1. Introduction
A system is designed by people, including regulatory, normative and cultural cognitive symbol systems, so as to restrict people’s interaction. Institution is a game rule, and transaction cost is the basis of institution formation. Market transaction costs are influenced by institutional arrangements, and these arrangements undoubtedly have an impact on economic growth and performance. Different economies’ protracted performance variances will be significantly impacted by the institutional development process [
1]. The material living conditions of people have substantially improved due to the rapid advancement of science, technology, and industrialization, and the environmental effects of human activity are becoming more pronounced. Some areas unilaterally pursue economic expansion at the expense of the environment and natural resources [
2]. The substantial threat posed by global climate change to human life and progress has drawn the attention of the international community. Restrictions on gas emissions were imposed on industrialized and developing nations, respectively, by the 1997 Kyoto Protocol and the 2009 Copenhagen climate negotiations summit [
3]. Although some Chinese cities’ air quality has improved recently, the country’s overall air quality is still not optimal. The conventional soot pollution, which is still a severe problem, is characterized by sulphur dioxide (SO
2), nitrogen oxides, and inhalable particles. As a result of the secondary pollution issues such as ozone and fine particles, the ozone layer is destroyed, acid rain occurs, fresh water supplies are depleted, water is polluted, and biodiversity is lost. The quality of human life and of the environment in which people live has declined as a result of frequent loss, extreme climate change, and other negative effects [
4].
The principal air pollutant under control at the time is sulphur dioxide (SO
2). It serves as acid rain’s primary precursor. PM2.5 pollution in the area will also result from the chemical transformation of sulphate. Sulphur dioxide (SO
2) emitted from the air is very harmful, which causes scholars to carry out research on SO
2 emission, FDI, foreign trade and other aspects. The faster the industrialization process is, the faster China’s economic growth is. The success of reforming and opening it up, and economic growth seem to be accompanied by obvious pollution problems. The deterioration of environmental quality is exacerbated with economic growth and trade liberalization. However, it does not grow at the same speed as economic indicators [
5]. Shen and Tang [
6] empirically analysed the impact of foreign trade on the emission of sulphur dioxide (SO
2) in China from 2002 to 2006. They believed that foreign trade is beneficial to reduce the emission of sulphur dioxide (SO
2) in China. They can reduce the emission of sulphur dioxide (SO
2) by changing the structure of export products and import products. Ma et al. [
7] used static and dynamic panel data models to empirically find an inverted “U” relationship between per capita income and per capita sulphur dioxide (SO
2) emissions, and technological progress will inhibit sulphur dioxide (SO
2) emissions. Ma [
8] analysed the impact of sulphur tax on the emission of sulphur dioxide (SO
2) and energy consumption in China, and believed that the collection of sulphur tax could not only achieve the goal of reducing the emission of sulphur dioxide (SO
2), but also have no significant negative impact on GDP. Wang et al. [
9] found that excessive use of energy and excessive emission of sulphur dioxide (SO
2) and chemical oxygen demand (COD) are the main sources of environmental inefficiency. Zhang et al. [
10] used a generalized spatial two-stage least squares (GS2SLS) model to explore the effect of import trade technology spillover on the intensity of industrial air pollution emissions. Zeng et al. [
11] found that FDI has a significant and positive direct impact on China’s economic growth and technological innovation, and can have a significant pull effect on the domestic economy through backward spillover channels, as well as a significant impact on SO
2 emissions.
By reading both the national and international literature, it can be observed that the relationship between economic growth and environmental quality has been an important direction of domestic and foreign research. However, at present, the academic research subjects mainly focus on the regions or the overall economic aggregate to reveal the changing relationship of the economic environment, and pay very little attention to the atmospheric environment of specific provinces and cities. In terms of research content, more studies focus on testing the overall change relationship between economic growth and environmental quality, the lack of follow-up institutional design, and the analysis of the path and influence between economic growth and environmental quality, especially further analysing the specific impact of institutional factors and economic growth factors on the environment.
There are many existing studies on the relationship between carbon dioxide (CO
2) emissions and economic growth [
12,
13,
14,
15,
16,
17,
18,
19,
20]. There are few studies on SO
2 emission, economic growth and institutional environment. It is important to keep in mind that most carbon dioxide emissions into the atmosphere do not immediately injure anyone; instead, they have long-term effects that affect everyone. Compared to carbon dioxide, sulphur dioxide is far more dangerous to people. The conflict between environmental pollution and economic growth is becoming more and more acute under the light of the dire situation of tighter resource constraints, serious environmental pollution, and ecosystem degradation, which has emerged as a major obstacle to China’s economy’s sustained and rapid growth. How, then, do regional sulphur dioxide (SO
2) emissions respond to China’s economic expansion? Should the economic growth path be responsible for the current situation of air pollution in China? How does the institutional environment affect economic growth and SO
2 emission? What impact will government intervention have on sulphur dioxide (SO
2) emissions? In order to answer these questions, this paper uses the fixed effects model to investigate the impact of institutional environment and economic growth on regional SO
2 emissions based on the provincial panel data from 2008 to 2017.
The following are this paper’s main contributions: First, there are not many studies on the connections between institutional environment, economic growth, and SO2 emission; instead, majority of the literature focuses on the connections between SO2 emission, FDI, and international trade, as well as the effects of foreign trade on SO2 emission. In actuality, the institutional environment and economic expansion will have a bigger impact on SO2 emissions. Furthermore, this article examines the institutional environment’s regulatory functions in relation to economic growth and SO2 emissions in addition to the relationship between institutional environment, economic growth, and SO2 emissions. In addition, this study adds to the body of knowledge on SO2 emissions and environmental governance by examining the effects of government intervention on economic growth and SO2 emissions. This study also provides empirical support for altering the nature and mode of government incentives during the transitional economy period, as well as for defining policies on regional environmental governance and government environmental performance audit.
The remainder of this essay is structured as follows: the second part shows our theoretical analysis and research hypothesis; the third part presents the econometric model, mainly varieties and data; the fourth part presents the testing results and analysis; the fifth part comprises endogenous problems and robustness test; and the last part presents conclusions and suggestions.
2. Theoretical Analysis and Research Hypothesis
Hypothesis 1: The relationship between economic growth (GDP) and sulfur dioxide (SO2) emission is inverted U-shaped.
The environmental Kuznets curve (EKC) theory [
21] was proposed by Grossman and Krueger to explain how economic growth affects the environment. When the per capita GDP was low, the emission of SO
2 was in the stage of centralized growth; however, when the per capita GDP was high, the emission of SO
2 was in the stage of decline. In other words, with economic growth, the emission of sulphur dioxide (SO
2) presents an inverted “U” type of increase and then decrease. This finding was made when studying the impact of NAFTA on the environment. Seldom and Song [
22] investigated the association between suspended particles, nitrogen oxides, sulphur dioxide (SO
2) and carbon monoxide (CO) and per capita GDP, and found that there was an inverted “U” relationship between the four pollutants and the per capita GDP. Since then, many scholars at home and abroad have verified that the inverted “U” relationship between economic growth and carbon emissions still exists (for example: [
23,
24,
25,
26]).
Hypothesis 2: The higher the institutional environment is, the lower the SO2 emission is, that is, the institutional environment has a significant negative correlation with SO2 emission; the institutional environment plays a negative regulatory role between economic growth and SO2 emission.
System is a type of behavioural norm with mechanisms for incentives and restraints that gives people a choice of interests. In other words, people should weigh the costs and benefits while deciding whether to follow the rules, and only after careful deliberation should they make that decision [
27]. To advance the industrialization and urbanization processes, institutional environment transformation is required. By establishing order and reducing uncertainty through the institutional structure, institutions play a fundamental and necessary role in economic progress. They also work to improve governance systems [
1]. It is not difficult to identify the successes of institutional innovation and the restrictions of the institutional environment on economic growth given the acceleration of industrialization and urbanization. The better the market order and the greater the concept and awareness of environmental protection, the fewer air pollutants such as sulphur dioxide (SO
2) will be released into the atmosphere. In contrast, the lower the institutional environment, the more environmental protection and governance may be neglected in order to pursue economic growth at the expense of the environment and resources, leading to an increase in the emission of air pollutants such as sulphur d. (SO
2). The institutional context is crucial for economic development. Economic growth is supported by a favourable institutional framework [
28,
29]. In the process of gradual economic transition, the market development in different regions is extremely uneven [
30]. The higher the institutional environment is, the higher the economic growth is, and the stronger the environmental protection and governance are. Therefore, we expect that the institutional environment and SO
2 emissions will change in the opposite direction. Since 2007, China’s overall greenhouse gas emissions from fossil fuels have increased to the highest level ever. This is a natural consequence of China’s lengthy period of rapid economic growth. With the acceleration of market-oriented processes, it is inevitable to objectively require a fundamental change from extensive to intensive economic growth. Institution is not simply thought of as an exogenous factor influencing economic behaviour; it is also necessary to consider how institutions develop, persist, and change. Institutions change to adapt to economic growth and regulate economic growth and emission of air pollutants such as sulphur dioxide (SO
2).
Hypothesis 3: The higher the level of government intervention is, the lower the SO2 emission is, that is, there is a significant negative correlation between the level of government intervention and SO2 emission; the level of government intervention plays a negative regulatory role between economic growth and SO2 emission.
The environment is a typical public good, and the consumption of environment has the characteristics of being non-competitive and non-exclusive. Without government intervention, environmental consumption will lead to excessive consumption. To improve energy efficiency and reduce pollution emissions, the government needs to implement active environmental control policies [
31]. China’s energy conservation and emission reduction goals are under pressure from the international community, and local governments are also subject to the mandatory requirements of the central government. For the central government, it is a political and economic process related to determination to change the incentive orientation, methods and corresponding regulations. For the local government, it is an incentive-related process to change the functions of the government, from blindly pursuing GDP to sustainable growth within the political and economic behaviour [
16]. The rigidity of energy demand in China’s economic growth at this stage indicates that the compulsory emission reduction in sulphur dioxide (SO
2) will certainly be at the expense of economic growth and the urbanization process, but it is possible to slow down the growth of sulphur dioxide (SO
2) emissions [
18]. Compared with the developed market economy countries and regions, the local governments of our country still have a lot of resources, and there are still many interventions in economic activities. At present, China’s economy has changed from intensive growth to extensive growth at the expense of the environment and resources. Therefore, we believe that the higher the level of government intervention, the stronger the government’s willingness to control and protect the environment, and the government uses economic means (such as tax and financial subsidies) and administrative means to intervene in the law and market mechanisms in order to affect the emission of air pollutants such as sulphur dioxide (SO
2) in the region. In the face of external system pressure and requirements, the emission of air pollutants such as sulphur dioxide (SO
2) in the region will show a downward trend. If the institutional arrangement is unreasonable, the policy making is not correct, the government’s interference in the economic and environmental control is unreasonable, and the legal structure is loose, it may cause rent-seeking behaviour or even the government’s deterioration, that is to say, the rent-seeking phenomenon and the government’s deterioration caused by the inadequate system and low management level may cause the negative correlation between natural resources and economic growth [
32]. Therefore, we expect that the level of government intervention is negatively related to SO
2 emissions, and negatively regulates the relationship between economic growth and SO
2 emissions.
Through the abovementioned assumptions, the following can be obtained: the higher the level of government intervention, the stronger the government’s willingness towards environmental control and protection, which affects the emission of air pollutants such as sulphur 2 (SO2) through tax and fiscal subsidies and administrative means such as the promulgation of systems and regulations. The institutional environment is essential to economic development; the better the institutional environment, the stronger the concept and awareness of environmental protection, and the lower the emission of air pollutants such as sulphur dioxide (SO2). On the other hand, due to insufficient government intervention and a lack of a system, environmental protection and governance will increase the emission of sulphur dioxide (SO2) at the expense of SO2; this is because environmental protection and governance will increase the emission of sulphur dioxide (SO2) at the cost of SO2.
3. Measurement Model, Main Variables and Data
In this paper, the provincial panel data of 31 provinces in China from 2008 to 2017 are used to verify the impact of the institutional environment and economic growth on regional sulphur dioxide (SO2) emissions and the regulatory role of the institutional environment.
Note: From the relevant research literature, there are many research data during this period, and the author should be more representative when establishing the model.
The measurement model is constructed as follows:
In order to investigate the influence of government intervention and economic growth on SO
2 emission in the region and the regulatory role of institutional environment, the measurement model is constructed as follows:
Among them, sub-script i(i = 1, 2, …, 31) and t(t = 2008, 2009, …, 2017) represent, respectively, i th province and year t, and represents the error term. The explained variable in the model (SO2) is the regional sulphur dioxide emission; Lngdp, Lngdpp represent regional GDP and per capita GDP, respectively. In order to investigate the possible non-linear relationship between GDP and SO2 emission, a square term was added to the model: Lngdp2, Lngdpp2. Total and Total_G represent the regional institutional environment and the level of government intervention. In order to test the interaction effect, the multiplier of institutional environment, GDP and per capita GDP is added to model (1). In model (2), the multiplier of government intervention level, GDP and per capita GDP is added. In addition, we control the difference between the total population (LNP) and the year.
In order to eliminate the heteroscedasticity and obtain the elasticity of the explanatory variables directly, natural logarithm processing is carried out for variables such as SO
2 emission, GDP, per capita GDP and total population. The data of SO
2 emission, GDP and total population in the model mainly come from China Statistical Yearbook and China Environmental Yearbook. The market-oriented index is adopted for system environment and government intervention level [
30]. The market index data from 2016 to 2017 are calculated using the moving average method. The specific operability definitions of variables in the model are shown in
Table 1.
6. Conclusions and Suggestions
Based on the provincial panel data from 2008 to 2017, this paper uses the fixed effect model to investigate the institutional environment, the level of government intervention, the impact of economic growth on regional sulphur dioxide (SO2) emissions, and the regulatory role of institutional environment and government intervention on economic growth and regional sulphur dioxide (SO2) emissions. It is found that when the economic growth (GDP) is at a low level, the regional sulphur dioxide (SO2) emissions are in a centralized growth stage; however, when the economic growth (GDP) is at a high level, the sulphur dioxide (SO2) emissions are in a declining stage, which is to say, with the economic growth (GDP), the sulphur dioxide (SO2) emissions show an inverted “U” pattern of rising first and then falling. It was found that the higher the level of institutional environment and government intervention, the lower the SO2 emission. Further tests show that the institutional environment plays a negative role in regulating economic growth (GDP) and sulphur dioxide (SO2) emissions, and the level of government intervention also plays a negative role in regulating economic growth (GDP) and sulphur dioxide (SO2) emissions. To promote sustainable development, based on the above conclusions, this paper puts forward the following policy recommendations:
(1) To limit the emission of air pollutants such sulphur dioxide, alter the energy structure and industrial structure, speed up the upgrading of industrial structure, raise technical proficiency and independent innovation capacity, and progressively phase out high energy consumption and emission industries (SO2).
(2) The high growth of China’s industry is at the expense of high energy consumption and high emissions. Improving and perfecting the environmental control system and incentive mechanism, guiding the rational consumption of energy and improving efficiency, are important ways of reducing emissions. The government cannot only guide enterprises to care about the use of resources, but should also put pressure on enterprises to innovate technology.
(3) In order to increase the strengthening of R & D of the renewable and new energy industry technology, on the one hand, the government is the “visible hand” to regulate and support new energy; on the other hand, the market “invisible hand” is used to stimulate and reallocate resources in order to reduce the emission of air pollutants such as sulphur dioxide (SO2) as much as possible.
(4) For increasing the strengthening of R & D of the renewable and new energy industry technology, on the one hand, the government is the “visible hand” that regulates and supports new energy; on the other hand, the market “invisible hand” is used to stimulate and reallocate resources in order to reduce the emission of air pollutants such as sulphur dioxide (SO2) as much as possible.
Due to the different development of different regions of China, there are also certain differences in the relationship between the institutional environment, economic growth and sulphur dioxide (SO2) emissions. This study has not deeply involved the specific analysis of economic environment coordination between regions, and the lack of spatial differences in a spatial pattern. In addition, due to the many parameters of sulphur 2 (SO2) emissions, some data and complex parameters did not flow into the estimation range; therefore, the data are not up to the date. In the next step, we can focus on the empirical research data in different regions, as well as a more comprehensive analysis of sulphur dioxide (SO2) emissions, in order to be more comprehensively evaluate and to analyse the coordinated development relationship between the institutional environment, economic growth and sulphur dioxide (SO2) emissions.