Environmental policy synergies: unintended benefits for smart manufacturing in China’s low-carbon cities

Smart manufacturing provides a practical pathway for enhancing economic performance while reducing environmental impact. This study empirically examines the unintended co-benefits of China’s Low-Carbon City Pilot (LCCP) Policy in promoting smart manufacturing adoption among A-share-listed firms from 2007 to 2023. Employing a staggered difference-in-differences approach, we find that the LCCP significantly promotes firms’ adoption of smart manufacturing technologies, despite its original focus on carbon mitigation rather than digital transformation. The effect is more pronounced among firms located in cities with lower resource dependence and more advanced industrial structures, as well as among traditional manufacturing firms and firms facing tighter financial constraints. Mechanism analysis further shows that city-level human capital upgrading lowers firms’ costs of adopting smart manufacturing technologies, while improvements in firms’ resource allocation efficiency enhance their ability to adopt smart manufacturing technologies. These findings highlight how targeted environmental policies can unintentionally catalyze technological upgrading, offering theoretical insights into policy-induced co-benefits and practical guidance for integrating industrial upgrading with sustainability objectives.