Favorable Fiscal Self-Sufficiency Enables Local Governments to Better Improve the Environmental Governance—Evidence from China’s Lower-Pollution Areas

Abstract

With the rapid development of industrial economy, local governments in China have invested a large amount of financial funds in environmental protection. In the era of widespread use of clean energy, local governments have a greater responsibility to coordinate fiscal policies with industrial development policies to improve regional environment. Local governments with large fiscal surpluses would make more efforts to improve environmental efficiency, rather than attract heavily polluting industrial enterprises to develop their local economies, and more likely to promote the use of clean energy equipment and raise environmental awareness in government. This paper focuses on testing the impact of abundant fiscal revenue of local governments on the efficiency of regional environmental governance with the data in all prefecture-level cities of China’s Guangdong province from 2001 to 2020. We estimate local environmental governance efficiency score with super-efficiency SBM method, taking unexpected output into account. Then we find that fiscal affluence has significant positive effect on the efficiency of environmental governance and the environmental awareness of the government also has obvious help in improving local environmental efficiency. We hope that these findings will provide practical help for local governments to improve their fiscal policy agendas and the quality of environmental governance.

1. Introduction

After a long period of rapid economic growth, China has emphasized the responsibility of local governments in environmental governance. Since the tax sharing system in 1994, the level of fiscal decentralization between the central and local governments in China has been very high. Local governments have gained not only independent fiscal power, but also more responsibilities. Economic development leads to air and water pollution, which are localized development problems. Therefore, environmental governance has become a very typical local governance responsibility. The central government encourages local governments to improve the quality of life of residents and attract more foreign investment by cleaning up the environment [1]. Under the background of fiscal decentralization, local governments also have great interest in environmental governance responsibility, because environmental governance investment itself is also a huge industrial distribution, which can promote the development direction of circular economy in many places [2]. As the performance of environmental governance and social responsibility has become an important criterion for enterprises to attract investment, local governments have more enthusiasm to invest financial funds in related industries.

China has a vast territory, and the level of environmental pollution varies greatly from region to region, and local governments have different standards for achieving environmental governance efficiency. Although some local governments have invested a huge amount of financial funds to deal with environmental pollution, the actual results are not ideal [3]. Therefore, how to measure the environmental governance performance of local governments is an important issue worthy of further study. Some local governments have invested a large amount of fund to control air and water pollution, and some have made strict emission policies, but they have not received good results. When we use the efficiency index to evaluate the environmental governance ability of local governments, the related issues will become more complicated, as fiscal expenditure in environmental governance will produce good outputs, but also produce undesirable ones [4]. However, only by considering the efficiency evaluation index of both good and bad outputs can we evaluate the environmental governance performance of local governments in a comprehensive way.

It is a very important dimension to evaluate the environmental governance performance of local governments according to the characteristics of different regions. Within China’s provinces, there is a large degree of horizontal competitive development mentality among local government officials [5,6,7]. Environmental governance efficiency is relatively not a more conspicuous achievement, not easy to be found by the higher level of government when they assess the performance of lower-level local governments. In order to better report the governance achievements to the higher-level government, local governments may be more willing to pay the more obvious financial input or start some environmental governance projects which more likely to lead to other aspects of pollutions [8].

If a local government is financially wealthy, it may not have much incentive to rely on the economic development of polluting industries, so it may focus on improving the efficiency of environmental governance, substantially enhancing the quality of local government public services and the satisfaction of local residents [9]. Under the arrangement of fiscal decentralization system, the difference of fiscal capacity of local governments has become larger. Accordingly, the fiscal expenditure of local governments is also different, resulting in the uneven level of public services, such as environmental governance, which depend on government funds.

There are some ways to assess a government’s fiscal capacity. Government size, tax revenue, budgetary revenue, and budgetary expenditure are all common variables that are often used to measure fiscal capacity [10]. Government size is a variable about the number of public employees whose salaries and benefits are supported by public finance. This is not an ideal variable to represent the level and efficiency of government governance. Budgetary revenue and expenditure mainly reflect the government’s fiscal scale from the perspective of the amount of fiscal funds, but in fact, they cannot accurately evaluate the government’s financial prosperity. To evaluate the fiscal strength of local governments, it is necessary to reflect the proportion of fiscal revenue and expenditure in the same variable [11]. Regardless of the fiscal size, the proportion of local government revenue in expenditure is the most sustainable indicator of fiscal capacity.

The target of assessing sustainability in local governance perspectives involves the relationship between governance efficiency and fiscal self-sufficiency [12,13]. The environmental pollution level in Guangdong Province is generally low in the whole country, especially in the air and water environment fields. The observation of environmental governance efficiency of different cities in Guangdong province is an important perspective to evaluate the level of local governance and sustainable development in Guangdong province. Financial power is the primary authority of local government. Chinese local governance is mainly dependent on government fiscal capability. The ability of governments to manage the environment is reflected in the efficiency of regional environmental governance, which can be largely measured by the effects generated by the financial funds invested [14]. Only by observing the level of fiscal investment from government in environmental governance, or only by examining the indicator results, particularly the statistical achievements, achieved by local environmental governance, it is impossible to truly understand the extent to which China’s local governments give consideration to economic development and green governance under the fiscal decentralization system [15,16]. In this paper, we take a two-stage research approach. Data Envelopment Analysis (DEA) method will be first used to calculate the efficiency of local environmental governance, and the proportion of local fiscal revenue to expenditure will be used as the indicator of government fiscal capacity in the following regression analysis.

2. Literature Review

Environmental governance belongs to public goods and needs a large amount of fiscal investment. Local economic development has led to large-scale environmental damage, many of which are invisible. Zhang et al. [17] argue that local governments have the responsibility to solve ecological and environmental problems fundamentally. Guo et al [18]. find Chinese local governments can create a win–win situation for the economy and environment if they manage their financial affairs well. Moreover, Oates [19,20] argue that local governments are close to communities and residents and better understand the preferences of local residents, so they have unique advantages in providing local public goods. Qian and Wilson [21,22] find the fiscal decentralization system has brought competitive development and abundant sources of fiscal revenue to local governments. The large fiscal revenue expectation of local governments is the policy basis for continuous investment in environmental governance to improve governance efficiency [23]. Many studies have drawn conclusions about the relationship between fiscal decentralization and local environmental quality. Kunce et al. and Ederington et al. [24,25] argue that decentralization leads to a decline in environmental quality as governments will lower environmental standards to attract investment, while others [26,27] reach different conclusions.

DEA method is used to calculate the environmental governance efficiency score on the basis of fiscal input, especially taking undesirable outputs into account [28,29,30]. Li et al. [31], Deng et al. [32] and Zhou et al. [33] examine the regional efficiency of environmental governance in China, in terms of evident time and space efficiency evolution characteristics. Wu et al. [34] present a new DEA approach, which considers both the fixed and the variant sum desirable outputs in the performance improvement of a DMU, to evaluate the environmental efficiencies of China and demonstrate that some economically developed provinces have better performance than less developed provinces. In particular, all efficient provinces are the developed ones. Fiscal input is the basis of environmental governance, but the relationship between the two is actually complicated. Li et al. [35] confirm that tax reduction is an efficient way to evaluate environmental performance in renewable energy fields, and Tong et al. [36] argue that in the context of the global era of new energy development, effective fiscal policies are crucial to promote the development of energy conservation and environmental protection industry. Zhou et al. [37] make some explorations on the efficiency of regional environmental governance in Guangdong, China through using GDP as the desired output [38,39,40]. Tang et al. [41] find that the rating and praise campaigns can effectively improve the efficiency of environmental governance, while the incentive effect is distorted and is not a long-term effect. Wu et al. [42] conclude that the extent to which the government encourages people and non-governmental organizations and local residents to participate in environmental governance will affect the efficiency level of environmental governance. These indicate that the factors affecting the efficiency of environmental governance are influenced by the government’s policy orientation.

Brehm [43] find local governments in Chinese relatively affluent provinces with better fiscal policy have more interests in expanding public spending in improving technical efficiency in the long run. Liu et al. [44] argue that local governments in China must receive both good fiscal support and regulatory measures to take environmental governance to the next level. Ran et al. [45] argue that the environmental decentralization system, which is good for improving the level of environmental governance must be based on a sound and sustainable fiscal policy platform. Sun et al. [46] examine the impact of fiscal stress on environmental efficiency from the perspective of urban horizontal imbalance and emphasize that the resilience of the fiscal system has a driving effect on environmental governance. Wu et al. [47] argue instead that the joint effect of local government competition and environmental decentralization produces the “race to bottom” effect, which reduces the efficiency level of regional green development. Lyu [48] and Que [49] argue that fiscal policy is an effective tool for environmental management, as environmental quality has a characteristic of regional spillover, thus the intervention of government is crucial.

3. Methods

3.1. Data

There are 21 prefecture-level cities in Guangdong, China. The panel data which is strongly balanced for the article came from the yearbooks published by Guangdong provincial government and local governments from 2002 to 2021, as well as special statistical reports on environmental governance from various places. The discharge and treatment data of three wastes used in the calculation of environmental governance efficiency were obtained from China Urban Statistical Yearbook, in which development and governance data for 293 Chinese prefecture-level cities are included.

3.2. Variables

As China gradually hands the responsibility of environmental governance to local governments, the actual results of environmental governance are more closely related to the financial situation of local governments [50]. Fiscal power in China rarely breaks regional boundaries, and there are few strong local cooperative governance mechanisms, which can only rely on the support of local government finance and relevant regulations [47]. The regional competition of the economically developed provinces like Guangdong has changed from the single economic scale growth to the high-quality growth competition mode of environment-friendly social development. In this policy context, the financial self-sufficiency of local governments becomes very important [51]. The explained variable in the study is the efficiency of local environmental governance (Efficiency). We comprehensively calculate the value of local environmental governance efficiency by DEA method, taking both desirable and undesirable outputs of three wastes treatment into account. Effective treatment rates of exhaust gas, wastewater and solid waste are good outputs, while ineffective treatment proportion of water and solid waste, sulfur dioxide emissions are not ideal outputs. Local governments’ fiscal self-sufficiency (Sufficiency) is the explanatory variable, which is calculated based on the ratio of budgetary revenue to budgetary expenditure.

In the “Big government, Small society” characteristics of Chinese governance, the government is the main driver of local affairs, so the government size (GovtSize), no matter how to measure it in terms of financial resources or personnel, is a variable that must be paid attention to when discussing governance efficiency. In the paper, we calculate it as the ratio of government administrative expenditure to general budget expenditure, rather than using number of fiscal supported public servant. Guangdong is one of the first regions in China to carry out reform and opening up and attract foreign investment. Its economic and industrial development is characterized by export-oriented manufacturing and service industry [52]. In recent years, Guangdong has taken the lead in promoting the development of new energy industry in China. These economic development directions are closely related to the environmental governance policies and fiscal allocation plans of each city [53]. We need to control the relevant variables in each regression model. We observe the importance of governmental awareness of promotion of green energy by variable of the number of electric buses used by each city government year by year (Ecar), as Guangdong is the main production and sales area of new energy vehicles in China. We controlled the variables that are closely related to regional development and governance, such as the level of economic development (GDPpc), fiscal expenditure in environmental protection (EnvInput), the size of the population (Popu), the degree of economic extroversion (FDI), and the proportion of the service sector (Tertiary). Given the uneven development within Guangdong Province, we created a regional dummy variable (AreaDummy) to divide the 21 regions into Pearl River Delta and non-Pearl River Delta regions, with the former being relatively wealthy. We want to control for the impact of regional development in the model. Below is the descriptive statistics table of variables (

Table 1. Statistical summarization table for variables.

Variable	Obs	Mean	Std. dev.	Min	Max
Efficiency	420	0.863484	0.4477596	0.042754	3.139752
Sufficiency	420	0.5914937	0.2673007	0.1488	1.7743
GovtSize	420	0.1228089	0.0331438	0.0509	0.2204
GDPpc	420	45,137.31	39,688.52	3164.33	203,825.5
Ecar	420	2635.686	6207.747	43	38728
Tertiary	420	41.48755	8.31252	24.44	72.50714
FDI	420	98,521.27	155847	1611	862,924.8
EnvInput	420	98,517.71	296,233.9	469	3,316,349
Popu	420	488.6666	282.9899	128.45	1874.03
AreaDummy	420	0.4285714	0.4954618	0	1
Suffiency2	420	0.4211443	0.3725204	0.0221414	3.14814

), which reports the summary statistics.

3.3. Environmental Governance Efficiency Calculation with DEA

We calculated local environmental governance efficiency score with super-efficiency SBM method. The efficiency of the effective DMU in traditional non-super-efficiency DEA model cannot be further distinguished. Super-efficiency model by removing the evaluated DMU from the reference set, that is, the efficiency of the evaluated DMU is obtained by referring to the frontier formed by other DMU, solves the problem that the efficiency of effective DMU cannot be distinguished. Suppose the total number of decision units (DMU) in period T is K, and each DMU uses M input factors and produces I desired outputs and R undesired outputs, $x_k\in R^M$,$y_k\in R^I$ and $b_k\in R^R$ respectively represent the input vector, expected output vector and unexpected output vector of the k DMU, then, the input-output of the k DMU in period t is expressed as $\left(x_k^t,y_k^t,b_k^t\right)$. Define the production possibility set constructed by other DMU other than $DM{U}_k$ as follows:

$$P^t=\{(x^t,y^t,b^t)|x^t\ge {\displaystyle \sum _{j=1,j\ne k}^K{x}_j^t}{\lambda }_j,y^t\le {\displaystyle \sum _{j=1,j\ne k}^K{y}_j^t}{\lambda }_j,b^t\ge {\displaystyle \sum _{j=1,j\ne k}^K{b}_j^t}{\lambda }_j,{\lambda }_j\ge 0\}$$

(1)

where, ${\lambda }_j$ is the weight coefficient vector (intensity vector), here we assume that scale returns are variable (i.e., VRS), so the sum of weight coefficients of all decision making units is equal to 1, i.e., ${\displaystyle \sum _{j=1,j\ne k}^K{\lambda }_j}=1$. Here, DMU is each district in Guangdong Province, and the input variable of each area is environmental input. The expected output variable is waste water utilization rate and solid waste treatment rate, and the unexpected output variable is sulfur dioxide and nitrogen oxide. Therefore, M = 1, I = 2, R = 2.

The super-efficiency SBM efficiency value of decision unit K $k\in \left\{1,2,\cdots ,K\right\}$ can be obtained by solving the following programming problem:

$$\begin{gathered} I{E}_{SuperSBM}^t\left(x_k^t,y_k^t,b_k^t,\lambda \right)=\min \frac{1+\left(1/M\right){{\displaystyle \sum }}_{m=1}^M\left(s_m^{x,-}/x_{m,k}^t\right)}{1-\left[1/\left(I+R\right)\right]\left[{{\displaystyle \sum }}_{i=1}^I\left(s_i^{y,+}/y_{i,k}^t\right)+{{\displaystyle \sum }}_{r=1}^R(s_r^{b,-}/b_{r,k}^t\right)]} \\ \begin{array}{c}s.t.\hspace{1em}{\displaystyle \sum _{j=1,j\ne k}^K{x}_{m,j}^t{\lambda }_j}-s_m^{x,-}\le x_{m,k}^t\\ {\displaystyle \sum _{j=1,j\ne k}^K{y}_j^t}{\lambda }_j+s_i^{y,+}\ge y_{i,k}^t\\ {\displaystyle \sum _{j=1,j\ne k}^K{b}_j^t}{\lambda }_j-s_{r,k}^{b,-}\le b_{r,k}^t\\ s_{}^{x,-}\ge 0,s_{}^{y,+}\ge 0,s_{}^{b,-}\ge 0,{\lambda }_{}\ge 0,{\displaystyle \sum _{j=1,j\ne k}^K{\lambda }_j}=1\\ m=1,2,\cdots ,M; i=1,2,\cdots ,I; r=1,2,\cdots ,R\end{array} \end{gathered}$$

(2)

Among them, $I{E}_{SuperSBM}$ stands for regional efficiency. $s_m^{x,-}$, $s_i^{y,+}$, $s_r^{b,-}$ respectively represent the relaxation variables corresponding to input variables, expected output variables and non-expected output variables. To solve Equation (2), we use the method of Charnes and Cooper (1978) [54] to convert the equation into the linear programming problem.

$$\begin{gathered} I{E}_{SuperSBM\_L}^t\left(x_k^t,y_k^t,b_k^t,\lambda \right)=\min \tau +\left(1/M\right){{\displaystyle \sum }}_{m=1}^M(S_m^{x,-}/x_{m,k}^t) \\ \begin{array}{c}s.t.\hspace{1em}1=\tau -[1/(I+R)][{\displaystyle {\sum }_{i=1}^I(S_i^{y,+}/y_{i,k}^t)+{\displaystyle {\sum }_{r=1}^R(S_r^{b,-}/b_{r,k}^t)}}]\\ {\displaystyle \sum _{j=1,j\ne k}^K{x}_{m,j}^t{\mathsf{\Lambda }}_j}-S_m^{x,-}\le \tau x_{m,k}^t\\ {\displaystyle \sum _{j=1,j\ne k}^K{y}_j^t}{\mathsf{\Lambda }}_j+S_i^{y,+}\ge \tau y_{i,k}^t\\ {\displaystyle \sum _{j=1,j\ne k}^K{b}_j^t}{\mathsf{\Lambda }}_j-S_{r,k}^{b,-}\le \tau b_{r,k}^t\\ \end{array} \\ \begin{array}{l}{S}_{}^{x,-}\ge 0,S_{}^{y,+}\ge 0,S_{}^{b,-}\ge 0,{\mathsf{\Lambda }}_{}\ge 0,\tau >0,{\displaystyle \sum _{j=1,j\ne k}^K{\mathsf{\Lambda }}_j}=\tau \\ m=1,2,\cdots ,M; i=1,2,\cdots ,I; r=1,2,\cdots ,R\end{array} \end{gathered}$$

(3)

Then the optimal solution of the original nonlinear programming problem (2) can be got by solving the optimal solution of equation (3) of linear programming.

Accordingly, we can also get the efficiency of each input-output variable $D{E}_{k,t}^{in}=\left(x_{k,t}^{in}-s_{k,t}^{in}\right)/x_{k,t}^{in}$, $D{E}_{k,t}^{uo}=\left(b_{k,t}^{uo}-s_{k,t}^{uo}\right)/b_{k,t}^{uo}$, $D{E}_{k,t}^{do}=y_{k,t}^{do}/\left(y_{k,t}^{do}+s_{k,t}^{do}\right)$.

Among them, $D{E}_{k,t}^{in}$, $D{E}_{k,t}^{uo}$, $D{E}_{k,t}^{do}$ respectively represents the efficiency of input variable, expected output variable and unexpected output variable. The larger the value is, the higher the efficiency of the input or output factor is. Figure 1 shows the time trends of environmental governance efficiency values in different regions in Guangdong province.

3.4. Regressions

As the panel data’s T = 20 is less than n = 21, the data is of a short panel. Due to the large differences among different regions in the province, there may be omitted variables that do not change over time, so we adopted the Two-way fixed effects model:

$$\begin{gathered} Efficienc{y}_{it}={\beta }_0+{\beta }_{1}Sufficienc{y}_{it}+\delta Control{s}_{it}+{\mu }_i+{\gamma }_t+{\epsilon }_{it} \\ \left(i=1,\cdots ,21;t=1,\cdots 20\right) \end{gathered}$$

In the robustness check stage, Hausman test is used to determine whether to use the fixed effects model.

4. Results

Table 2. Regression result.

	(1)	(2)	(3)	(4)
Variables	OSL	FE1	FE2	FE3
Sufficiency	0.652 ***	0.737 ***		0.848 ***
	(0.163)	(0.104)		(0.176)
Sufficiency2			3.819 **
			(1.063)
GovtSize	0.188	0.188	3.166	0.035
	(0.678)	(0.663)	(4.757)	(0.791)
GDPpc	−1.112 *	2.373	−9.808
	(1.167)	(1.307)	(5.798)
Ecar	0.003 **	0.024 ***	1.148 **	0.008 **
	(6.491)	(0.03)	(1.689)	(0.001)
Tertiary	−0.007	0.0174		−0.006
FDI   EnvInput   Popu   AreaDummy	(0.005) 1.112 (5.153) −7.853 (1.146) −0.012 (0.001) −0.209 * (0.094)	(0.07) 1.408 (1.119) 2.137 (−7.858) 1.637 ** (−0.031) 1.26 (0.209)	2.079 * (−4.287) 1.673 * (−1.697) 2.37 * (−0.0713) 0.987  (0.131)	(0.004)     −2.251 ** (6.983) −0.01 ** (0.002)
Constant	0.673 **	0.313 *	0.405 **	0.913
	(0.253)	(0.673)	(0.362)	(0.228)
F-test	11.58	40.81	77.38	16.34

* p < 0.05, ** p < 0.01, *** p < 0.001.

shows the result of regressions, which shows that local governments’ fiscal self-sufficiency degree has significant positive influence on environmental governance efficiency. This means that the more financially wealthy local governments are, the more efficient they will be in environmental governance. This proves to a large extent that we think that governments with rich finances will be more willing to improve the efficiency of environmental governance, which is not obvious and remarkable political achievement, rather than just focusing on environmental investment scale. The results show that local governments can better manage the environmental governance if their revenue exceeds the expenditure, rather than just relying on financial input, which is very consistent with our expectations.

We use the number of electric buses used in each region year by year to test the impact of local government environmental protection awareness on environmental governance efficiency, and the results show that this impact is also significantly positive. Guangdong is one of the provinces with the fastest development of new energy industry. It is of great significance to examine the attitudes of local governments in the orientation of new energy policies. Promoting the use of electric vehicles is an important indicator to measure the environmental governance policy orientation of local governments. The test results of electric bus variables in this paper are in line with our research hypothesis.

There are no significant results for other variables such as per capita GDP, government size, economic externality, environmental fiscal expenditure, and proportion of tertiary industry. In addition to the number of regional populations, in one model we found that the square term of fiscal self-sufficiency showed a relatively obvious correlation with the explained variables. A positive correlation coefficient means that the influence curve of fiscal self-sufficiency is a U-shaped curve. This regression is consistent with our previous partial correlation and fitted scatter plot between core variable and the explained variable based on controlling other variables (Figure 2). The U-shaped curve means when the level of fiscal self-sufficiency is less than 0.5, the degree of financial affluence does not have a positive impact on the efficiency of environmental governance, but a negative impact. When the level of fiscal self-sufficiency exceeds 0.5, the degree of financial affluence has a very obvious positive impact on the efficiency of environmental governance. It’s reasonable that when local governments are in a serious fiscal deficit, they have no policy leverage to deal with the improvement of environmental governance efficiency.

To further determine whether to use fixed-effect model or random effect model, we performed a Hausman test on the regression results (Figure 3). The p value is 0.0000, so the null hypothesis that $H_0: {\mu }_i$ and $x_{it, }{z}_i$ is not correlated is strongly rejected. The test shows that the fixed effect model should be adopted instead of the random effect model.

5. Discussion

5.1. Regionalism of Environmental Governance

The long-term regional economic development competition leads to the regionalism characteristic of environmental governance in China. China’s local industry development is already highly linked to environmental governance and fiscal revenue policies. Although the central government issues unified regulations and enforcement standards on environmental issues, provincial governments still have greater decision-making power in specific local affairs, especially ecological and environmental issues that are relatively territorial. Scientific efficiency evaluation has become the best index system to measure the level of regional environmental governance. We can observe these related governance policies with the provincial government as the decision-making boundary.

In the era of rapid popularization of clean energy, provincial governments should guide local city governments to raise awareness of environmental protection and promote the development of new-energy transportation and logistics industries with greater fiscal policies, especially in regions like Guangdong that lead the industry development. Affluent fiscal revenue makes it easy for the government to encourage more environmentally friendly industries, and the development of advanced industries will bring good competitiveness to the region, which is a benign development mode. This could create a regional demonstration effect.

5.2. The Effect of Fiscal Policies to Promote Sustainable Development

In our research result, promoting the use of electric vehicles (Ecar), as an important indicator to measure the environmental governance policy orientation of local governments, has significantly positive influence in environmental governance efficiency. Affluent local governments have a greater incentive to exclude heavily polluting industries. This will, to a large extent, form a positive interaction between the government and local residents, so as to obtain the maximum support from residents for environmental governance policies and finally improve the efficiency of environmental governance. Guangdong province plays an important role in foreign investment in China. In this way, developed regions will become environmentally friendly societies and be better able to attract high-quality foreign investment and enterprises. In the paper, we find foreign investment variable (FDI) doesn’t have significant influence on efficiency, which might indicate that high-quality foreign investment is the result, rather than the cause of good environmental governance efficiency.

Under the traditional theory of strong government, strengthening the administrative power of the government is regarded as the basic way to improve the efficiency of public affairs. The research conclusion of this paper supports that increasing the government’s fiscal revenue, improving the corresponding fiscal policies, and enhancing the government’s environmental awareness will be more conducive to the improvement of local environmental governance efficiency. Enhancing administrative power also means expanding the size of government. In the results, we find government size (GovtSize) is not a positive factor in improving the efficiency of environmental governance.

5.3. Strengthening the Policy Collaboration and Assessment

China has strengthened policy coordination at the central government level in environmental governance. Under the guidance of these macro policies, local governments, especially provincial governments, must pay attention to the combination of environmental fiscal policies with industrial development and tax regulation. The government can encourage enterprises to introduce more advanced environmental protection technologies and equipment through policy coordination and can also use fiscal and tax policies to encourage local enterprises to explore environmental technology innovations. With the boom of the new energy industry, Guangdong can serve as a pilot province in China to integrate environmental fiscal policies with the development orientations of clean energy enterprises, environmental governance enterprises and other industries.

The assessment and evaluation system of environmental governance agenda is crucial. The inter-agency policy group could be responsible for developing a scientific and rational indicator system for evaluating environmental governance efficiency and drawing up detailed implementation rules for government departments. Provincial governments should also establish a unified and operational supervision mechanism so that environmental protection authorities can effectively carry out daily supervision. Local people’s congress should even raise relevant administrative regulations into local laws and orders in time to strengthen environmental protection.

6. Conclusions

6.1. Theoretical and Practical Implications

The idea adopted in this paper is to study the basis of the provincial environmental governance policy, rather than to analyze a specific policy or a specific indicator. We estimated the efficiency score of environmental governance in Guangdong province adopting super-efficiency SBM DEA method and have scientifically sound time trend calculated value. We used the latest local development data for Guangdong province from 2001 to 2020. Instead of simply taking GDP as the expected output, multiple indicators such as sewage and waste gas treatment rate and sulfur dioxide clearance rate are incorporated into the efficiency estimation model as the expected output. This paper examines the relationship between fiscal affluence, government size, local economic structure, government environmental awareness and environmental governance efficiency. We find that fiscal affluence and government environmental awareness have significant positive effects on the efficiency of environmental governance. As the improvement of environmental governance efficiency is not an obvious political achievement, local officials are not willing to provide policy support, except to invest a large amount of financial funds to launch some environmental governance projects, which might not improve efficiency. This is in line with the basic principle of official incentive mechanism in theory. We hope that these findings will provide practical help for local governments to improve their fiscal policy agendas and the quality of environmental governance. Especially at a time when the world is facing severe climate challenges, it is a beneficial sustainable development strategy for governments to encourage residents to raise awareness of clean energy use.

6.2. Research Limitations and Recommendations for Future Research

Considering that the research on the incentive mechanism of officials has a certain correlation with the research design of this paper, the efficiency of environmental governance at the level of political sociology can be further explored in future research. Future research can be further extended to the field of official mentality and policy value orientation, based on the design of better research variables. For example, we can better construct variables like environmental awareness (Ecar). In addition, from the perspective of political mobility, officials in rich areas have relatively more opportunities to get promoted in China, which will lead to more research hypotheses related to political incentives and theories on the efficiency of public governance. China has encouraged local governments to use more tax tools to balance the relationship between economic development and environmental protection. Both tax revenue and fiscal transfer payment alike are extremely sensitive parts of local authority. From these perspectives, an in-depth discussion of the relationship between fiscal instruments and environmental governance should have a place in future research [55,56]. Environmental rule by law is an important issue in the field of public governance, which is of great significance to the study of environmental governance efficiency. China’s central government has for years improved environmental governance by strengthening direct inspections and pushing local governments to enact more regulations. This administrative system puts a lot of political pressure on local officials, who have primary responsibility for local environmental governance. It is also of great significance to study the ways to improve the efficiency of local environmental governance from the perspective of administrative and legal supervision [57]. If we can collect relevant data in the field of rule of law related to Chinese regional environmental governance and construct reasonable variables, it will be of great help to study local public governance efficiency.