Low-carbon economy and innovative pilot program on trade in services: Quasi-experimental evidence from Chinese cities

Abstract

Trade in services is an important driver of the low-carbon economy, but related causal evidence is limited. To fill this gap, this paper uses China's innovative pilot program on trade in services (TSP) as a quasi-experiment and employs the staggered DID method to quantify the impact of this policy on carbon total factor productivity (CTFP). The empirical evidence shows that the TSP policy causes a 6.82 % increase in CTFP in pilot cities, primarily driven by technical innovation effects. However, it also results in a decline in environmental emission efficiency. Moreover, the policy exerts significant siphoning effects on nearby cities within a 150-km radius of the pilot cities, with the effects diminishing as physical distance increases. By considering the energy-saving targets from the 13th Five-Year Plan to identify the moderating role of environmental policy, high-intensity energy-saving targets are demonstrated to effectively mitigate the reduction of emission efficiency caused by the TSP policy. Our findings highlight the key role of service trade in promoting cities' low-carbon growth. Relevant authorities should continue to deepen the TSP policy and adopt diversified policy mixes to achieve a win-win outcome for both the economy and the environment.