Environmental regulation, synergistic emission reduction, and regional environmental spillover effects: A quasi-natural experiment from rare earth industry emission standards

Rare earth elements are critical materials, yet their production imposes severe ecological damage and pollution. This paper investigates the synergistic emission reduction effects, underlying mechanisms, and regional environmental spillovers of pollutant emission standards in China’s rare earth industry, exploiting the 2011 Emission Standards for Pollutants from the Rare Earth Industry as a quasi-natural experiment. We find that the standards induce coordinated reductions across multiple pollutants, driven by declining emission intensity rather than output contraction. The regulation operates through four channels: Porter effects, directed technological change, cleaner production, and intra-industry resource reallocation. Specifically, it stimulates green innovation, raises green total factor productivity, and redirects technological progress toward higher-value, less polluting downstream applications; it prompts cleaner production at both the input and pollutant-generation stages; and it accelerates resource reallocation toward more productive, less financially constrained, and downstream firms. The standards further generate positive environmental spillovers, improving environmental quality not only in host counties but also in adjacent regions. These findings provide theoretical and empirical foundations for environmental regulation of strategic resource-intensive industries and offer new insights into the spatial dimensions of environmental policy.