How Industrialization Stage Moderates the Impact of China’s Low-Carbon Pilot Policy?

Abstract

The goal of China’s low-carbon pilot policy (LCP) is not only to solve the problem of climate change but, more importantly, to achieve the low-carbon transformation of cities. This paper analyzes the industrialization stage’s moderating effect on LCP policy implementation using the difference-in-difference model (DID) with the Low Carbon Development Index (LCDI) as the explained variable. We find that for the low-carbon pilot cities (LCPCs) at the later stage of industrialization, the LCP policy has a positive impact on LCDI, gradually increasing with the study period’s extension. The marginal impact reaches its maximum in the second year after its implementation. For the LCPCs at the middle stage of industrialization, the LCP policy has a weakly negative impact on LCDI. The marginal impact does not change to positive until the fourth year after its implementation. In terms of mechanism analysis, the LCP policy enhances LCDI by slowing down the industrialization process and boosting innovation; the industrialization stage does not constrain the effect. In contrast, the LCP policy’s impact on LCDI by facilitating FDI (Foreign Direct Investment)inflows is strongly influenced by the industrialization stage. For the LCPCs at the later stage of industrialization, the LCP policy can enhance LCDI through FDI. For the LCPCs at the middle stage of industrialization, the LCP policy reduces the inflow of FDI, and the positive effect of FDI on LCDI does not pass the significance test. Thus, this paper argues that a one-size-fits-all strategy to policy implementation should be avoided. Instead, the industrialization stage should be considered a criterion for city classification, and a differentiated target responsibility assessment mechanism should be adopted according to local conditions.

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