Does Industrial Agglomeration Promote Carbon Efficiency? A Spatial Econometric Analysis and Fractional-Order Grey Forecasting

In theory, the industrial agglomeration is a double-edged sword as there are both positive and negative externalities. China’s cities, with great disparities on degrees of the industrial agglomeration, often face different energy and carbon dioxide emission problems, which raise the question whether the industrial agglomeration promotes or inhibits energy efficiency and carbon dioxide emission. This paper explored the effects of the industrial agglomeration on carbon efficiency in China. Spatial econometric methods were implemented using panel data (2007–2016) of 285 cities above the prefecture level. The results revealed that industrial agglomerations have significant impacts on the urban carbon efficiency with significant spatial spillover effects. The agglomerations of the manufacturing and high-end productive service industries take positive effects on carbon efficiency while the low-end productive and living service industries take negative effects. As a comparison, we found that the agglomeration effects at the level of the megalopolis are greater than those at the national level, especially for the living services industry, in which the higher levels of agglomeration make the effects on carbon efficiency change from negative to positive. The divisions of labor for the central and common cities in the megalopolises are integrated into the industrial agglomeration. Furthermore, the fractional-order grey forecasting model is used in this paper. By the virtue of its advantage in dealing with small sample data which lack statistical rules, this paper makes an out-of-sample prediction of carbon efficiency and industrial agglomeration degree of Chinese cities. By adding the predicted results to the spatial correlation test, new evidence on the spatial correlation of carbon efficiency and spatial division of labor between cities is obtained. Based on the empirical results of the present study, we have proposed some policy recommendations.