Unveiling the mechanisms: How does the new energy demonstration city pilot policy affect urban energy efficiency? Evidence from a quasi-natural experiment in China

The pilot program of new energy demonstration cities (NEDC) is a key strategic measure for China to promote sustainable and high-quality development. It is imperative to analyze this policy’s impact and leverage it to foster a green transition of the socio-economy to realize the dual carbon goals of carbon peak and carbon neutrality. Based on panel data from 253 prefecture-level cities in China spanning 2008–2022, the difference-in-differences (DID)model is employed and a series of robustness checks are conducted to demonstrate that the NEDCpilot policy has significantly improved energy efficiency (EE). Specifically, thepolicy results in a gain of 0.15 units in energy efficiency.Our analysis identifies three primary channels through which the policy enhances EE: green technological innovation, structural transformation and upgrading, and government governance. In particular, the NEDC policy exerts a marked positive impact on both government fiscal support and environmental regulation.Heterogeneity analysis reveals the strongest effects in the eastern and western regions, non-resource-based cities, and municipalities or sub-provincial cities.Consequently, effective implementation calls for strategies that are adapted to local conditions.Further analysis confirms the presence of positive spatial spillover effects from the NEDC pilot program.Therefore, the effectiveness of the New Energy Demonstration City policy varies across regions, city types, and administrative levels. It is thus more necessary to rely on the synergistic promotion of green technology innovation, industrial transformation, and government guidance, while making good use of inter-city spillover effects to ensure that the demonstration experience benefits a wider range of areas.