The impact of vertical fiscal asymmetry on carbon emissions in China

Abstract

Facing the double pressure of promoting economic growth and achieving the goal of “emission peak” by 2030, China must cut down the carbon emission intensity. Focusing on the typical characteristics of China’s financial system arrangement, we theoretically analyze the mechanism of vertical fiscal asymmetry affecting carbon emission intensity and use a panel data from 30 Chinese provinces to conduct an empirical examination. The results show that (1) vertical fiscal asymmetry significantly increases the local carbon emission intensity. After a series of robust tests, such as replacement variables and sample data, the conclusion is still valid. (2) The analysis of regional heterogeneity shows that the influence of vertical fiscal asymmetry in carbon emission intensity is the largest in the central area of China, followed by the eastern provinces, and not evident in the western area. The rise in carbon emission intensity brought on by vertical fiscal asymmetry can be successfully reduced by the central transfer payment. The impact of vertical fiscal asymmetry on carbon emission intensity will be greatly lessened when the central transfer payment surpasses the threshold. (3) The mechanism test shows that vertical fiscal asymmetry increases the carbon emissions intensity by three paths: reducing the intensity of environmental regulation, strengthening local governments’ dependence on land finance, and local government competition. The above analysis further enriches the relevant research on how China’s vertical fiscal asymmetry system affects carbon emission intensity through land finance and local government competition while pointing out the role of transfer payment, and it can help to provide new ideas and empirical evidence for further improving the financial system and promoting the green development of the economy.

Mitigating the conflict between economic and green development: Emission reduction mechanisms for vertical transfer payments

“…The results of this study are important for the central government to formulate transfer payment policies, and to reduce carbon emissions in order to achieve the goal of low‐carbon development. Our study shows that transfer payments have a positive role in promoting low‐carbon development and that an increase in vertical transfer payments reduces carbon emission, which is consistent with the findings of scholars such as Xia et al (2022), Liu and Zhang (2022) and Zhao et al (2023). However, Xia et al (2022), Liu and Zhang (2022), and Zhao et al (2023) all explore the relationship between transfer payments and carbon emission intensity from the macro perspective that fiscal imbalance (fiscal asymmetry) increases CO 2 emissions in the context of China's fiscal decentralization and that vertical transfers compensate for the fiscal imbalance of local governments.…”

“…Regarding carbon emissions, Zhao et al (2023) found that vertical fiscal asymmetry in local governments increases local carbon intensity whereas vertical transfers reduce the negative impact of fiscal asymmetry on carbon emissions. Jin et al (2023) studied the carbon emissions impact mechanism of the central government's transfer payments to local eco-functional zones and showed that the transfer payment policy for key eco-functional zones reduces carbon intensity by promoting industrial structure upgrading.…”

“…Our study shows that transfer payments have a positive role in promoting lowcarbon development and that an increase in vertical transfer payments reduces carbon emission, which is consistent with the findings of scholars such asXia et al (2022),Liu and Zhang (2022) and Zhao et al (2023). However, Xia et al (2022), Liu and Zhang (2022), andZhao et al (2023) all explore the relationship between transfer payments and carbon emission intensity from the macro perspective that fiscal imbalance (fiscal asymmetry) increases CO 2 emissions in the context of China's fiscal decentralization and that vertical transfers compensate for the fiscal imbalance of local governments. In this paper, we take the data of enterprises as the sample to explore the impact of vertical transfers on enterprises' CO 2 emissions.…”

Can Land Transfer Promote Agricultural Green Transformation? The Empirical Evidence from China

“…As a result, efficient agricultural mechanized operations and land management become achievable, subsequently promoting agricultural technology progress. Moreover, as land gradually shifts to large-scale agricultural operators, they are more likely to access agricultural loans and government support [47]. This, in turn, reduces financing constraints and loan difficulties for these operators, encouraging them to adopt new production technology and further promoting agricultural technology progress [48].…”