Can social credit demonstration cities reduce urban carbon emissions?

Formal environmental regulations in China, typically imposed through top-down mechanisms, often face enforcement challenges and inefficiencies. In contrast, informal institutions such as social credit systems offer alternative approaches to managing urban environmental issues. This study investigates whether the establishment of Social Credit System Demonstration Cities (SCSDCC) can lower urban carbon emission intensity (CEI). Using panel data from 283 Chinese cities and a multi-period difference-in-differences (DID) framework, we find that SCSDCC significantly reduce CEI, with an average reduction of 18.80 % compared to non-demonstration cities. The findings remain robust after accounting for other concurrent policy pilots and using urban elevation as an instrumental variable to address endogeneity. The results suggest that the SCSDCC promote emission reductions by improving energy efficiency, encouraging technological innovation, and supporting economies of scale. Moreover, the policy generates spatial spillovers, reducing CEI in neighboring areas. The effect is more pronounced in small and medium-sized cities, northern regions, non-resource-based economies, and cities without overlapping pilot programs. These results underscore the environmental value of social credit systems as informal regulatory tools in urban carbon governance.