The Relationships Between Environmental Regulation and Eco-Efficiency: Evidence from China

Abstract This study explores the causal relationships between environmental regulation and eco-efficiency in China’s industrial and power sectors using a vector autoregressive (VAR) model and Granger causality tests. By analysing data from 2006 to 2020, we find that energy structure plays a pivotal role in determining eco-efficiency within the industrial sector, while imperative environmental regulations are a significant Granger cause of eco-efficiency in the power sector. Industrial agglomeration also exerts notable effects in both sectors. These findings underscore the sector-specific differences in the effectiveness of environmental regulations and highlight the need for tailored policy approaches to improve eco-efficiency across industries.