Neighbor's profit or Neighbor's beggar? Evidence from China's low carbon cities pilot scheme on green development

Abstract

China has implemented three sets of low-carbon city pilot policies (LCCP), making it the world's most extensive low-carbon and green development program. Many studies have examined the impact of this policy on green development. However, studies rarely discuss spillover effects. This deficiency can lead to biased policy evaluations. This study employs a quasi-experimental approach to investigate the spillover effects of LCCP on the green total factor productivity (GTFP) of neighboring non-pilot cities and identify the underlying mechanisms. Using panel data from 283 cities in China spanning from 2004 to 2020, this study employs the time-varying difference-in-difference method. The empirical evidence suggests that LCCP can significantly enhance the GTFP growth of non-pilot cities located within 100 km, with an average annual increase of approximately 1.43%. Mechanism analysis indicates that increasing technological innovation and learning from the pacesetter play crucial intermediary roles in promoting GTFP improvements in neighboring cities. Furthermore, the spillover effects exhibit noticeable heterogeneity, particularly among cities in the eastern region, middle region, and large cities. These findings provide empirical evidence regarding the spillover effects of China's largest carbon pilot policies, contributing to a comprehensive assessment of policy impacts and offering fresh insights for climate policy tools.