The impact of environmental regulation on the coordinated development of environment and economy in China

The contradiction between environmental protection and economic development has become an important issue in China. Environmental regulation, as a vital content of public regulation, is an effective approach to rectify market failure. Thus, studying the impact of environmental regulation on the coordinated development between environment and economy is beneficial to design the most suitable environmental management system for Chinese government. Based on the theory of regulation economics and industrial organization, this paper incorporates environmental regulation policy in the traditional SCP paradigm and analyzes the conduction mechanism of market structure and market behaviors on the coordinated development between environment and economy. With the empirical analysis, we find the existence of an EKC curve, which means that tightening the environmental regulation is an effective means of guaranteeing economic growth and optimizing environmental quality. Eventually, we point out the problems existing in China’s current environmental regulation system and design a new one which is more suitable for the current economic development stage of China.