Does new energy demonstration city policy curb air pollution? Evidence from Chinese cities

Abstract

China has embarked on realizing a green-oriented energy structure transition with a series of policy tools. In 2014, the National Energy Administration launched a new energy demonstration city (NEDC) policy, but its effect on air pollution mitigation has not been fully examined. By employing the Difference-in-difference strategy, this study examines the effect of the NEDC policy on air pollution mitigation with Chinese prefecture-level city data. The results reveal that the NEDC policy can significantly lead to a 0.13-unit drop in SO2 emissions. The NEDC policy curbs pollution by stimulating green investments, promoting green technology innovation, advancing resource allocation efficiency, and reducing energy consumption. The effect of the NEDC policy appears to be heterogeneous under different conditions. Furthermore, this phenomenon is more conspicuous in prefectures led by older officials, where the age incentives nearing the promotion golden age threshold amplify the effects of air pollution mitigation, while those nearing retirement years exacerbate such effects. Notably, the interaction effect between environmental regulations and the NEDC policy on air pollution mitigation is elucidated. Moreover, positive spatial spillover effects extending to neighboring regions are identified, underscoring the imperative of regional collaboration and technological diffusion. Based on the findings above, several policy implications are proposed.