Connecting Fiscal Decentralization with Climate Change Mitigation in China: Directions for Carbon Capturing Systems

Abstract

The research aims to assess the relationship between fiscal decentralization and climate change mitigation to warrant the direction for the carbon-capturing systems of China. The study estimated the results of China and applied unit root test, cointegration analysis, CS-ARDL test, and robustness analysis. The survey results highlighted a significant relationship between the fiscal decentralization index and climate change mitigation. More specifically, the budgetary decentralization index’s economic, governmental, and institutional factors play a substantial role in climate change mitigation in the short run. While governmental factors are found insignificant asein the long run, economic, institutional, and cultural factors revealed a significant connection in the Chinese setting. The results of the study are robust in both long-run and short-run perspectives. The study also presented prudential guidelines for using fiscal decentralization as an environmental tool for climate change mitigation and launching an effective system for carbon capture management from the Chinese perspective.