Impact of Climate Policy on Labor Earnings: Evidence From Low‐Carbon City Pilot Policy in China

ABSTRACT This paper use China's Low‐Carbon City Pilot program as a quasi‐natural experiment, combining city‐level data with the China Labor Dynamics Survey (CLDS) data to empirically examine the impact of climate policies on labor earnings in the aggregate labor market. Our findings reveal that climate policies have a significant positive impact on earnings in the overall labor market without adversely affecting employment. However, climate policy has substantial distributional effects, favoring skilled workers in green industries but disadvantaging low‐skilled labor. This distributional effect primarily stems from the industrial restructuring and technological upgrading in cities induced by climate policies through administrative regulations and economic incentives. Furthermore, our research indicates that the effects of climate policies on the labor market extend to the household level, raising certain social distributional concerns.