Industrial agglomeration, CO2 emissions and regional development programs: A decomposition analysis based on 286 Chinese cities

Abstract

The economic impact of industrial agglomeration has been examined by many studies. However, few has focused on its environmental consequences partly due to data availability. Applying decomposition method to a newly constructed industrial-level CO2 emissions dataset of 286 Chinese prefectural and above (PAA) cities over the period 2004–2013, this paper examines the mechanism of how industrial agglomeration impacts urban CO2 emissions through three components, scale, composition and technique effects. We find that industrial agglomeration pushed up CO2 emissions through the scale effect, but reduced CO2 emissions through both the technique and composition effects. At the regional level, the effect of agglomeration on CO2 emissions was dominated by the scale effect in the central and western cities. However, in the eastern cities, the scale effect was almost offset by the technique and composition effects. China’s regional development programs tend to relocate economic activities from the more agglomerated eastern cities towards the more dispersed western cities. This relocation may have reduced the environmental efficiency gains from industrial agglomeration.