How Does Agricultural Land Lease Policy Affect Agricultural Carbon Emission? Evidence of Carbon Reduction Through Decreasing Transaction Costs in the Context of Heterogeneous Efficiency

Given the increasing environmental pressures, it is essential that agriculture achieves the goal of sustainable and low-carbon development. In 2010, China, as the top carbon emitter, introduced a policy on agricultural land lease (ALL), which has been met with considerable approval from farmers and has resulted in a notable surge in the rate of ALL within the country. Nevertheless, the question of how the ALL policy affects agricultural carbon emissions (ACEs) remains unanswered. What are the transmission mechanisms? To answer these questions, this paper presents an equilibrium model that accounts for the heterogeneous production efficiency among farmers. It offers a theoretical analysis of the impact of ALL policy on agricultural carbon emission reduction (ACER) and presents an empirical test of this impact using a difference-in-differences (DID) model. Our research shows that the ALL policy gives impetus to ACER. This conclusion persists even after conducting the robustness and endogeneity tests. The mechanism posits that the policy achieves ACER through reducing the proportion of rural agricultural employees. Heterogeneity analysis indicates that the policy effect is significant in both the northern and southern regions of China. Nonetheless, the effect is only observable in economically developed areas, regions with high chemical fertilizer application rates, and areas with restricted agricultural progress. This study elucidates the connection between land transfer and agricultural carbon emissions, offering empirical evidence to support the advancement of green and low-carbon agricultural development.