The impact of the Low-Carbon City Pilots programme on industrial land transfer by local governments in China

Abstract

Local governments have played an important role in China’s economic development over the past 30 years. They are often driven by economic and political interests. They have relied on the fact that they hold a monopoly on the supply of land to transfer industrial land at low prices or by agreement in order to attract investment. This has had serious environmental repercussions. As the problem of climate change becomes more and more serious, central government has promulgated a large number of environmental regulation policies in recent years. But the way in which local governments (as policy implementers) respond to central government by changing their behaviour vis-à-vis the transfer of industrial land is still inadequate. This study takes the Low-Carbon City Pilots (LCCP) programme as a starting point, collecting industrial land transfer data on more than 280 Chinese cities from 2008 to 2018 and using a multi-period difference-in-differences model to study how environmental regulation affects the industrial land transfer behaviour of local governments. The results show that the LCCP programme has significantly reduced the scale of industrial land transfers by local government. This trend is mainly reflected in a reduction in the number of transfers; meanwhile, any reduction in the area of industrial land transfers is concentrated in cities with low levels of land finance and innovative cities. The study finds that local governments in different cities have different incentives for undertaking environmental protection, based on their endowment characteristics; there is also a difference in their preferred policy tools: reducing competition to attract investment, enhancing environmental supervision or increasing investment in science and education. This study offers fresh insights into environmental regulation and economic development, and provides a reference for how to achieve industrial upgrading and sustainable development through government guidance, under the central and local ‘principal–agent’ relationship.