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

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.