.
Unlike the domestic mainstream literature on environmental regulation which either focuses on mandatory environmental regulation methods like direct taxation, fines and compulsory shutdowns or explores impacts of a macro environmental policy change on the economy and society, we use micro-factory clean production projects and sewage data near these projects to conduct more micro and detailed public policy evaluation study. This paper has three innovations: (1) We use counterfactual framework of a natural experiment to better simulate the environmental benefits brought by the implementation of the PA to global green development. (2) The KP’s effect on GHG emission reductions is demonstrated in the micro-geographic unit with CDM projects for the first time, enriching the research exploring the impacts of the KP and CDM on energy conservation and emission reductions and promoting green development. (3) We evaluate China's contribution to emission reductions under the KP using panel data for the first time, responding strongly to some countries' accusations that developing countries like China are not proactively reducing emissions.
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