Provincial and regional analysis of carbon neutrality policy and the environmental Kuznets curve: examining their effect on CO2 emissions in China.

Abstract

China is making a challenging effort to achieve its ambitious goal of becoming carbon-neutral by 2060. Therefore, the Chinese government should develop effective policy tools to improve its carbon neutrality plan. Due to this importance, an empirical study is required to examine the comprehensive effect of the carbon neutrality policy on CO2 emissions in China. Also, the role of economic development on the environment, the environmental Kuznets curve (EKC) hypothesis in the carbon neutrality-CO2 emissions nexus, has yet to be examined. Considering this gap, the present study investigates the impacts of carbon neutrality policy and the economy on CO2 emissions at China's provincial and regional levels from 2006 to 2017. We use a comprehensive approach to measure the carbon neutrality policy through the source control and sink increase perspectives. This study performs the panel-corrected standard errors (PCSE) and the feasible generalised least squares (FGLS) regression techniques to control the heteroscedasticity and cross-sectional correlation issues. The results show that an improvement in energy efficiency and renewable energy power generation decreases the per capita CO2 emissions at the provincial level from the source control perspective. From the sink increase perspective, only green space development affects CO2 emissions reduction; the development of carbon capture, utilisation, and storage (CCUS) does not. Also, this study shows that the EKC hypothesis holds true in China nationally and in the central region. Due to differing regional development patterns, the impact of carbon neutrality policy on CO2 emissions varies across regions. This study suggests specific policy implications such as increasing R&D investment per unit of GDP to support CCUS technologies at provincial and regional levels.