Can ecological compensation reduce air pollution? New evidence from resource-based cities in China

China has made great efforts to establish an ecological compensation mechanism, but there lacks empirical evidence on whether this scheme effectively reduces air pollution. To test the effectiveness of air quality ecological compensation (AQEC) on air pollution control, this study considers 114 resource-based cities in China and uses a multi-period difference-in-difference (DID) model for empirical analysis. The finding shows that the AQEC policy significantly reduces the concentration of air pollutants by promoting air pollution prevention and local authority enthusiasm for pollution abatement, resulting in an average annual decrease in PM2.5 concentrations of approximately 3.9 µg/m3 in the pilot cities. The AQEC policy of resource-based cities in eastern and northern China, and those with less financial pressure have greater inhibitory effects on air pollution. The study recommends establishing long-term protection mechanisms and implementing differentiated policies focused on green technological innovation and financial autonomy.