The Effects of Low-Carbon Governance on Energy-Environmental Efficiency: Evidence from China’s Low-Carbon City Pilot Policy

ABSTRACT

Energy-environmental efficiency directly relates to global climate change and sustainable development. The research applies a staggered DiD design to estimate the effects of low-carbon governance on energy-environmental efficiency via panel data of 284 cities in China. Results show that low-carbon governance significantly improves both unified energy-environmental efficiency and pure energy-environmental efficiency. Heterogeneity analysis reveals that low-carbon governance in central cities has no significant effect on energy-environmental efficiency, while that in peripheral cities can improve energy-environmental efficiency, which indirectly confirms the law of decreasing returns to scale. At the same time, low-carbon governance in both resource-based and non-resource-based cities improves energy-environmental efficiency. However, among resource-based cities, low-carbon governance in growth and mature cities facilitates energy-environmental efficiency, while this effect disappears in declining and regeneration cities. Mechanism tests suggest that low-carbon governance immediately improves energy-environmental efficiency through intensive energy use and carbon emission reduction channels. The intermediate effect channels are mainly driven by fiscal decentralization, industrial structure upgrading, industrial agglomeration, innovation, and marketization, where fiscal decentralization plays a dominant role.

KEYWORDS:

• Climate policy
• low-carbon governance
• energy-environmental efficiency
• EBM

JEL:

• C61
• Q43
• R38

Acknowledgments

We are grateful to Chun-Ping Chang for his guidance on an earlier version of this article. We are also grateful to the anonymous referees for helpful suggestions. All errors are our own.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. According to Montinola, Qian, and Weingast (1995), “Race to the top” denotes that, under a rational fiscal decentralization regime, a portion of independent fiscal rights and responsibilities are devolved for local governments to increase their sensitivity to the demands and preferences of potential competitors, and then to motivate local governments for competitively improving investment efficiency until the top.

2. Sustainable development requires that economic activities reduce pollution and greenhouse gas emissions as much as possible. Following Zhang et al. (2020), we consider CO₂ and all pollutant emissions as non-desired outputs in order to measure energy environmental efficiency more precisely.

3. The four municipalities directly under the central government are Beijing, Shanghai, Tianjin, and Chongqing. Except for Shenzhen, Dalian, Qingdao, Ningbo, and Xiamen, all of the 15 sub-provincial cities are provincial capitals. The 27 provincial capitals include Shijiazhuang, Shenyang, Harbin, Hangzhou, Fuzhou, Jinan, Guangzhou, Wuhan, Chengdu, Kunming, Lanzhou, Taipei, Nanning, Yinchuan, Taiyuan, Changchun, Nanjing, Hefei, Nanchang, Zhengzhou, Changsha, Haikou, Guiyang, Xi’an, Xining, Hohhot, Lhasa, and Urumqi. In addition, Taipei City is not considered due to the unavailability of data.

Additional information

Funding

This work was supported by the National Social Science Foundation of China [Grant No.21BJY229].