How does environmental regulation affect economic growth? Evidence from Beijing-Tianjin-Hebei urban agglomeration in China

The governments of the Beijing-Tianjin-Hebei urban agglomeration have introduced a series of environmental policies to ameliorate pollution problems, but there are concerns that such a move can negatively impact the economy. In this article, panel data for 13 prefecture-level cities in the Beijing-Tianjin-Hebei region from 2003 to 2018 are used to investigate the influencing mechanism of environmental regulation on economic growth. The empirical results indicate an inverted “U”-shaped relationship between economic growth and environmental regulation. In a sense, the non-linear relationship implies that the Porter hypothesis and the compliance cost hypothesis apply to different levels of environmental stringency, respectively, which results in an empirical supplement to the existing theoretical framework. Furthermore, energy intensity and industrial structure are valid transmission paths for the economic effect of environmental regulation, despite their opposite directions. Overall, a win–win situation of economic prosperity and ecological improvement can be achieved through the implementation of appropriate environmental regulation.