Regional development, agricultural industrial upgrading and carbon emissions: What is the role of fiscal expenditure? —-Evidence from Northeast China

Carbon emissions represent an important cause of climate change. Agriculture is affected by climate change as well as a major source of carbon emissions. In this study, the PVAR and Han-Phillips GMM dynamic SDM models as well as urban panel data of Northeast China from 2007 to 2021 were used to explore the response mechanisms and spatial effects in the logical framework of “Regional development -Agricultural industrial upgrading-Carbon emissions”, and to analyze the effect of fiscal expenditure on agricultural carbon reduction and climate risk management. The results show that: (1) The long-term regulation effect of fiscal expenditure on agricultural carbon reduction is ineffective, because fiscal agricultural expenditure only stimulates industrial upgrading, whereas fiscal environmental expenditure has a long-term stimulating effect on regional development; (2) Fiscal environmental expenditure has a short-term inhibiting effect on agricultural carbon emissions, which is only significant during the lag 1 period; (3) The spatial correlation of agricultural carbon emissions is mainly due to fiscal agricultural expenditure and industrial upgrading, based on the effects of technological spillovers, industrial linkages, and resource crowding between cities; and (4) Regional development and industrial upgrading contribute to agricultural carbon emissions in the long term; however, agricultural carbon emissions threaten long-term development. The above-mentioned results verify that regional development and agricultural industry upgrading depend on the environment in the sample area and indicate that insufficient attention has been paid to the low-carbon development of agriculture in fiscal expenditure. Currently, agricultural carbon reduction in China faces difficult challenges because of the time and spatial interactions, which must be considered in terms of systematic interventions, cross-regional, and development longevity in the future. This study supports the practice of agriculture carbon reduction and provides a new perspective for detailed analysis of the effect of fiscal expenditure on regional and industrial development.