Can the low-carbon city pilot policy promote the upgrading of high-carbon emitting enterprises? Evidence from China

As a crucial environmental reform system to realize “carbon peaking” and “carbon neutrality”, the pilot policy of low-carbon cities (LCCs) puts pressure and challenges on high-carbon emitting enterprises (HCEEs) while providing opportunities for these firms to take the path of independent transformation. Employing the data of Chinese listed enterprises from 2006 to 2016 and adopting a difference-in-differences (DID) model, we evaluated the impact of LCC construction on the upgrading of HCEEs and its mechanisms. The results indicate that LCC construction enhances the upgrading of HCEEs in the pilot cities. The conclusions remain stable after a series of robustness tests. The mechanism analysis reveals that LCC construction triggers the upgrading of HCEEs by promoting resource allocation efficiency, R&D investment, and green technology innovation. The heterogeneity results indicate that this positive effect is more pronounced for HCEEs in regions with more stringent environmental law enforcement. This study also observes that the upgrading impact is more prominent for state-owned enterprises, enterprises with higher bargaining power, and enterprises whose managers have a long-term vision. The above results provide directions for upgrading HCEEs and replicable evidence for cities in developing economies to fulfill the win–win target of environmental protection and economic transformation.