When China’s environmental governance encounters marketization of economy: Good or bad?

Chinese economy has benefited from the transformation from the planned economic system to the market economic system. At the same time, serious environmental problems have emerged, especially the issue of greenhouse gas emissions. We explore the heterogeneity effect of marketization and sub-market perfection levels on China's provincial carbon emissions under different carbon emission distributions during 2008–2014. The results show that marketization has an inverted U-shaped impact on carbon emissions. However, not all marketization of sub-markets show such effects. Developing the factor market, market intermediary organizations and the legal system environment have an inverted U-shaped impact on China's provincial carbon emissions. This effect is also influenced by provincial carbon emissions distribution. Marketization has a greater impact on carbon emissions in the province with lower carbon emissions. This conclusion has also been confirmed in the development of the product market. It is worth noting that the development of non-state-owned economies only has an inverted U-shaped impact on high carbon emission provinces. The development of the factor market has a greater restraint on higher carbon emission provinces. The Chinese government should unswervingly promote marketization process to cross the threshold based on different carbon emission distributions. They also need to optimize factor market development, cultivate good market intermediary organizations, and create a sound legal system environment.