The Ratchet Effect of Environmental Policy Combinations
Abstract
Governments increasingly pair command-and-control regulation with market-based instruments, but whether the resulting combination produces effects that persist independently of its component instruments remains unclear. We distinguish two claims conflated under “ratchet effect”: that policy effects reinforce over time, and that they resist reversal once intensity is later scaled back. Using 288 Chinese prefecture-level cities (2000–2023) and the staggered rollout of environmental courts and emissions-trading pilots, we estimate two-way fixed-effects, event-study, and asymmetric models. Neither instrument alone reliably lowers PM 2.5 , but their interaction does, with effects strengthening for several years post-adoption. Reductions in policy intensity do not proportionately restore prior pollution levels—a pattern far stronger for command-and-control than market-based instruments. These findings extend policy feedback theory to environmental policy mixes, showing that instrument pairing, not stringency alone, governs the durability of environmental gains.