How effective has the low-carbon city pilot policy been as an environmental intervention in curbing pollution? Evidence from Chinese industrial enterprises

Abstract

In response to China's burgeoning environmental pollution, since 2010, Chinese policymakers have implemented a low-carbon city pilot policy (LCCP) and expanded the pilot project's dimension since then. An accurate evaluation of the consequences of this environmental intervention is vital for the further promotion and extension of this pilot project. In this milieu, we develop a framework to put credibility on this newly intervened policy by harnessing robust econometric approaches. To achieve this objective, we garner integrated data from 2006 to 2014, sourced from two distinct databases: the Chinese Industrial Enterprise database and the China Enterprise Pollution Emissions database. This paper deploys a time-varying Difference in Difference (DID) approach to scrutinize the influence of LCCP on China's emissions reduction agenda from a micro-perspective. The findings reveal that: (1) LCCP significantly reduces enterprise pollution by promoting eco-friendly technologies and innovation capacity; (2) LCCP promotes healthy urbanization and restores the urban ecosystem by abating emissions intensities significantly (i.e., for every one percentage point increase in LCCP, firm-level emissions plummet by 1.87%); (3) LCCP efficacy in controlling emissions varies in terms of ownership, type and location of the firms (i.e., LCCP policy is more efficacious in controlling emissions if the firm is foreign or private-owned if it is a capital and technology-intensive high polluting firm and if the firm is located in eastern and western zones of the country). The findings are robust after replacing the explained variables, changing the estimation method, excluding the interference of outliers, considering the lagged term, and excluding other policy interference. Based on the findings, this study touts the Chinese Government's LCCP policy by providing firm-level theoretical support and empirical evidence for China to boost the revamping strategy of carbon-neutral cities. Therefore, the benefits of pilot cities should be further harnessed to guide enterprises in low-carbon pilot cities so that they can engage in cleaner production activities and achieve green transformation through policy preferences and other incentives. Further policy suggestions have been made in the relevant section.