Impact of green fiscal policy on the collaborative reduction of pollution and carbon emissions: Evidence from energy saving and emission reduction policy in China

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Research background: Since China is facing the dual challenges of environmental pollution and climate change, how to effectively deal with the collaborative reduction of pollution and carbon emissions (CRPCE) has become an important problem. Energy saving and emission reduction fiscal policy (ESER), as a green fiscal policy, plays an important role in solving China's environmental problems. Purpose of the article: The aim of this study is to analyze the direct impacts, mechanisms and spatial spillover effects of the ESER policy on the CRPCE through theoretical and empirical analyses, thereby providing practical and feasible fiscal-related policy proposals for developing countries like China to achieve low-carbon development. Methods: Difference-in-differences method (DID), spatial DID. Findings & value added: Based on panel data from 274 Chinese cities, this study analyzes the impact of ESER policy on the CRPCE. The findings demonstrate that the ESER policy effectively enhances the CRPCE. The mechanism analysis demonstrates that the impact of the ESER policy is realized by promoting green technology innovation, improving energy efficiency, and increasing industrial structure upgrading. The heterogeneity analysis demonstrates that the ESER policy can be more effective in enhancing the CRPCE when it is implemented in northern, resource-based, and high fiscal self-sufficiency cities. The spatial analysis results suggest that ESER policy attenuates the CRPCE of neighboring cities. In addition, the co-implementation of the ESER policy and the innovation policy is more effective in enhancing the CRPCE, but cities are required to implement the innovation policy first. This study broadens the research perspective on the synergistic effects of green fiscal policy in reducing pollutant and carbon emissions, and offers a useful guide for other developing countries on green fiscal policy.