Collaborative effect of the energy conservation and emission reduction fiscal policy in China

Abstract

Government-led national comprehensive demonstration cities for Energy Conservation and Emission Reduction Fiscal Policy (ECERFP) are pivotal for China in addressing environmental governance. Using a panel dataset covering 278 Chinese cities from 2003 to 2019, this study adopts the staggered difference-in-differences (DID) approach to investigate the synergistic impacts of ECERFP on pollution and carbon reduction. The findings indicate that ECERFP contributes to a 3% improvement in pollution reduction performance, a 1.5% enhancement in carbon reduction performance, and a 4% overall increase in combined pollution and carbon reduction efforts. Furthermore, the study examines the heterogeneous effects of ECERFP on environmental performance. ECERFP significantly influences the synergistic efforts in pollution and carbon reduction by fostering green innovation, enhancing energy allocation, and optimizing industrial structures. This study both theoretically and empirically outlines the specific pathways and mechanisms through which “incentive-based” green fiscal policy promotes synergistic pollution and carbon reduction, thus providing a pragmatic foundation for enhancing the role of fiscal policy in environmental governance.