Abstract
This paper examines the effectiveness of China's Environmental Protection Tax in reducing regional carbon emissions. Using a difference-in-differences empirical strategy, we analyze panel data from 287 Chinese cities over the period from 2009 to 2021. The results demonstrate that the Environmental Protection Tax has led to a significant reduction of 5.63% in carbon emissions. Mechanism analysis reveals that this reduction is primarily driven by increased investment in green research and development, improved energy efficiency, and industrial upgrading. Further heterogeneity analysis shows that the policy is more effective in eastern regions, Non-old traditional industrial areas, strong government concern areas, and energy-intensive areas. In addition to reducing carbon emissions, the Environmental Protection Tax has also lowered other air pollutants, improved air quality, and enhanced residents' subjective well-being. These findings provide robust empirical support for the optimization of environmental tax policies to further strengthen China's transition to a low-carbon economy and advance its sustainable development objectives.