Spillover Effect of Low-Carbon Transition: Evidence from Chinas Low-Carbon Pilot City Policy

Low-carbon transition is one of the enduring goals that China will continue to pursue in the future. This paper employs the Chinas low-carbon pilot city policy, implemented by the central government, as a quasi-natural experiment and utilizes panel data from 261 Chinese cities over the period 20032021. Applying a multi-period difference-in-differences (DID) approach, the study empirically examines the impact of the low-carbon city pilot policy on city innovation levels and explores the heterogeneity of the policy effects. The results indicate that the low-carbon city pilot policy significantly enhances innovation levels overall and the conclusion remains robust after a series of robustness tests. The heterogeneity analysis shows that the policy effects are not significantly influenced by the different pilot cohorts but exhibit regional differences, with Eastern region cities benefiting more from the policy than those in the Central and Western regions. Based on these findings, the paper recommends that the government should keep on promoting the low-carbon transition policy and adopt a differentiated policy strategy across different regions, to better improve innovation as well as decreasing the carbon emission.