How does fiscal policy affect the green low-carbon transition from the perspective of the evolutionary game?

Abstract

The implementation of effective fiscal policy is an inevitable choice to help green low-carbon transition and strengthen the construction of ecological civilization. This paper constructs a dynamic model of the tripartite evolutionary game among the central government, the local government and the high pollution and high carbon emission (Double-high) enterprises. Accordingly, we examine the impact of the central government's regulatory mechanism and local government's implementation intensity on green and low-carbon transition. Taking Comprehensive Demonstration Cities of Energy Conservation and Emission Reduction Fiscal Policies as the entry point of the study, a staggered differences-in-differences model is used for empirical evaluation, which reveals the effect of fiscal policy on green and low-carbon transition. The theoretical modeling shows that the strategies of Double-high enterprises are affected by the interaction between the central government and local governments, and there is diversity in the strategy stability and equilibrium state of each subject. Under the premise that the central government pays attention to the motives of enterprises and local governments, the fiscal subsidies, tax incentives and penalties of local governments, as well as the supervision, reward and punishment mechanisms and transfer payments of the central government, directly shape the impact of fiscal policy on green and low-carbon transition. The empirical results show that effective fiscal policy can promote green low-carbon transition, in which fiscal decentralization has a moderating role. Finally, the paper emphasizes the importance of the leading role of the central government and the implementation capacity of local governments, as well as the key role of internal changes within firms in addressing the relationship between emissions reduction and development.