Intergovernmental fiscal transfers and CO2 emissions in China

Effectively evaluating the influencing factors of environmental pollution at the system level has become a hot topic in sustainable socioeconomic development; however, none of the existing studies have attempted to explore the relationship between intergovernmental fiscal transfers and environmental pollution. In this work, we aim to address the research gap from theoretical and empirical perspectives. Under the framework of endogenous growth theory, we first analyze the dynamic relationship between intergovernmental fiscal transfer ratio and the environment. Findings demonstrate that intergovernmental fiscal transfer ratio and environmental pollution have a bell-shaped relationship. We then conduct an empirical investigation of CO2 emissions with panel data for China’s 30 provinces for the period of 1998–2017 by combining spatial econometric methods. The robust empirical results support the aforementioned theoretical findings. The findings of this work may help the central and provincial governments of China in addressing CO2 emission problems by using a reasonable intergovernmental fiscal transfer ratio.