Carbon regulation and economic growth: City-level evidence from China

Abstract

This study uses a quasi-difference-in-differences strategy to examine the net impact of place-based carbon reduction targets on economic growth of 285 cities in China. The Luenberger indicator is calculated to measure low-carbon technology at the city level and identify the influencing mechanism. The findings demonstrate that place-based carbon reduction targets have a negative influence on regional economic growth. The place-based targets have created a compelling reason for local governments to intervene in economic activities. In terms of scale effect, the targets result in a decline in the input scale of core production factors. In terms of technological effect, the targets lead to an improvement in low-carbon total factor productivity (TFP). However, the reduced factor input scale is the major cause of the policy's negative influences on economic growth.