Does Transfer Payments Promote Low‐Carbon Development of Resource‐Exhausted Cities in China?

Abstract Employing a time‐varying difference‐in‐differences model and a data set collected from 2,735 counties in China from 2003 to 2017, this study examines the causal relationship between Chinese government transfer payments to resource‐exhausted cities (TPREC) and carbon emissions for the first time. Our results show that TPREC could significantly reduce carbon emissions of resource‐exhausted cities in China. A variety of robustness tests supports our findings. Our further mechanism analysis shows that TPREC mainly affects carbon emissions through the following three channels: (a) promoting technological progress and industrial upgrades; (b) increasing vegetation carbon sequestration; (c) strengthening government environmental regulations. Finally, this paper analyzes the spatial heterogeneity of the carbon emission reduction effect of TPREC and finds that the most significant reduction effect of TPREC is in the western region and coal‐exhausted cities. This paper provides new empirical evidence for the role of transfer payments in promoting low‐carbon development using a unique set of data. Our findings provide new insights for decision‐makers to facilitate the low‐carbon development of resource‐exhausted cities.