Carbon emissions from the perspective of regional competition: evidence from China’s low-carbon city policy

Global warming poses a prominent challenge to every country. As one of the largest developing countries, China has experienced rapid economic transformation in its pursuit of sustainable development. This paper delves into a quasi-natural environmental experiment conducted in China, specifically focusing on the low-carbon city program initiated in 2010. Our study uncovers the phenomenon of regional competition among Chinese local governments with regard to carbon emissions, which in turn generates spillover effects stemming from the policy. To identify the effects of the low-carbon city policy on both economic and environmental development, we employ the spatial difference-in-differences approach. Our analysis suggests that reductions in carbon emissions in the pilot cities will lead to a decrease in carbon emissions and economic performance in the surrounding areas. Finally, by exploring firm-level data, we find that the policy significantly impacts large private firms operating in non-secondary industries.