Every coin has two sides: Dual effects of energy transition on regional sustainable development—A quasi-natural experiment of the New Energy Demonstration City Pilot Policy

Energy transition policies are crucial in restructuring energy supply and demand, mitigating global warming, and fostering regional sustainable development. As a pivotal pilot initiative in China's energy transition, the New Energy Demonstration City Pilot (NEDC) policy has garnered substantial interest from industry and academic circles. This study employs panel data from 1749 counties in China spanning 2010–2021, treating NEDC policies as a quasi-natural experiment and utilizing the TWFE-DID model to analyze their impact on regional sustainable development. This study further investigates the policy's underlying mechanisms for promoting regional sustainable development and examines its negative effects from the perspectives of geographical location, and regional type. The study finds that: (1) The NEDC policy significantly enhances the sustainable development level of counties,with robust results from various tests; (2) The NEDC policy advances sustainable development in pilot areas by fostering technological innovation, enhancing energy efficiency, optimizing the energy structure and land use structure; (3) The NEDC policy has two primary negative effects: first, it may induce the “pollution haven effect”, which hinders the sustainable development of neighboring regions; second, it may disrupt the industrial transformation of Growing resource-based cities, further exacerbating urban-rural development inequalities. The results of this study suggest that when formulating and implementing energy transition policies, the government should carefully consider regional disparities and prioritize social equity to mitigate the potential negative social impacts associated with these policies.