Going carbon-neutral in China: Does the low-carbon city pilot policy improve carbon emission efficiency?

To combat climate change and move towards carbon neutrality, China has implemented the low-carbon city pilot (LCCP) policy since 2010, with carrying out three batches of pilot cities so far. Despite the large-scale construction of low-carbon cities, we still know little about whether they could effectively improve carbon emission efficiency (CEE). Using a dataset of 285 cities in China spanning 2003–2018, we exploit variation across cities and over-time in implementing the LCCP policy to examine the impact of such policy on CEE. Our difference-in-differences (DID) estimates document that the LCCP policy resulted in a 2.04 % increase in CEE in pilot cities relative to non-pilot cities after the policy implementation. This policy effect is sustainable and strengthens over time. Our mechanism analysis further reveals that carbon emission reduction is the primary driver of the improvement in CEE, which is achieved through reducing scale effect, optimizing structure effect and promoting technique effect. Finally, the LCCP policy effect is more pronounced in eastern, western, non-mineral resource-based, and high innovation level cities. We find convincing evidence on the effectiveness of government-led LCC policy in a developing country.