Green location-oriented policies and their effect on carbon abatement costs: evidence from China’s Eco-Industrial Demonstration Parks

Green location-oriented policies are pivotal in reducing carbon emissions. Currently, it remains unclear whether green location-oriented policies can affect the marginal abatement cost (MAC) of carbon emissions. This study leverages the establishment of China’s Eco-Industrial Demonstration Parks (EDP) as a quasi-natural experiment to investigate this effect. Utilizing data from 2006 to 2019 for prefecture-level and above cities, we estimate the shadow price of carbon dioxide using a dual model of slacks-based measure, which serves as a proxy for MAC. Through a staggered difference-in-differences (DID) model, our analysis reveals that EDP construction has increased MAC in demonstration cities by 9%. This result remains robust under heterogeneous robust estimation, synthetic DID, continuous DID, and double machine learning models. The effectiveness of EDP in raising MAC is particularly significant in cities hosting multiple parks, regions without traditional industrial bases, and the eastern areas. Mechanism analysis suggests that EDP influences MAC through carbon intensity and green innovation effects. Additionally, EDP construction exhibits significant positive spillovers to the control group. These findings provide policy insights for maximizing the sustainable development benefits of EDP.