The Impact of Environmental Regulations on Technological Progress of the Pesticide Manufacturing Industry in China

The Chinese government has been continuously strengthening environmental regulations. to promote the reduction in pesticide use. However, the issue of excessive pesticide use remains unresolved. Technological progress of the pesticide manufacturing industry plays a critical role in reducing pesticide intensity and is a key objective of environmental regulations for pesticides. This study examines the impact of China’s environmental regulations on technological progress of the pesticide manufacturing industry by using panel data from 30 provinces between 2004 and 2020 and constructing command-and-control and market-incentive environmental regulations. Empirical results show that environmental regulations have significantly promoted technological progress of the pesticide manufacturing industry, with market-incentive environmental regulations proving more effective than command-and-control environmental regulations. Regional analysis reveals that the eastern and western regions are consistent with the national results, while the central region shows heterogeneity. In the eastern and western regions, environmental regulations have fostered technological progress, generating an “innovation compensation effect”. However, the central region exhibits a dual effect. On one hand, environmental regulations have stimulated research in pesticide technologies; on the other hand, they have squeezed out investment in high-quality and innovative technologies, thereby hindering technological progress to some extent. Consequently, the government should enhance environmental supervision, revise environmental protection laws, and increase investments and subsidies for pesticide enterprises to foster technological innovation. Moreover, the formulation and implementation of environmental regulations should account for regional disparities.