Environmental policies and low-carbon industrial upgrading: Heterogenous effects among policies, sectors, and technologies in China

Abstract

Low-carbon industrial upgrading is a central means to achieve long-term climate change mitigation and sustainable industrial development. Yet the empirical evidence on the effects of environmental policies on low-carbon industrial upgrading remains relatively rare, and the analysis of channels is unexamined. Based on the panel data of 30 provinces in China from 2000 to 2016, this paper has contributed to the literature by testing the impacts of four distinct environmental policies on low-carbon upgrading and their possible channels. We found that energy-saving goals (ESGs) and new energy subsidies (NESs) promoted low-carbon upgrading, while pollution discharge fees (PDFs) restrained low-carbon upgrading and emission trading schemes (ETSs) had no impact. These conclusions were still tenable after a series of robustness tests. Channel analysis reveals that ESGs realized both low-carbon innovation and high-carbon industry restructuring (especially reflected in manufacturing), NESs were effective, but only in directing innovation. PDFs did not improve low-carbon upgrading, possibly due to their negative effects in low-carbon fields (including two sub-fields: energy efficiency and renewable energy). The restructuring and innovative effects of ETSs were insignificant. Finally, this paper put forward several policy implementations, including the promotion of market mechanisms, more strict law enforcement, and low-carbon industry development.