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Visible hand or invisible hand in climate governance? Evidence from China

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  • Wu, Shu
  • Hu, Fangfang
  • Zhang, Zhijian

Abstract

The top-down governance imperative in addressing climate change distinguishes climate policies from traditional environmental policies catering to bottom-up governance demand across most countries. This study aims to explore the effectiveness of China's climate policy mix, given its representation as a country with a top-down climate governance demand and influence on global climate governance outcomes due to its enormous economic aggregate and emission base. Utilizing a balanced panel dataset comprising 288 Chinese cities from 2001 to 2020, this study employs a two-way fixed effect model to examine the impact of the carbon emission trading scheme (ETS) and the carbon emission control policy (ECP) on carbon dioxide emissions, along with their heterogeneous effects and potential mechanisms. The findings indicate that both ETS and ECP have substantially reduced carbon dioxide emissions, although their synergistic effect has not yet manifested. Specifically, a 1 CNY increase in ETS prices or a 1 % growth in ECP targets leads to a decrease of 1.232 million tons or 0.814 million tons in carbon dioxide emissions, respectively. Moreover, the effects of the ECP are reinforced in resource-based cities or those receiving greater fiscal support, while diminishing with the rise in foreign direct investment. Conversely, the heterogeneous effect of the ETS is negligible. Further mechanism analysis reveals that technological innovation and energy structure transformation are the primary channels for reducing carbon dioxide emissions. These findings carry significant implications for climate policy formulation in China and other developing countries.

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  • Wu, Shu & Hu, Fangfang & Zhang, Zhijian, 2024. "Visible hand or invisible hand in climate governance? Evidence from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:rensus:v:204:y:2024:i:c:s1364032124005240
    DOI: 10.1016/j.rser.2024.114798
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