The impact of fiscal decentralization on CO2 emissions in China

This paper evaluates the impact of fiscal decentralization on CO2 emissions in China. We build an equation to combine fiscal decentralization and CO2 emissions and decompose it using the logarithmic mean Divisia index (LMDI) decomposition technique. Then, we examine the nonlinear impact of fiscal decentralization on CO2 emissions using a dynamic panel regression model and Chinese interprovincial data from 1997 to 2015. The empirical results show that the direct impact of fiscal decentralization on CO2 emissions is nonlinear, and the higher the per capita fiscal expenditure, the more fiscal decentralization can reduce CO2 emissions. Moreover, the government’s emissions reduction policies effectively reduce CO2 emissions only when they are conducted at the provincial and city levels, and some differences among regions remain.