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Identifying the Impact of Green Fiscal Policy on Urban Carbon Emissions: New Insights from the Energy Saving and Emission Reduction Pilot Policy in China

Author

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  • Jianzhe Luo

    (Monash Business School, Monash University, Melbourne, VIC 3145, Australia)

  • Xianpu Xu

    (School of Business, Xiangtan University, Xiangtan 411105, China)

  • Lei Liu

    (School of Business, Xiangtan University, Xiangtan 411105, China)

Abstract

Urban carbon reduction is instrumental in enabling cities to realize their developmental sustainability objectives. However, regional disparities in economic development pose significant challenges to low-carbon transitions. This study utilizes panel data from 282 cities in China spanning 2006–2021, considering the energy saving and emission reduction (ESER) fiscal policy as an external shock. Using a multi-period difference-in-differences approach, we assess how ESER impacts urban carbon emissions. Our findings indicate that ESER significantly reduces municipal carbon emissions by an average of 23.3% compared to non-pilot cities. Mechanism analyses suggest that this effect operates through reduced energy consumption, improved industrial structure, and enhanced green innovation. ESER’s impact exhibits heterogeneity across cities with different levels of economic development, population size, innovation capacity, and industrial composition. Moreover, we find evidence of spatial spillover effects, as ESER benefits extend to neighboring regions. These results confirm the effectiveness of ESER in promoting low-carbon development and offer practical implications for enhancing environmental governance through green fiscal instruments.

Suggested Citation

  • Jianzhe Luo & Xianpu Xu & Lei Liu, 2025. "Identifying the Impact of Green Fiscal Policy on Urban Carbon Emissions: New Insights from the Energy Saving and Emission Reduction Pilot Policy in China," Sustainability, MDPI, vol. 17(17), pages 1-27, August.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:17:p:7632-:d:1731423
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