Heterogeneous low-carbon targets and energy structure optimization: Does stricter carbon regulation really matter?

Abstract

In this study, we use the difference-in-difference strategy to examine the effect of stricter carbon regulation on energy structure. We find that, under stricter carbon regulation, regions with above-average carbon intensity reduction targets (CIRTs) prefer to use high-carbon energy. This conclusion is found to be reliable after the robustness tests; the regions with moderate CIRTs prefer to use low-carbon energy. When low-carbon targets are increased, the effect of the policy is much greater. The reason is that above-average CIRTs lead to an improved marginal output growth rate and an increased technological bias of high-carbon energy. This increased bias further causes enterprises to increase the scale of high-carbon energy input and reduce the proportion of low-carbon energy. This study reveals that, under the constraints of the low-carbon policy, stricter carbon regulation is not conducive to optimizing the energy structure, while moderate CIRTs are conducive to increasing the consumption of low-carbon energy.