IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v87y2025icp1595-1611.html

Is market integration conducive to carbon reduction? Evidence from Chinese cities

Author

Listed:
  • Li, Lang
  • Luo, Nengsheng

Abstract

Reducing carbon emissions is a key measure to mitigate global warming and presents a vital opportunity for economic transformation. This paper, based on models of free trade's environmental impact, theoretically explores the mechanisms through which market integration affects carbon emissions. Using data from Chinese prefecture-level cities between 2003 and 2022, it empirically examines the carbon reduction effects of market integration, its influencing mechanisms, the moderating effects of related factors, and inter-regional carbon transfer dynamics. The findings indicate that increased market integration helps reduce carbon emission intensity but exacerbates inequalities in regional carbon reduction responsibilities. Specifically, a 1 % increase in market integration reduces carbon emission intensity by approximately 0.06 %. Market integration achieves emissions reduction primarily through improvements in energy efficiency, industrial upgrading, and green technological innovation. The carbon reduction effects of market integration vary across different markets, regions, and city types. Additionally, market integration enhances the carbon reduction impact of environmental regulations, while greater openness to international markets amplifies the carbon reduction effects of market integration. Grounded in China’s unique political system, this study provides valuable insights for optimizing the coordination between domestic market integration and carbon reduction strategies.

Suggested Citation

  • Li, Lang & Luo, Nengsheng, 2025. "Is market integration conducive to carbon reduction? Evidence from Chinese cities," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1595-1611.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1595-1611
    DOI: 10.1016/j.eap.2025.07.029
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625003042
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.07.029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Zhang, Zeyi & Luo, Xuehua & Hu, Huiying & Du, Jiating & Xu, Baoliang, 2023. "Market integration and urban air quality: Evidence from the Yangtze River Economic Belt of China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 910-928.
    2. Pei Yuan & Mingzhen Shao & Chao Ma, 2024. "RETRACTED ARTICLE: Unlocking Economic Unity: The Digital Economy’s Impact on Market Segmentation in China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 16700-16734, December.
    3. Huang, Ruting & Miao, Qin & Liu, Chen & Li, Zhi, 2025. "Market segmentation and the dilemma of energy efficiency improvement: New insights from Chinese manufacturing firms," Energy, Elsevier, vol. 322(C).
    4. Tanaka, Kenta & Managi, Shunsuke, 2021. "Industrial agglomeration effect for energy efficiency in Japanese production plants," Energy Policy, Elsevier, vol. 156(C).
    5. García-Hiernaux, Alfredo & Guerrero, David E. & McAleer, Michael, 2016. "Market integration dynamics and asymptotic price convergence in distribution," Economic Modelling, Elsevier, vol. 52(PB), pages 913-925.
    6. Qiao, Junfeng & Li, Yuan & Yu, Jie, 2024. "Administrative-led urbanization and urban carbon emission intensity: Evidence from city-county merger in China," Energy Economics, Elsevier, vol. 136(C).
    7. Kun Zheng & Hongbing Deng & Kangni Lyu & Shuang Yang & Yu Cao, 2022. "Market Integration, Industrial Structure, and Carbon Emissions: Evidence from China," Energies, MDPI, vol. 15(24), pages 1-22, December.
    8. Zhang, Yue-Jun & Sun, Ya-Fang & Huang, Junling, 2018. "Energy efficiency, carbon emission performance, and technology gaps: Evidence from CDM project investment," Energy Policy, Elsevier, vol. 115(C), pages 119-130.
    9. Xu, Fei & Liu, Qian & Zheng, Xingdong & Cao, Luqi & Yang, Mian, 2022. "Research on the impact of China's high-speed rail opening on enterprise market power: Based on the perspective of market segmentation," Transport Policy, Elsevier, vol. 128(C), pages 121-137.
    10. Lv, Yulan & Chen, Wei & Cheng, Jianquan, 2020. "Effects of urbanization on energy efficiency in China: New evidence from short run and long run efficiency models," Energy Policy, Elsevier, vol. 147(C).
    11. Kenji Fujiwara, 2011. "Market Integration and Competition in Environmental and Trade Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(4), pages 561-572, August.
    12. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    13. Shiqi Lyu & Zexian Chen & Simei Pan & Lianhua Liu, 2023. "Market integration and economic growth," PLOS ONE, Public Library of Science, vol. 18(11), pages 1-23, November.
    14. Hu, Jiukai & Luo, Deqing & Wang, Yiming, 2025. "Innovative incentive effects of domestic market integration: Evidence from the Yangtze River Delta region of China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1580-1594.
    15. Li, Sihui & Liu, Yining & Zhao, Jinchun & Xu, Baochang, 2024. "Market integration and the risk of corporate leverage manipulation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    16. Yanjun Yang & Rui Xue & Dong Yang, 2020. "Does market segmentation necessarily discourage energy efficiency?," PLOS ONE, Public Library of Science, vol. 15(5), pages 1-19, May.
    17. Zhang, Qianxiao & Duan, Yixue, 2024. "Digital empowerment and export quality: The moderate effect of market segmentation," Finance Research Letters, Elsevier, vol. 63(C).
    18. Bingjiang Luan & Hanshuo Yang & Hong Zou & Xi Yu, 2023. "The impact of the digital economy on inter-city carbon transfer in China using the life cycle assessment model," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
    19. PU, Zhengning & FEI, Jinhua, 2022. "The impact of digital finance on residential carbon emissions: Evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 515-527.
    20. Liu, Jun & Huang, Bihui & Hu, Yaoyu, 2024. "The influence of tax incentives on market segmentation in the context of a unified national market," Finance Research Letters, Elsevier, vol. 65(C).
    21. Orlowski, Lucjan T., 2020. "Capital markets integration and economic growth in the European Union," Journal of Policy Modeling, Elsevier, vol. 42(4), pages 893-902.
    22. Cheng, Qiongwen & Zhao, Xiaoge & Zhong, Shihu & Xing, Yudan, 2024. "Digital financial inclusion, resident consumption, and urban carbon emissions in China: A transaction cost perspective," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1336-1352.
    23. Qin, Quande & Yu, Ying & Liu, Yuan & Zhou, Jianqing & Chen, Xiude, 2023. "Industrial agglomeration and energy efficiency: A new perspective from market integration," Energy Policy, Elsevier, vol. 183(C).
    24. Zheng, Yilin & Lu, Ming & Li, Jiewei, 2022. "Internal circulation in China: Analyzing market segmentation and integration using big data for truck traffic flow," Economic Modelling, Elsevier, vol. 115(C).
    25. Zhou, Xiaoyan & Zhang, Jie & Li, Junpeng, 2013. "Industrial structural transformation and carbon dioxide emissions in China," Energy Policy, Elsevier, vol. 57(C), pages 43-51.
    26. Junfeng Zhao & Jianliang Shen & Jinling Yan & Xiaodong Yang & Yu Hao & Qiying Ran, 2023. "Corruption, market segmentation and haze pollution: empirical evidence from China," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 66(3), pages 642-664, February.
    27. Chen, Xu & Chen, Xueli & Song, Malin, 2021. "Polycentric agglomeration, market integration and green economic efficiency," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 185-197.
    28. Long, Yan & Liu, Liangcan & Yang, Bing, 2024. "The effects of enterprise digital transformation on low-carbon urban development: Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 201(C).
    29. Xin Fan & Shan Jin & Zeyu Chen, 2023. "Who Benefits from Domestic Market Integration?," Journal of Happiness Studies, Springer, vol. 24(6), pages 2083-2109, August.
    30. Hou, Xiang & Hu, Qianlin & Liang, Xin & Xu, Jingxuan, 2023. "How do low-carbon city pilots affect carbon emissions? Staggered difference in difference evidence from Chinese firms," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 664-686.
    31. Zhao, Xiaomeng & Liu, Chuanjiang & Sun, Chuanwang & Yang, Mian, 2020. "Does stringent environmental regulation lead to a carbon haven effect? Evidence from carbon-intensive industries in China," Energy Economics, Elsevier, vol. 86(C).
    32. Wei, Na, 2024. "Green finance, market integration, and regional economic resilience," Finance Research Letters, Elsevier, vol. 67(PA).
    33. Henrekson, Magnus & Torstensson, Johan & Torstensson, Rasha, 1997. "Growth effects of European integration," European Economic Review, Elsevier, vol. 41(8), pages 1537-1557, August.
    34. Yuanchao Bian & Kaiyi Song & Junhong Bai, 2021. "Impact of Chinese market segmentation on regional collaborative governance of environmental pollution: A new approach to complex system theory," Growth and Change, Wiley Blackwell, vol. 52(1), pages 283-309, March.
    35. Niu, Baozhuang & Xu, Haotao & Mu, Zihao, 2024. "To divide or not to divide: Impact of carbon market connections on firms’ resilient profitability and emission reduction," International Journal of Production Economics, Elsevier, vol. 270(C).
    36. Su, Hongwei & Liang, Biming, 2021. "The impact of regional market integration and economic opening up on environmental total factor energy productivity in Chinese provinces," Energy Policy, Elsevier, vol. 148(PA).
    37. Dong, Zhaoyingzi & Xia, Chuyu & Fang, Kai & Zhang, Weiwen, 2022. "Effect of the carbon emissions trading policy on the co-benefits of carbon emissions reduction and air pollution control," Energy Policy, Elsevier, vol. 165(C).
    38. Sun, Aijun & He, Qun & Xiao, Chenchan & Hua, Yu & Zhang, Jianping, 2024. "The spatial spillover effects of regional integration on carbon emissions," International Review of Economics & Finance, Elsevier, vol. 95(C).
    39. Peixin Li & Lixia Li & Yichun Xie & Xueliang Zhang, 2021. "Investigating the effects of market segmentation on firm survival and their heterogeneities in China," Growth and Change, Wiley Blackwell, vol. 52(4), pages 2614-2634, December.
    40. Younes Ahmadi & Akio Yamazaki & Philippe Kabore, 2022. "How Do Carbon Taxes Affect Emissions? Plant-Level Evidence from Manufacturing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(2), pages 285-325, June.
    41. Parsley, David C. & Wei, Shang-Jin, 2001. "Explaining the border effect: the role of exchange rate variability, shipping costs, and geography," Journal of International Economics, Elsevier, vol. 55(1), pages 87-105, October.
    42. Nema, Pragya & Nema, Sameer & Roy, Priyanka, 2012. "An overview of global climate changing in current scenario and mitigation action," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 2329-2336.
    43. Du, Kerui & Li, Pengzhen & Yan, Zheming, 2019. "Do green technology innovations contribute to carbon dioxide emission reduction? Empirical evidence from patent data," Technological Forecasting and Social Change, Elsevier, vol. 146(C), pages 297-303.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hou, Xinshuo & He, Yan & Liu, Xin & Li, Dongyang & Zhang, Shijie, 2025. "Market segmentation and urban energy consumption: An analysis of threshold effects from an agglomeration perspective," Energy Economics, Elsevier, vol. 147(C).
    2. Zhang, Wei & Liu, Xuemeng & Wang, Die & Zhou, Jianping, 2022. "Digital economy and carbon emission performance: Evidence at China's city level," Energy Policy, Elsevier, vol. 165(C).
    3. Qian Cheng & Yongqing Xiong & Jinghui Liu, 2025. "The impact of electric vehicle adoption on regional energy market integration in China," Asian Economic Journal, East Asian Economic Association, vol. 39(2), pages 217-244, June.
    4. Du, Zhili & Wang, Yao, 2022. "Does energy-saving and emission reduction policy affects carbon reduction performance? A quasi-experimental evidence in China," Applied Energy, Elsevier, vol. 324(C).
    5. Huo, Xiuzhen & Dong, Yuanyuan, 2025. "From market segmentation to consumption growth: How does digital-real integration strengthen the consumption stimulation effect in a unified national market?," International Review of Economics & Finance, Elsevier, vol. 103(C).
    6. Yan, Bingqian & Xia, Yan & Jiang, Xuemei, 2023. "Carbon productivity and value-added generations: Regional heterogeneity along global value chain," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 111-125.
    7. Yu, Chenyang & Tan, Yuanfang & Zhou, Yu & Zang, Chuanxiang & Tu, Chenglin, 2022. "Can functional urban specialization improve industrial energy efficiency? Empirical evidence from China," Energy, Elsevier, vol. 261(PA).
    8. Xiaolin Yu & Kai Wan, 2025. "Can removing regional barriers reduce carbon emissions in border regions? Quasi-natural experiments from China," Economic Change and Restructuring, Springer, vol. 58(2), pages 1-29, April.
    9. Peng, Shengnan & Liu, Chan & Wang, Ze & Ye, Zihan & Sun, Xialing & Tan, Zhanglu, 2024. "The impact of the carbon reduction policy effectiveness on energy companies' ESG performance," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    10. Zhen Li & Yanyan Shen, 2025. "Government-led innovation and carbon emissions: evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(11), pages 27587-27610, November.
    11. Xu, Hao & Xu, Jingxuan & Wang, Jie & Hou, Xiang, 2023. "Reduce production or increase efficiency? Hazardous air pollutants regulation, energy use, and the synergistic effect on industrial enterprises' carbon emission," Energy Economics, Elsevier, vol. 126(C).
    12. Zhang, Huijin & Hu, Wenbo, 2025. "Unveiling the reality of carbon reduction: Is the Paris Agreement turning the world green or just painting it green?," Energy Economics, Elsevier, vol. 148(C).
    13. Shahzad, Umer & Ferraz, Diogo & Nguyen, Huu-Huan & Cui, Lianbiao, 2022. "Investigating the spill overs and connectedness between financial globalization, high-tech industries and environmental footprints: Fresh evidence in context of China," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    14. Lu, Zhou & Mahalik, Mantu Kumar & Mahalik, Hrushikesh & Zhao, Rui, 2022. "The moderating effects of democracy and technology adoption on the relationship between trade liberalisation and carbon emissions," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    15. Xu, Le & Yang, Lili & Li, Ding & Shao, Shuai, 2023. "Asymmetric effects of heterogeneous environmental standards on green technology innovation: Evidence from China," Energy Economics, Elsevier, vol. 117(C).
    16. Wang, Yang & Zhang, Kexin, 2025. "Industrial and financial cooperation, heterogeneous green technological innovation, and urban low carbon transformation," International Review of Economics & Finance, Elsevier, vol. 102(C).
    17. Zhao, Ruizeng & Sun, Jiasen & Wang, Xinyue, 2024. "Synergistic impact of digital finance and urban agglomeration policy on carbon emission reduction," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    18. Chang Liu & Huixin Zhou & Zitong Li & Dingyang Zhou & Yingying Tian & Guanghui Jiang, 2024. "Location Preferences and Changes in Pollution-Intensive Firms from the Yangtze River Economic Belt, China," Land, MDPI, vol. 13(11), pages 1-17, November.
    19. Bo Li & Fei Xing & Mark Yu, 2018. "Upstream Pricing Schemes, Trade Liberalization, Trade and Environmental Policies of Downstream Countries," Sustainability, MDPI, vol. 10(7), pages 1-13, July.
    20. Fu, Zhengtang & Lu, Xi, 2025. "Driving electric vehicles obtain environmental income: A new incentive mechanism with digital technology," Energy, Elsevier, vol. 341(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1595-1611. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.