Urbanization with the pursuit of efficiency and ecology: Theory and evidence from China

Abstract

The urbanization-environment nexus has been widely studied and discussed in academia and practice. However, previous studies have primarily relied on empirical analyses using outcome indicators such as CO2 emissions and often overlooked the role of policy and governance, which is not compatible with China's unique top-down urbanization model. To address this gap, this study presents a new perspective on the urbanization-environmental nexus by analyzing the impacts of ecological policy considerations on urbanization. It is the first to provide theoretical deductions and empirical extensions of such effects, using general equilibrium models, welfare analysis, and regression analysis with Chinese provincial data. The study draws three key findings. Firstly, it provides both theoretical models and empirical evidence from China that substantiate the negative impacts of ecological policy considerations on urbanization. Secondly, the study highlights the regional heterogeneity of the impacts, which are more significant across central and western regions of China and in regions without pilot cities of pollution rights trading (PRT) or carbon emission trading (CET) schemes. Finally, the study identifies two effective mechanisms for realizing the negative effects: reducing urban gas supply and labor-intensive industrial output. In order to strike a balance between urbanization and eco-environment, it is crucial to upgrade and implement the green transformation of urban energy systems and labor-intensive industrial production modes. These conclusions enrich our theoretical and empirical understanding of the urbanization-environment nexus, and emphasize the critical role of policy making and government intervention in achieving sustainable urbanization and ecological civilization construction in China.