Environmental regulations, Chinese-style fiscal decentralization, and carbon emissions: from the perspective of moderating effect

Abstract

This study explores the moderating mechanism of fiscal decentralization on the relationship between environmental regulations and carbon emissions. Using longitudinal data of 30 provinces in China from 2002 to 2017, a spatial econometric model was constructed to empirically test the moderating effect of fiscal decentralization, as well as its spatial and temporal differences. The highlights of the results are as follows: (1) Environmental regulations has significantly curbed regional carbon emissions, and the suppression effect remains consistent over spatial and temporal stages, which indicates it exerts a positive effect in carbon control. (2) Fiscal decentralization exacerbates carbon emissions, although this negative effect is not significant in general. However, there are significant spatial regional differences in its impact on carbon emissions. Fiscal decentralization significantly suppresses carbon emissions in the eastern region, exacerbates carbon emissions in the western region, and has no significant impact on carbon emissions in the central region. This shows that local governments in China prioritize economic development over environmental protection and carbon control. (3) The moderating effect of fiscal decentralization on the relationship between environmental regulations and carbon emissions is not significant for the entire country as a whole. However, there are significant spatial regional differences in this moderating effect, and the relationship was found to be significant in the Western region. (4) There are no significant time-phased differences in the effects of environmental regulations, fiscal decentralization, and its cross item on carbon emissions.