(2023) Lessons Learned From China's Low-Carbon City Pilot Policy. Empir Econ

Empirical Economics
https://doi.org/10.1007/s00181-023-02491-x
“Bottom-up” abatement on climate from the “top-down”

design: lessons learned from China’s low-carbon city pilot
policy
Qingyang Wu1 · Zhen Sun2 · Linhan Jiang3 · Lei Jiang2
Received: 8 January 2023 / Accepted: 17 August 2023

© The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2023
Abstract
In Sharm El Sheikh, Egypt, representatives from 198 countries convened for the 27th
Conference of the Parties to the United Nations Framework Convention on Climate
Change (COP27) held between November 6 and 20, 2022. A consensus emerged
regarding the imperative of embracing a “bottom-up” approach to tackling climate
change. The phased introduction of dual-stage measures within the low-carbon city
pilot policy in China affords a reputable natural experiment and establishes a treatment
cohort for gauging carbon emissions within these zones. Empirical estimation of the
abatement impact of China’s low-carbon city pilot policy on carbon emissions is
undertaken herein, leveraging a comprehensive dataset composed of information on
carbon dioxide emissions and economic indicators spanning the years 2000–2017.
Key findings are: (1) The low-carbon city pilot policy effectively reduces carbon
emissions by 0.2808 Mt and decreases emission intensity by 11.59%. (2) China can
achieve 40.28% of its emissions reduction target outlined in the 14th Five-Year Plan
due to the efficacy of low-carbon cities. (3) The emissions reduction effect of the policy
significantly increases with the implementation of Emissions Trading Scheme pilots.
4) The primary-stage initiatives of the low-carbon city pilot policy drive its emissions
reduction effect, while the secondary-stage policy has limited impact due to rational
public expectations. This research presents a model for low-carbon city development,
proposing strategies that align with a “bottom-up” approach to tackle climate change.
These insights may encourage member parties to strengthen commitments and adopt
net-zero goals at COP meetings.
B Lei Jiang
jianglei@nankai.edu.cn
1 Institute of Economics, Tsinghua University, Beijing 100084, China

2 School of Economics, Nankai University, Tianjin 300071, China
3 Harris School of Public Policy, University of Chicago, Chicago, IL 60637, USA
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Keywords Low-carbon city pilot policy · Carbon emissions reduction · Coupling

effect · Rational expectation · County-level dataset
1 Introduction
From November 6th to 18th, 2022, delegates from 198 nations convened at the 27th
Conference of the Parties to the United Nations Framework Convention on Climate
Change (COP27) in Sharm El Sheikh, Egypt. COP27 was not merely anticipated as
a continuation of the 2021 COP26 held in Glasgow. While consensus was aimed at
achieving global climate objectives and sustainable development targets, the confer-
ence also saw more technical discussions centering on the necessity of a “bottom-up”
approach to addressing climate change. As a special regulation mode, China’s low-
carbon city pilot program, initiated in 2010, has provided a unique pathway for
emerging emitters to fulfill their Nationally Determined Contributions (NDCs). This
initiative not only aids these nations in meeting their commitments but also serves as an
inspiration for other member parties to elevate their efforts and make net-zero pledges
at COP27. The regulatory model of China’s program holds potential to catalyze further
climate action.
Climate change stands as one of the most formidable challenges confronting human-
ity in the twenty-first century (Hailemariam et al. 2020), exerting a profound influence
on various dimensions of society. Triumph over these challenges necessitates signif-
icant contributions from China, considering its status as the world’s largest emitter
of carbon dioxide, responsible for approximately 30% of global emissions over the
past decade according to the Emissions Database for Global Atmospheric Research
(EDGAR). In China, the onus of addressing global warming falls heavily on its cities
due to their pivotal role in carbon emissions. Characterized as densely populated human
settlements with extensive built infrastructure, urban areas contribute substantially,
encompassing around 85% of China’s GDP, attracting over 90% of its tertiary indus-
tries, and consuming over 75% of the nation’s total energy at present (Oberheitmann
2019). These urban regions are also accountable for the largest share of greenhouse
gas emissions within China, responsible for approximately 70% (Wei et al. 2020) or
even exceeding 80% (Dhakal 2009) of the country’s overall emissions.
In response to the challenges posed by climate change and in a bid to fulfill NDC,
China has rolled out a suite of environmental regulations and climate change policies
(Tang et al. 2020; Chen et al. 2022a, b). One prominent measure is the low-carbon city
pilot policy, which is directly aligned with the objectives of the NDC (Song et al. 2020).
Initiated by China’s National Development and Reform Commission (NDRC) in 2010,
this policy saw the launch of three distinct rounds of low-carbon city pilot programs
in 2010, 2012, and 2017. The inaugural 2010 pilot encompassed five provinces and
eight cities, the subsequent 2012 round incorporated 28 cities and Hainan Province,
and the most recent 2017 round brought in a total of 45 cities, districts, and counties.
In sum, the low-carbon city pilot policy has embraced 6 provinces, 80 cities, and
one region. Each pilot city’s government has tailored a transition plan, factoring in
its industrial structure, resource allocation, and climatic conditions. This includes
strategies like new energy subsidies, promoting green transportation, and fostering
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“Bottom-up” abatement on climate from the “top-down”…
industrial ecology. This study seeks to assess the grassroots impact of this top-down
low-carbon city pilot policy, aiming to unearth replicable urban low-carbon models
and effective strategies to counteract climate change at the city level. It’s important to
note, however, that the effectiveness of the low-carbon city pilot can vary regionally
(Oberheitmann 2019).
Research into the low-carbon city pilot policy and its consequent impacts has bur-
geoned in recent years. Developed countries, with their extensive coverage, offer a
rich backdrop for investigating the dynamics of these low-carbon initiatives (Wolff
2014). To illustrate, Ellison et al. (2013) probed into London’s low-emission zone
targeting vehicles and discerned a 2.46–3.07% decline in particulate matter concen-
trations within the zone—a steeper drop compared to the just over 1% decrease in areas
beyond the zone. Wolff (2014) delved into the repercussions of low-emission zones
on air pollution and vehicle spatial distribution, leveraging German data. His findings
suggest potential health benefits worth 2 billion dollars, set against a 1 billion-dollar
investment in cutting-edge vehicles. Gehrsitz (2017) explored the interplay between
low emission zones, air quality, and birth outcomes in Germany, establishing a 4–8%
reduction in regional fine particulate matter. Yet, the correlation to enhanced infant
health remains elusive.
Research from developed nations underscores the efficacy and robustness of the
low-carbon city pilot policy. However, juxtaposed with these nations, the enactment
of region-specific environmental regulations in developing countries grapples with sig-
nificant hurdles (Greenstone and Hanna 2014; Li et al. 2016). The influence of such
policies on carbon dioxide emissions remains, for the most part, theoretically tenu-
ous. Leveraging data from three iterations of China’s low-carbon city pilot programs,
scholars have pivoted their focus to the ramifications on total factor productivity (Chen
et al. 2022a, b), carbon emission efficiency (Yu and Zhang 2021; Wen et al. 2022),
green technological innovation (Ma et al. 2021), and ecological efficacy (Song et al.
2020). Some have even ventured to forge index systems for policy analysis (Li et al.
2018; Wang et al. 2021). Yet, these outcome metrics fall short of directly illuminating
the quintessential low-carbon triumphs of these pilot cities. The empirical landscape
remains nebulous on the precise contribution of these city pilot policies to China’s
carbon emission reduction, let alone their alignment with overarching climate change
objectives. In light of these gaps, a post-hoc assessment of the low-carbon city pilot
policy’s potency emerges as both timely and imperative.
At COP21, the Paris Agreement was ratified by 196 Parties, collectively com-
mitting to curtail global warming to below 2 °C, and ideally to a mere 1.5 °C above
pre-industrial levels. In subsequent COPs, notably COP26 and COP27, delegates have
sought innovative strategies to combat escalating greenhouse gas emissions. Despite its
significance, only a handful of studies have categorized China’s low-carbon city pilot
program as a ‘bottom-up’ approach to climate policy, and even fewer have critically
analyzed its contribution to climate action. Leveraging a comprehensive dataset span-
ning from 2000 to 2017, which encapsulates information on carbon dioxide emissions
and pertinent economic markers across China’s districts and counties, our study treats
the initiation of the low-carbon city pilot policy in 2010 and 2012 as a quasi-natural
experiment. Through the application of the staggered Difference-in-Differences (DID)
method, we evaluate the policy’s repercussions on carbon dioxide emissions and its
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intensity. Furthermore, our analysis extends the benchmark to probe the synergistic and
coupling effects of this policy, seeking to discern the presence of rational expectations
within climate policy endeavors.
Compared to previous literature, the primary contributions of this study are: first,
this research offers a quantitative assessment of the low-carbon city pilot policy, par-
ticularly its direct impact on carbon dioxide emission and intensity reduction. We
use a staggered DID model, which is more tailored than leveraging green technology
innovation (Ma et al. 2021; Chen and Wang 2022) or carbon emission efficiency (Yu
and Zhang 2021; Wen et al. 2022) as proxy indicators. This addresses a gap in the
low-carbon policy literature regarding carbon emission reduction. Second, instead of
the conventional macro research that focuses on city or province levels, we harness the
county-level carbon emission data provided by Shan et al. (2018, 2020). This satellite-
sourced data, which is standardized, long-standing, and consistent across regions,
presents a more accurate representation of China’s carbon dioxide emissions. More-
over, such granular data captures a higher degree of heterogeneity, mitigating potential
bidirectional causality. Third, while some studies have zeroed in on individual low-
carbon pilot cities or provinces like Xiamen (Lin et al. 2014), Beijing (Shen et al.
2018), and Guiyang (Peng and Deng 2021), they haven’t offered a comprehensive
understanding of the overall impact of the low-carbon city pilot policy. Contrarily,
our research evaluates the policy across the nation from 2000 to 2017, furnishing a
benchmark that is invaluable for subsequent inquiries. Additionally, we introduce a
novel concept termed the “coupling effect.” Empirical analysis is conducted to ascer-
tain if the amalgamation of diverse climate change instruments can enhance the innate
effects of a standalone policy. Lastly, our study unveils a unique perspective by prob-
ing the presence of rational expectations in the enactment of climate change policy.
Specifically, given the two iterations of the low-carbon city pilot policies, if individuals
draw insights from the first phase, achieving impactful emission reductions during the
second phase could be challenging. A detailed depiction of the low-carbon city pilot
policy’s effective mechanism is provided in Fig. 1.
The present findings indicate: (1) In cities implementing the low-carbon city pilot
policy, there’s an average reduction in carbon dioxide emissions by approximately
0.2808 Mt and a decline in emission intensity by about 11.59%, when compared to
non-pilot cities; (2) roughly 28.98% of the reduction in carbon emissions intensity and
15.13% of the carbon emission offset since 2000 can be attributed to the introduction of
the low-carbon city pilot policy; (3) with the effectiveness of low-carbon cities, China
is on track to achieve 40.28% of its emission reduction targets set for the 14th Five-Year
Plan period; (4) the carbon emission reduction impacts of independent environmental
regulation are notably amplified when combined with other measures. For instance,
the projected reduction in carbon emissions due to the low-carbon city pilot policy
could almost double under the supervision of emissions trading scheme (ETS) pilots;
(5) the most significant carbon emissions reduction effect of the low-carbon city pilot
policy is observed during its first round, suggesting that the climate change policy may
deviate from its original intent because of the influence of rational expectations.
The findings of this study suggest that distinct climate change policies, when syner-
gistically implemented, can act as a beneficially complementary or harmonious blend.
This integrated approach can significantly expedite the low-carbon transition, given
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Fig. 1 The influential mechanism of the low-carbon city pilot policy
its well-orchestrated coordination. Furthermore, policymakers should be cognizant

of “policy ineffectiveness” stemming from the prevalence of rational expectations. A
strategic method to navigate the public’s anticipations of the pilot policy would be to
deploy both retrospective and unanticipated measures.
The structure of this paper is delineated as follows: Sect. 2 delves into the literature
review and formulates hypotheses; Sect. 3 introduces the data collection process and
the identification framework; the empirical test results and a detailed analysis are
presented in Sect. 4; finally, Sect. 5 culminates with conclusions and proffers policy
recommendations.
2 Policy background and research hypotheses
2.1 The establishment of low-carbon cities in China
In recent times, global warming issues have gained heightened attention due to the
relentless rise in atmospheric carbon dioxide concentrations. This has prompted poli-
cymakers to explore solutions for mitigating climate change effects. Chinese cities are
witnessing climate change-induced adversities like escalating sea levels and unpre-
dictable torrential rains. Under the projected 70% urbanization rate in 2030, these
conditions could impact over a billion of China’s population, according to govern-
ment estimates.
To counteract the rising greenhouse gas emissions and meet the NDC of The Paris
Agreement, China’s NDRC launched an official directive on developing low-carbon
cities, initiating a series of pilot projects in 2010 (Chen et al. 2021). These pilot cities,
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while being the primary greenhouse gas emitters, are also on the frontline of climate
change risks. They bear the responsibility of defining carbon emission limits, design-
ing carbon quota allowances, and fostering local carbon trading supervision systems.
These pilot initiatives, with their diverse focuses, encompass areas like ecological
industries, green transportation, sustainable architecture, and promoting low carbon
consumption habits (Oberheitmann 2019).
The inaugural set of pilot programs was introduced in five provinces (Guangdong,
Liaoning, Hubei, Shaanxi, and Yunnan) and eight cities (Tianjin, Chongqing, Shen-
zhen, Xiamen, Hangzhou, Nanchang, Guiyang, and Baoding) in 2010. The second
phase commenced at the close of 2012, covering 28 cities in Hainan Province. Draw-
ing from the experiences of these two phases, the third round was initiated by China’s
NDRC at a more localized level in 2017, selecting 45 cities, districts, and counties.
The low-carbon city pilot policy has ushered in a series of unforeseen outcomes.
This includes advancements in carbon emission efficiency (Yu and Zhang 2021; Chen
et al. 2021), green technological innovations (Ma et al. 2021; Chen et al. 2022a,
b), air quality enhancement (Xu et al. 2023), and shifts in investment behaviors of
energy-intensive enterprises (Wen et al. 2023). Notwithstanding, due to data limita-
tions in certain cities, comprehensive evaluations of the low-carbon city pilot policies,
specifically regarding carbon emissions reduction, are limited. However, one pivotal
takeaway from the ongoing journey towards achieving climate change targets is the
robust vertical integration between the central and local governments. Explicitly, the
presence of the low-carbon city pilot policy spurs a top-down design approach that
catalyzes bottom-up innovations from diverse sectors including industries, companies,
and households (Peng and Bai 2018).
2.2 Research hypotheses
2.2.1 Carbon emissions reduction of low-carbon city pilot policy
The promotion tournament mechanism in China encompasses not just economic

growth but also the enforcement of environmental regulations. Governments in pilot
cities have developed digital platforms to monitor and disseminate data on carbon
emissions. Leveraging this data, local entities have crafted innovative evaluation frame-
works and explored effective mitigation strategies, keeping the overarching mitigation
objectives in mind. Policymakers have rolled out industrial policies that adjust the local
industrial landscape, bolstering the advanced manufacturing sector. Their goal is to
facilitate the transition to a circular economy through low-carbon technology. Concur-
rently, there’s an ongoing shift in the local energy mix, with a pronounced emphasis
on renewable energy sources.
Addressing climate change is not solely a directive from the top; it also spurs
grassroots efforts. Shifts in industrial structures and gains in energy efficiency are
often spurred by the dynamic recalibration of comparative advantages. With tightening
carbon emission standards, labor and capital are repositioned according to their relative
abundance or scarcity. This realignment fosters a clean industrial framework as policies
curb high-carbon industries and promote low-carbon alternatives (Millimet et al. 2009;
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Ryan 2012). Faced with economic challenges stemming from environmental norms,
high-polluting, energy-intensive firms often struggle to remain viable and may exit the
market (Cheng et al. 2019). Conversely, businesses in low-carbon and energy-efficient
sectors face fewer economic hurdles amidst changing external conditions. Thus, the
comparative advantages introduced by the low-carbon city pilot initiatives enable a
fluid market entry and exit of firms. This dynamism propels the transition from a
broad-based industrial model to a more concentrated one.
The classical Porter hypothesis posits that prudent environmental regulations can
not only mitigate the financial burdens imposed on firms by ecological preservation
but also stimulate them to engage in innovative activities, thereby enhancing their pro-
duction efficiency (Porter and Van der Linde 1995; Lee et al. 2011). The low-carbon
city pilot policy fosters a plethora of innovations such as green patents and increased
R&D inputs, which are instrumental in the transition to a low-carbon economy. The
integration of innovative low and zero-carbon technologies, including biomass heat-
ing, solar photovoltaics, and high-efficiency gas boilers, can notably diminish carbon
emissions and intensity, maintaining a steady GDP output.
Beyond the corporate lens, it’s imperative to examine the mechanics of low-carbon
behaviors at the household level (Zhang et al. 2018). From this perspective, the con-
sumption patterns of individuals are fundamentally influenced and molded by the
low-carbon city pilot policy. The rising living standards have positioned household
consumption facets—like food, electricity, housing, transportation, and apparel—as
pivotal contributors to greenhouse gas emissions (Elhaffar et al. 2020). Moreover,
this top-down policy carves a refreshed paradigm for a low-carbon lifestyle, inspiring
households to internalize green values and foster favorable stances towards altruistic
endeavors that benefit the environment (Dubois et al. 2019). The emergence of low-
carbon education in academic curricula also plays a role in imparting environmental
knowledge to younger generations, thereby cultivating a robust ecological responsibil-
ity that influences their purchasing decisions (Park et al. 1994). Descriptive normative
messages in environment-centric advertisements, a prevalent trend in China, serve as
catalysts motivating households towards energy conservation (Cheng et al. 2014). A
case in point is the promotion of green electric vehicles, which bolsters residents’ pur-
chasing awareness and behavior towards such eco-friendly transportation alternatives
(Li et al. 2018). In essence, the low-carbon city pilot policy proficiently reduces carbon
dioxide emissions and emission intensities, leveraging both top-down and bottom-up
strategies. This leads to the core hypothesis set to be scrutinized in this research:
H1 The implementation of a low-carbon city pilot policy can significantly reduce
carbon dioxide emissions and carbon emissions intensity.
2.2.2 Coupling effect of climate change policies
The low-carbon city pilot policy embodies elements of voluntary environmental reg-
ulations. These regulations can be perceived as outcomes stemming from iterative
interactions between administrators and individuals during emissions negotiations.
They underscore individual voluntariness in both mitigating climate change and adopt-
ing cleaner production (Ren et al. 2022). Beyond voluntary measures, the Chinese
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government has implemented a combination of mandatory and market-driven envi-

ronmental regulations to curtail greenhouse gas emissions. For instance, from 2013
to 2016, China’s NDRC initiated eight ETS pilot programs aimed at restricting and
diminishing carbon emissions, a strategy lauded as effective in carbon reduction (Dong
et al. 2022; Li and Wang 2022). Integral to the ETS is the obligation for public disclo-
sure of corporate emissions, leveraging digital platforms to oversee and collect data
pertinent to carbon emissions—an elemental component of the low-carbon city pilot
policy.
However, the evolution towards a more sustainable and cost-effective energy uti-
lization is impeded by cultural constraints and societal norms (Sovacool and Griffiths
2020). In contrast to ETS policies, the low-carbon pilot policy accentuates corpo-
rate adherence to environmental regulations. Informed consumers, leaning towards
eco-friendliness, are more inclined to shift their purchasing behavior away from ’unfa-
vorable’ producers, especially when privy to publicly disseminated data on a firm’s
environmental stewardship (Arora and Gangopadhyay 1995). Mandatory emission
disclosures, serving as public information, augment the regulatory framework. They
redefine the interplay among various regulatory modalities like standards, taxes, and
permits. Consequently, emission reductions, predicated on public data, assume a more
expansive and national character. While the mandatory emissions trading scheme of
China’s ETS pilots may not directly influence long-term energy-saving behaviors in
households or prompt firms to transition towards clean, net-zero emissions, the low-
carbon city pilot policy can bridge this gap, harmonizing voluntary compliance with
ETS mechanisms. This synergy suggests that the efficacy of the cap-and-trade system
can be amplified when integrated with the low-carbon city pilot policy. A similar ratio-
nale extends to mandatory environmental directives (Jiang et al. 2021). To encapsulate
the above discussion:
H2 Each separate environmental policy’s capabilities of totally mitigating the climate

change can be enhanced after coupling together.
2.2.3 Obstacles effect of rational expectations
A pivotal challenge confronting the efficacy of environmental regulations lies in the

difficulty of asserting that current individual reactions align with predicted outcomes,
derived from historical experiences or theoretical constructs, due to the notion of ratio-
nal expectations. The influence of rational expectations challenges the conventional
wisdom that governments can consistently achieve desired policy outcomes by seed-
ing public perspectives with outdated or misleading anticipations. This concept finds
its roots in the 1970s. Pioneering works by Lucas (1972), Lucas and Prescott (1981),
and Lucas and Sargent (1981) elucidated that these rational anticipations by the public
hamper government efforts to control forecast deviations in a reliable and practical
manner, given that errors emerging from rational expectations tend to be inherently
unpredictable.
Upon the conclusion of the inaugural round of low-carbon city pilot policies,
it’s foreseeable that a second round will be introduced, largely influenced by the
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achievements and insights garnered from the initial phase. While the maiden pilot
was restricted to eight cities and five provinces, official directives pertaining to these
low-carbon city initiatives distinctly outline ambitious goals for greenhouse gas emis-
sions, aiming for the year 2020. The governmental strategy is to amplify support, refine
policy tools, and bolster regulatory enforcement to galvanize more cities towards the
low-carbon paradigm. Taking cues from the experiences of the first cohort of pilot
cities, there will be a concerted effort to refine both the overarching policy framework
and its detailed execution mechanisms. This persistent policy thrust is projected to
fortify the success rate of low-carbon urbanization, steering it towards the dual ide-
als of sustainability and environmental conservation. Consequently, buoyed by the
accomplishments of the first phase, the rollout of the subsequent low-carbon city pilot
policies is anticipated to be even more comprehensive and strategic.
Additionally, the primary phase underscored the pivotal role of local administrations
in championing and disseminating principles of a green, low-carbon ethos. The ripple
effects of these advocacy drives could potentially heighten the propensity of cities in
the upcoming pilot stage to proactively curtail their emissions. However, this endeavor
has its intricacies. If public reactions are informed by rational expectations stemming
from the previous policy iteration, the second round—designed to spur businesses and
households towards greener operational and consumption habits—might introduce
added complexity. This could hamper the optimization of carbon emission curtailment
and its intensity reduction. For instance, businesses, drawing parallels with prior policy
frameworks, might devise strategies to evade potential economic setbacks imminent
with the new regulation. Such tactics might encompass pre-emptive relocation to
jurisdictions beyond the purview of the low-carbon initiative (Lin and Sun 2016; Hao
and Deng 2018), or the submission of skewed carbon emissions reports. Significantly,
during the low-carbon city pilot implementations, an informed citizenry, especially
those who align their behaviors with past policy data, might recalibrate their actions,
rendering the policies ineffective due to their rational forecasts. In essence, with the
populace’s expectations molded by the first phase, the outcomes of the succeeding
low-carbon city pilot policy might not only wane but also potentially veer off the
intended climate change mitigation trajectory. This leads us to the fourth hypothesis
set for examination:
H3 The interference of rational expectations of the public prevents the low-carbon
city pilot policy from taking effect both systematically and comprehensively in both
the two rounds.
3 Identification framework
3.1 Data specification
This study employs a panel dataset encompassing carbon dioxide emissions and asso-
ciated economic metrics for China’s districts and counties spanning the period from
2000 to 2017. First and foremost, a significant portion of existing literature relies
on carbon dioxide emission data predominantly at the national and provincial tiers,
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largely due to constraints in data acquisition. These broader datasets may inadequately
illuminate nuanced causality or capture micro-level variances. Addressing this, our
study harnesses county-level carbon emission data, as detailed by Chen et al. (2020),
Shan et al. (2018, 2020). These emissions estimates are derived via the back par-
ticle swarm optimization algorithm—a stochastic optimization technique influenced
by avian flock movements (Settles 2005). Chen et al. (2020) further refined this data
through inter-calibrating nighttime light readings between DMSP/OLS (1992–2013)
and NPP/VIIRS (2012–2020).
Second, within the DID framework, low-carbon pilot cities are delineated as the
treatment cohort. Pertinent information regarding these cities was meticulously col-
lated from the NDRC website. Though three pilot city initiatives have been introduced
to date, this study restricts its focus to the first two—primarily due to data availability
constraints. These were launched in 2010 and 2012, respectively. The inaugural round,
initiated by the NDRC in 2010, engaged five provinces and eight cities across China.
Subsequently, the 2012 iteration encompassed Hainan Province alongside 28 other
Chinese cities (Yu and Zhang 2021). A more granular exposition on this is available
in Sect. 3.2.1.
Third, to mitigate any potential interference from extraneous factors, we’ve con-
trolled several economic indicators in our model. The genesis of these data is traced to
several sources: The China County Statistical Yearbook, The China Statistical Year-
book, and The China Finance Yearbook, all spanning the years 2000 to 2017.
3.2 Variable settings
3.2.1 The low-carbon city pilot
Cities are crucial players in both carbon emission production and climate change
mitigation within China. Currently, while occupying less than 1% of China’s total
land area, urban zones generate 85% of the country’s GDP. Furthermore, these cities
house 90% of China’s tertiary industry, yet they consume only 75% of the nation’s
total energy (Oberheitmann 2019).
Recognizing the importance of cities in combating climate change and to align with
NDC objectives, China rolled out its low-carbon city pilot policy in 2010. As it stands,
every province boasts at least one pilot city, each with its unique focus areas, ranging
from low-carbon management and green infrastructure to sustainable transportation.
However, classifying the nature of the low-carbon city pilot policy’s environmental
regulations proves challenging. This is because the policy intricately melds two distinct
paradigms of environmental governance: market-oriented and command-and-control
approaches.
For cities or provinces designated as low-carbon pilot regions, there is an expec-
tation that their subordinate districts or counties will adopt low-carbon management
practices and transition to cleaner solutions. In our proposed econometric model, we
introduce an indicator variable, Pilot_cities. This variable is assigned a value of one if
a particular county falls under the jurisdiction of cities or provinces that have imple-
mented the low-carbon city pilot policy in a given year; it is set to zero otherwise. As
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previously discussed, our study considers two rounds of pilot cities that were initi-
ated in 2010 and 2012. Yet, for cities selected in both the first and second rounds of
the low-carbon city pilot program—such as those in Wuhan, Guangzhou, Kunming,
and Yan’an—the intervention time node is set at the earlier date of policy enforce-
ment. However, there remains debate regarding the precise commencement date of the
second round of pilot cities that had a tangible impact. To elucidate, the official docu-
mentation for the second round was released on November 26, 2012, but an amended
version was presented on December 31, 2012, rendering these timelines potentially
outdated. To account for this uncertainty and the policy’s latency, we designate 2013
as the year marking the second round of pilot cities’ actual implementation. Figure 2
visually depicts the carbon emission trends of non-experimental towns juxtaposed
against the two-round experimental cities. Here, two distinct vertical red lines indi-
cate the intervention periods in 2010 and 2013. Prior to 2010, a close inspection reveals
that the average carbon emissions across all city categories followed a nearly identical
trajectory. A significant shift, however, manifested in 2010, and after 2013, the gap
in average carbon emissions between pilot and non-pilot cities narrowed. Although a
more comprehensive analysis will be presented in the empirical section, these evolving
emission trends across the different city categories offer insightful economic inter-
pretations. Figure 3 provides a visual representation of the spatial distribution and
evolution of the two rounds of low-carbon city pilots. Notably, these pilot initiatives
appear randomized, widespread, and evenly dispersed across various regions. Such a
distribution is critical, enhancing the robustness of causal inferences in our ensuing
analyses.
Fig. 2 Changes in carbon emissions between treatment and control groups. Note The curves illustrate the
time trends of carbon emissions of non-experimental cities as well as those of experimental two-round
counties. Two vertical lines in 2010 and 2013 indicate the start years of two rounds of low-carbon city
policies, respectively
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Fig. 3 The spatial distribution of the two rounds low-carbon pilot cities. Note The first-round pilot cities are
represented by cities in the green area, the second-round pilot cities are represented by cities in the yellow
area, and the pilot cities in both rounds are represented by cities in the red area
3.2.2 Other variables
Recognizing the potential influence of underlying factors not central to our primary
focus, we’ve incorporated a suite of control variables. These were chosen to ensure
that the observed results are primarily attributed to our experimental interventions. The
selection criteria for these control variables are anchored in the principles of the IPAT
model (Ehrlich and Ehrlich 1990) and the STIRPAT model (Dietz and Rosa 1997;
York et al. 2003), paralleling the methodology of Yu and Zhang (2021). Specifically,
our control variables include: (1) Local affluence is gauged through GDP per capita
(Pgdp). (2) Demographic dimensions are captured via regional population density
(Popdens). (3) The structures of industry and energy are denoted by the proportion of
the added value from both secondary (Ind) and tertiary (Ter) industries, following the
metrics set by Jiang et al. (2019). (4) Recognizing that technological advancements
necessitate appropriate funding, we use the ratio of financial institutions’ loans and
savings to GDP (Fin) as a proxy indicator, as suggested by Zhang (2011) and Wu et al.
(2023a). (5) Given the active role China’s government plays in national economic
activities, we incorporate the ratio of general budget government expenditure to GDP
(Gov). This is to account for the potential effects of fiscal decentralization on carbon
emissions, as highlighted by Shan et al. (2021) and Wu et al. (2023c).
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3.3 Identification framework
We are particularly intrigued by the effectiveness of the low-carbon city pilot policy in
achieving carbon emission reductions. To explore this, we’ve employed the staggered
DID model, building our analysis on foundational works by Hausman and Kuersteiner
(2008), Cengiz et al. (2019), Callaway and Sant’Anna (2021), and Goodman-Bacon
(2021). The model is outlined as follows:
yit β0 + β1 Pilot_citiesit + ϑ X + μ + δit (1)
with i indexing the basic administrative unit–county/district, the specific year is sym-
bolized by t. The outcome variables, yit , include the local carbon dioxide emissions
and the carbon emissions intensity of county/district i in year t. As our regressor
of interest, Pilot_ citiesit identifies whether the county/district has been listed as the
low-carbon city pilots, valuing one if it is regulated and zero otherwise. And its coeffi-
cient β1 exactly captures the impact of low-carbon city pilot policy on carbon dioxide
emissions and carbon emission intensity. If β1 is estimated as negative, this indicates
the implementation of a low-carbon city pilot policy can significantly reduce carbon
dioxide emissions or carbon emission intensity. X is a set of control variables includ-
ing Pgdp, Pgdp2 , Popdens, Ind, Ter, Fin, and Gov, as seen in Table 1. The vector μ
includes a series of semi-parametric dummies, representing the fixed effects across
different counties and years. δit is the residual of this model.
4 Results and discussion
4.1 Baseline results
We estimated and evaluated the impact of low-carbon city pilot policies on climate
change mitigation using the DID framework, as illustrated in Eq. (1). Our baseline
results are tabulated in Table 2. The even columns showcase the multivariate linear
regression results after incorporating the control variables, whereas the odd columns
omit them. There is compelling evidence of a significantly negative effect on carbon
dioxide emissions and their intensity. Furthermore, the negative coefficients signify
a pronounced reduction following the implementation of the low-carbon city pilot
policy. Notably, the direction and statistical significance of our key coefficients remain
consistent regardless of the inclusion of control variables. A closer look at the findings
in Columns (2) and (4) reveals that, in comparison with non-pilot cities, the enactment
of low-carbon city pilot policies results in an average decrease in carbon dioxide
emissions by approximately 0.2808 Mt and a reduction in intensity by around 11.59%
for the covered cities. These findings substantiate the validity of our initial hypothesis.
Since 2000, China’s carbon emissions per GDP have reportedly decreased by 40%,
even as their absolute carbon emissions surged by approximately 1.9 times. Based on
our estimations, roughly 28.98% (11.59%/40%) of this reduction in carbon emissions
intensity, and about 15.13% (0.281/1.857) of the absolute carbon emission offset over
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Table 1 Descriptive statistics of variables
Label Variable Obs Mean Std. Dev. Median Min Max
Explained Variables CO2 Carbon dioxide emissions (Mt) 12,276 1.857 2.054 1.239 0.000 24.005
CO2 /GDP Carbon emissions intensity (Mt/RMB) 12,276 0.383 0.399 0.285 0.000 7.976
Explanatory Variables Pilot_cities Whether the counties have been listed as the 12,276 0.091 0.288 0.000 0.000 1.000
low-carbon city pilots
Control Variables Pgdp Gross domestic product per capita (RMB per capita) 12,276 1.943 2.157 1.250 0.068 26.915
Pgdp2 Squared Pgdp 12,276 8.431 27.275 1.563 0.005 724.406
Popdens Population per unit area (capita per square 12,276 0.025 0.028 0.016 0.000 0.366
kilometre)
Ind The proportion of the added value of the secondary 12,276 0.383 0.161 0.371 0.020 0.892
industry in GDP (%)
Ter The proportion of the added value of the tertiary 12,276 0.349 0.103 0.340 0.067 0.851
industry in GDP (%)
Fin The ratio of loans of financial institutions to GDP 12,276 0.576 0.390 0.486 0.000 7.600
(%)
Gov The ratio of general budget expenditure to GDP (%) 12,276 0.265 0.273 0.177 0.015 3.064
Q. Wu et al.
Table 2 Impacts of low-carbon city policies on carbon emissions
Outcome CO2 ln CO2 /GDP
(1) (2) (3) (4)
Pilot_cities − 0.3614*** − 0.2808*** − 0.1316*** − 0.1159***

(0.0349) (0.0312) (0.0200) (0.0191)
Pgdp 0.4885*** − 0.0728***
(0.0154) (0.0094)
Pgdp2 − 0.0106*** 0.0035***
(0.0008) (0.0005)
Popdens 5.8882*** − 0.6965
(1.1721) (0.7170)
Ind − 1.4353*** − 0.5702***
(0.1359) (0.0831)
Ter 0.0830 − 0.4715***
(0.1739) (0.1064)
Fin 0.2287*** 0.1310***
(0.0274) (0.0167)
Gov − 0.5483*** 0.9335***
(0.0582) (0.0356)
_cons 1.8854*** 1.4049*** − 12.7780*** − 12.5906***
(0.0077) (0.1131) (0.0044) (0.0692)
Year FE Yes Yes Yes Yes
County FE Yes Yes Yes Yes
N 12,261 12,261 12,261 12,261
R2 0.866 0.895 0.787 0.809
*, **, and *** indicate significance at 10, 5, and 1% statistical levels, individually. FE is abbreviated for
“Fixed Effects”. Robust standard errors are in parentheses for all regressions
the past two decades, can be partially ascribed to the introduction of the low-carbon
city pilot policy.
In our benchmark model, the coefficient β1 encapsulates the cumulative treatment
effect of the low-carbon city pilot policy over eight consecutive years starting from
2010. This suggests that the policy has facilitated an annual reduction of around
0.0351 Mt (0.2808/8) in carbon emissions and decreased carbon emissions intensity
by about 1.45% (11.59%/8) within the treated cities. Beyond these historical effects,
it’s pertinent to assess the prospective contributions of the low-carbon city pilot policy
toward China’s emission reduction targets. With China’s ambitious pledge to reduce its
carbon emissions intensity by 18% as outlined in the 14th Five-Year Plan (2021–2025),
the projected impact of the low-carbon cities suggests that they could account for
approximately 40.28% ((1.45% × 5)/18%) of the targeted emissions reductions.
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Q. Wu et al.
After incorporating various control variables and two-way fixed effects, our results
remain robust and consistent, underscoring the tangible impact of the low-carbon
city pilot policy on local carbon reduction. Furthermore, the regression coefficients
of the control variables in Table 2 provide additional insights. A significant relation-
ship emerges between carbon emissions and both linear Pgdp and quadratic terms
of Pgdpˆ2. This suggests an environmental Kuznets curve (EKC) trend within our
sample timeframe. The coefficients for Ind and Ter highlight the potential benefits of
industrial structural transformation toward achieving net-zero targets. However, the
Fin results indicate that while financial development in China is a significant driver
for carbon emissions, it appears to exert limited influence on the transition to cleaner
production, corroborating Zhang’s (2011) findings.
4.2 Testing the parallel trend assumption
The staggered DID model operates on the premise that there are parallel trends
between the treatment and control groups preceding the introduction of an exoge-
nous shock. Essentially, prior to the intervention, the outcome trends for both groups
should align. In line with methodologies proposed by Callaway and Sant’Anna (2021)
and Goodman-Bacon (2021), we incorporate lead and lag terms and subsequently for-
mulate a series of policy dummies, as represented in Eq. (2). Our analysis captures an
11-year period, covering five years before and after the enactment of the low-carbon
city pilot policy. As a point of reference, we utilize the year directly before the policy’s
initiation. Given the second pilot phase in 2013, our dataset spans from 2000 to 2017.
An important caveat is our ability to only observe the effects of the second round of
pilot policies over four post-implementation periods. Comprehensive data on Chinese
districts and counties has been consistently available since 2000, thus providing us
with an extensive sampling duration. Nevertheless, our primary focus is to discern the
parallel trends that existed before the policy’s implementation. As such, we symmetri-
cally analyze five periods before and after the policy’s introduction, gleaning insights
from the estimated coefficients of the subsequent regression.

+5
j
yit β0 + β j Pilot_citiesit + ϑ X + μ + δit (2)
j−5, j−1
j +j
where the dummy variable Pilot_ citiesit equal zero, except as follows: Pilot_ citiesit
−j
equals one for counties in the jth year after piloted, while Pilot_ citiesit equals one
for counties in the jth year before piloted. Figures 4 and 5 show the evolution of
the estimated coefficients and the corresponding 95% confidence intervals based on
Eq. (2). Before the exogenous shock, the series of estimated coefficients exhibited
negligible systematic divergence from zero. This confirms the parallel trajectory of
the treatment and control groups. However, post-shock, a pronounced discrepancy
arises when juxtaposing the pilot cities to their non-pilot counterparts. The differential
in carbon emissions between these two groups amplifies over time. This signals that
the policy not only curbed carbon emissions in the pilot cities from their anticipated
trajectory but also that the impact of this policy has profound, enduring implications. Of
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Fig. 4 Dynamic effects of low-carbon city pilot policies on carbon dioxide emissions. Note The estimated
coefficients β are represented by the dots, and the 95% confidence interval of them is indicated by the vertical
solid lines. The years relative to the start of policies are represented on the abscissa axis. The benchmark is
denoted by the vertical red dotted line, which serves as one year prior to the policy shock
Fig. 5 Dynamic effects of low-carbon city pilot policy on carbon emissions intensity. Note The dots represent
the estimated coefficients β, with the vertical solid lines marking the 95% confidence interval of them. The
axis of abscissa represents the years relative to the start of policies. One year prior to policy shock is served
as the benchmark, indicated by the vertical red dotted line
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Q. Wu et al.
particular note is the observation that carbon emissions experienced a more substantial
decline immediately following the policy’s enactment. Conversely, the drop in carbon
intensity became more marked after approximately three periods. This suggests that,
in the short term, districts and counties responded to the policy by curbing carbon
emissions, potentially compromising output. However, in the longer term, the policy
appeared to catalyze a surge in green efficiency, resulting in a reduction in carbon
intensity.
4.3 Region-based placebo test
While our study provides in-depth insights, it acknowledges the potential influence of
latent factors. These unobservable factors could significantly confound our outcomes,
leading to considerable estimation bias. To ensure that these latent confounders do
not distort our results, we have designed a series of region-based placebo tests to
identify if these unobservable perturbing factors existed within our initial identification
framework. Based on the baseline regression, we generate the pseudo estimators with
the following expression of β̂1 , shown in Eq. (3).

cov Pilot _cities , δ / X , μ
β̂1 β1 + ξ var Pilot _citiesit /itX , μ (3)
it
where ξ is the partial impact of unobserved factors on the explained

variables. If
ξ 0, β̂1 is the consistent and unbiased estimator, that is, E β̂1 β1 . So we
pseudo
randomly generate a list of low-carbon cities, thus obtaining a false estimator β̂1
pseudo
correspondingly. And the process is repeated 500 times, thus causing 500 β̂1
pseudo
accordingly. Figures 6 and 7 depict the distribution of these false estimators β̂1
and their corresponding p-values on outcomes in the randomization test. And the
distributions of p-values in both figures are 0-symmetric, and the real β̂1 s are evidently
far from the false estimators, as expected from the theory of placebo test. So the results
of placebo tests strongly support that our accurate estimator is unlikely to be driven by
overlooked factors, and thus the core conclusion of this paper is considerably robust.
4.4 PSM-DID estimation
One potential pitfall in the DID framework is the risk of selectivity bias. Specifically,
the non-randomized selection of low-carbon pilot cities could produce biased con-
clusions. For example, there’s a prevailing tendency to institute low-carbon industrial
pilots in regions with high energy consumption. Such patterns could influence the
central government’s decision to set up pilots in these areas.
To address this, we employ the propensity score matching (PSM) approach, a well-
regarded statistical technique that calculates the net effect after adjusting for covariates
that predict the likelihood of being treated (Rosenbaum et al. 1983; Heckman et al.
1998). Crucially, the covariates used here align with the control variables we estab-
lished in our benchmark. We then employ three matching methods—nearest-neighbour
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Fig. 6 Distribution of estimators and p-values on carbon dioxide emissions in the randomization test. Note
The horizontal axis represents the estimated coefficients of explanatory variables, and the vertical axis
represents the corresponding probability values (p-values). The 500 region-based simulations have been
assigned randomly, which is consistent with the 500 yellow circles. The real value of the benchmark is
0.2808, which is obviously far from the false estimators
Fig. 7 Distribution of estimators and p-values on carbon emissions intensity in the randomization test. Note
The horizontal axis represents the estimated coefficients of explanatory variables, and the vertical axis
represents the corresponding probability values (p-values). The 500 region-based simulations have been
assigned randomly, which is consistent with the 500 yellow circles. The real value of the benchmark is
0.1159, which is obviously far from the false estimators
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Q. Wu et al.
Table 3 Impact of low-carbon city policies on carbon emissions with PSM-DID
(1) (2) (3) (4) (5) (6)

Label Neighbour Kernel Radius Neighbour Kernel Radius
Matching Matching Matching Matching Matching Matching
Pilot_cities − − − − − − 0.1156***
0.3443*** 0.2806*** 0.2807*** 0.1014*** 0.1160***
(0.0339) (0.0313) (0.0313) (0.0277) (0.0191) (0.0190)
_cons 1.2763*** 1.4059*** 1.4088*** − − −
12.4791*** 12.5816*** 12.5856***
(0.1051) (0.1133) (0.1135) (0.0858) (0.0691) (0.0691)
Control Yes Yes Yes Yes Yes Yes
variables
Year FE Yes Yes Yes Yes Yes Yes
County FE Yes Yes Yes Yes Yes Yes
N 8687 12,240 12,224 8687 12,240 12,224
R2 0.911 0.887 0.887 0.811 0.797 0.810
“Fixed Effects”. Robust standard errors are in parentheses for all regressions. Three matching methods,
nearest neighbor matching (1:1), quartic kernel matching (bandwidth 0.06), and radius matching (caliper
0.05) are considered here
matching, kernel matching, and radius matching—to match each participant with their
counterfactual counterparts based on their propensity scores.
Table 3 showcases the results derived from PSM-DID. Notably, all the core coef-
ficients across columns (1)–(6) are negative. The estimators in the benchmark for
‘Pilot_cities’ range from − 0.3443 to − 0.2806 for CO2 and from − 0.1160 to −
0.1014 for ln CO2 /GDP. These results closely mirror our baseline regressions, specif-
ically, − 0.2808 for CO2 and − 0.1159 for ln CO2 /GDP. Furthermore, the p-values for
most PSM-DID results attain the 1% significance level, underscoring the robustness
of our conclusions.
4.5 Heterogeneity analysis
To delve deeper into the reactions of local carbon emissions within various subgroups
to the shock of the low-carbon city pilot policy, a heterogeneity analysis is undertaken.
Panel C depicts the distribution of sample units across different waves of pilot cities
in this heterogeneity analysis. Based on this delineation, the proportions of pilot cities
across diverse waves appear to be relatively uniform, with no significant disparities in
unit counts among the subgroups.
Primarily, the entire sample is bifurcated based on the geographical positioning
of the counties: specifically, the eastern segment versus the central and western seg-
ments. This categorization aligns with precedents set by prior research. Secondly,
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energy consumption serves as a metric indicating both the reluctance towards local
emission reduction and challenges in transitioning from industrial entrenchment. Thus,
the median energy consumption per capita is employed as the demarcation, splitting
the dataset into high and low energy consumption cohorts. Lastly, assessing the invig-
orating impact of governmental administrative management prowess proves not only
significant but also illuminating. Consequently, the sample is partitioned based on the
count of grassroots units within each county.
Table 4 presents the estimated results. Columns (1) and (2) elucidate regression
results based on regional characteristics. The coefficients and significance levels of
the middle & western groups are markedly greater than their eastern counterparts.
This suggests that counties, traditionally characterized by heavy-industrial dominance,
might experience a more pronounced abatement effect in carbon emissions from the
low-carbon city pilot policies, especially when the GDP output value is held constant.
In the subsequent analysis, Column (4) achieves a significance level of 1%, standing
in contrast to the estimator in Column (3). This difference can be interpreted similarly
to the earlier distinction. A majority of regions with comparatively low per capita
energy consumption are currently undergoing rapid economic expansion, grappling
with escalating greenhouse gas emissions. The initiation of low-carbon city pilot poli-
cies appears effective in curbing the surge of carbon emissions, steering the industrial
structure towards a cleaner, low-carbon energy framework.
Lastly, an intriguing observation emerges from Columns (5) and (6). Counties or
districts boasting superior governmental administrative capabilities manifest a more
pronounced reduction effect from the low-carbon city pilot policy. Specifically, the
regression outcomes for the high governmental administrative capability group attain a
significance level of p 0.01. In contrast, the estimators of the lesser capability group
do not meet the significance threshold. This strongly underpins the theory that environ-
mental enhancement ought to synchronize with a comprehensive suite of obligatory
regulations and initiatives.
4.6 Coupling effect
It stands to reason that the collective impact of various climate change policies would
amplify the overall effect of carbon emissions reduction. However, empirical report-
ing on such synergies remains sparse. At a structural level, environmental strategies
can be bifurcated into two primary paradigms: mandatory and market-based envi-
ronmental regulations. Mandatory strategies, as the name suggests, are typified by
coercion and predominantly leverage administrative actions such as defining emis-
sion standards and curtailing or terminating operations of egregiously polluting plants
(Xie et al. 2017; Zhou et al. 2022). Conversely, market-based environmental strate-
gies encompass mechanisms like cap-and-trade (pollution rights trading) and pollution
levies, commonly known as carbon taxes (Chameides and Oppenheimer 2007; Goulder
2013). Ideally, this policy dichotomy would be augmented with voluntary environmen-
tal regulations, enhancing the efficacy in accomplishing climate change objectives.
The low-carbon city pilot policy offers an implicit nod to voluntary environmental
regulations. Such regulations arise as a culmination of iterative negotiations between
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Q. Wu et al.
Table 4 Heterogeneity analysis across different regions
Outcome CO2
(1) (2) (3) (4) (5) (6)

Label Eastern Middle & High ENE Low ENE High BI Low BI
western
Panel A
Pilot_cities − 0.0588 − − 0.0037 − 0.3958*** − 0.3918*** − 0.0697
0.3285***
(0.0649) (0.0367) (0.0405) (0.0492) (0.0479) (0.0426)
_cons − 0.2779 1.3656*** 0.6801*** 2.1682*** 1.5653*** − 0.8426***
(0.4008) (0.1170) (0.0762) (0.2451) (0.1575) (0.1765)
variables
Time FE Yes Yes Yes Yes Yes Yes
N 2142 10,119 6565 5650 4763 5146
R2 0.934 0.884 0.945 0.953 0.891 0.944
Outcome ln CO2 /GDP
(1) (2) (3) (4) (5) (6)

Label Eastern Middle & High ENE Low ENE High BI Low BI
western
Panel B
Pilot_cities − − 0.0068 − − − 0.0510
0.0827*** 0.1358*** 0.1219*** 0.1541***
(0.0112) (0.0244) (0.0529) (0.0313) (0.0325) (0.0419)
_cons − − − − − −
12.2624*** 12.6064*** 12.2956*** 12.4711*** 12.9442*** 11.6977***
(0.0694) (0.0777) (0.0995) (0.1557) (0.1069) (0.1732)
variables
Time FE Yes Yes Yes Yes Yes Yes
N 2142 10,119 6565 5650 4763 5146
R2 0.972 0.791 0.771 0.886 0.848 0.710
Label Eastern Middle & western High ENE Low ENE High BI Low BI
(%) (%) (%) (%) (%) (%)
Panel C
R1 36.21 20.31 21.32 23.50 24.78 20.20
R2| Non 9.77 2.77 4.59 4.45 4.17 5.20
R1
Non R 54.02 76.92 74.09 72.04 71.05 74.60
*, **, and *** indicate significance at 10, 5, and 1% statistical levels, individually. FE is abbreviated for “Fixed
Effects”. Robust standard errors are in parentheses for all regressions. “ENE” and “BI” describe the levels of
regional energy consumption per person and bureaucratic intervention individually. “R1” represents the counties or
districts included in the first-round low-carbon city pilot policy and the counties or districts shared by first-round
and second-round low-carbon city pilot policies. “R2 | Non R1” represents only the counties or districts included
in the second-round low-carbon city pilot policy, while the ones in the first round are excluded. “Non R” represents
the counties or districts excluded in the first-round or second-round low-carbon city pilot policy.
123
administrators and individual entities, spotlighting the intrinsic willingness of these

individuals to invest in climate change mitigation and cleaner production practices
(Ren et al. 2022). The potential synergy between varying climate change policies,
such as the ETS—a market-driven environmental strategy—has yet to be extensively
dissected. Notably, the low-carbon city pilot policy inherently features elements of
voluntary participation. While certain studies attest to the ETS’s efficacy in curbing
carbon emissions (Dong et al. 2022; Li and Wang 2022), the putative synergistic
effect—whereby these policies bolster each other’s climate change mitigation capa-
bilities—remains an enigma. This research endeavors to shed light on the influence
of ETS in this regard. Historically, China’s NDRC initiated a spate of ETS pilots,
spanning five provinces and three cities from 2013 to 2016. These included Shanghai,
Tianjin, Shenzhen, Beijing, and Guangdong in 2013, with Hubei, Chongqing, and
subsequently Fujian in 2016, joining the fold. These pilots, conceived in 2011, aimed
to impose constraints on and reduce carbon emissions (Wu and Wang 2022; Wu et al.
2023b). In the context of this research, the dummy variable ‘ETS’ is delineated to
denote counties or districts falling under the purview of these ETS pilot initiatives.
Table 5 demonstrates the presence of a coupling effect. In the designated pilot areas
of ETS, the efficacy of the low-carbon policy in reducing emissions is reinforced. It
is crucial to note that in order to accurately evaluate the pilot policies for low-carbon
cities, it is advisable to exclude the influence of the ETS, as shown in columns (3)
Table 5 Effects that are coupled with market-oriented environmental regulations
Outcome ln CO2 /GDP
(1) (2) (3) (4)
Pilot_cities − 0.1070*** − 0.0941*** − 0.0941*** − 0.0941**

(0.0212) (0.0202) (0.0241) (0.0427)
Pilot_cities × ETS − 0.1316*** − 0.1145*** − 0.1331*** − 0.1331**
(0.0369) (0.0349) (0.0385) (0.0648)
ETS 0.0186 0.0186
(0.0337) (0.0603)
_cons − 12.7777*** − 12.5964*** − 1.0834*** − 1.0834***
(0.0044) (0.0692) (0.1889) (0.2461)
Control variables No Yes Yes Yes
N 12,261 12,261 12,261 12,261
R2 0.787 0.810 0.810 0.796
“Fixed Effects.” Robust standard errors are in parentheses for all regressions. ETS indexes that the five
provinces and three cities supervised with carbon allowances transaction between 2013 and 2016, executed
in Shanghai, Tianjin, Shenzhen, Beijing, and Guangdong were carried out in 2013, Hubei and Chongqing
followed before 2014, the last one is Fujian in 2016 (see details in Wu 2022). Robust standard errors are
clustered at county level in column (3) and at city level in column (4)
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Q. Wu et al.
and (4). Otherwise, there is a risk of estimating the combined effect of both pilot
policies. Nevertheless, upon comparing columns (1) and (2) with columns (3) and (4),
the coefficients of both the interaction term and the low-carbon pilot variable remain
relatively unchanged even when the ETS variable is incorporated into the regression.
This suggests, to some extent, that the confounding effect is not substantial. In fact,
the reduction effect of the ETS in the pilot cities, as indicated in columns (3) and
(4), is not significantly pronounced. Cao et al. (2021) observed that the ETS had no
discernible impact on improving the coal efficiency of the power sector, but rather on
reducing electricity output, implying inefficiency within the largest carbon-emitting
industry. Furthermore, our findings indicate the ineffectiveness of ETS policies in the
context of implementing low-carbon policies at the district and county levels. This
highlights that market-based environmental regulation, exemplified by the ETS, does
not independently yield significant reductions in carbon emissions, at least during the
sample period. However, the effectiveness of voluntary emissions reductions can be
augmented when coupled with market-based environmental regulation such as the
ETS. This presents additional empirical evidence supporting the potential ineffective-
ness of certain policy approaches.
4.7 Obstacles effect of rational expectation
Contemporary economic theory posits that under rational expectations, policy out-
comes should not display systematic and pervasive disparities. As Lucas’s critique
underscores, if a new forecast fails to accurately capture changes in people’s expecta-
tions and temporal inconsistencies, relying solely on historical data to prognosticate
the impacts of specific economic policies becomes untenable. This introduces the
query: to what extent do rational expectations potentially influence the efficacy of
low-carbon city pilot policies? The framework of these policies presents a compelling
experimental environment.
Elaborating further, the complete dataset is segmented into three distinct subsam-
ples:
• “R1 | Non R2” encompasses only the entities from the inaugural round of the low-
carbon city pilot policy.
• “R2 | Non R1” includes entities solely from the second round, with first-round
participants excluded.
• “R2 | R1” amalgamates entities from both the first and second rounds.
Table 6 delineates the variability of CO2 and lnCO2 /GDP across these pilot city
scenarios. The pioneering round of the low-carbon city pilot policy has witnessed
a reduction in carbon dioxide emissions by 0.3205 Mt and a diminution in carbon
emissions intensity by 13.57%, statistically significant at the 1% level. Contrarily,
the second-round policy exerts a markedly diminished effect, curbing carbon dioxide
emissions by a mere 0.1069 Mt and reducing carbon emissions intensity by 1.29%.
Moreover, cities under the purview of both policy rounds exhibited non-significant
carbon reduction outcomes. Subsequent robustness tests, spanning the exclusion of
ETS effects (refer to Table 7), designating the second-round pilot cities as control
units for the first-wave impact analysis (Table 8), and employing the PSM method
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Table 6 Assessments on multi-round effect
(1) (2) (3) (4) (5) (6)

Label R1| Non R2 | Non R2 | R1 R1| Non R2 R2 | Non R1 R2 | R1
R2 R1
Pilot_cities − − 0.1069 − 0.2934* − − 0.0129 − 0.1050

0.3205*** 0.1357***
(0.0345) (0.0779) (0.1565) (0.0214) (0.0493) (0.1003)
_cons 1.3857*** 1.4661*** 1.4255*** − − −
12.6110*** 12.5241*** 12.5431***
(0.1165) (0.1266) (0.1301) (0.0722) (0.0802) (0.0834)
variables
N 11,632 9874 9435 11,632 9874 9435
R2 0.890 0.883 0.877 0.805 0.793 0.790
“Fixed Effects.” Robust standard errors are in parentheses for all regressions. Three scenarios are examined
here: (1) “R1| Non R2” means that only the cities included in the first-round low-carbon city pilot policy
are considered. (2) “R2 | Non R1” means that only the cities included in the second-round low-carbon city
pilot policy are considered, while the ones in the first round are excluded. (3) “R2 | R1” means that the cities
shared by first-round and second-round low-carbon city pilot policies are considered
(Table 9), corroborated these observations. The first policy wave was efficacious, but
concerns arise regarding potential deviations in the sample impacting the original
parallel trend. Figures 8 and 9 illustrate parallel trend analyses for carbon emissions
and carbon intensity, respectively.
The amassed evidence bolsters the hypothesis that the general populace, upon gaug-
ing impending policies, might preemptively adapt behaviors—either to align with or
counteract policy implications. For example, enterprises might preemptively relocate
to neighboring cities or intentionally submit distorted historical carbon emission data.
Consequently, the anticipated impact of the low-carbon city pilot policies could be
attenuated, potentially diverging from the original aspirations of the climate change
initiative.
5 Conclusions and policy implications
From November 6 to 18, 2022, COP27 convened in Sharm El Sheikh, Egypt, with
representatives from 198 countries. They collectively underscored the paramount
importance of global climate objectives, notably the aspiration to limit warming to
1.5 °C above pre-industrial levels. A notable focus of COP27 was the technical empha-
sis on a “bottom-up” approach to climate action. In this context, China’s low-carbon
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Q. Wu et al.
city pilot program, seldom studied as a “bottom-up” climate policy, warrants a thor-
ough examination concerning its role in climate action. Utilizing county-level panel
data spanning 2000–2017, we crafted a quasi-natural experiment deploying a staggered
Difference-in-Differences (DID) method. This approach aimed to quantify the impact
of the low-carbon city pilot policy on carbon dioxide emissions and their respective
intensities. Our key findings include: (1) Relative to non-pilot cities, the low-carbon
city pilot policy’s execution has, on average, culminated in a decline in carbon diox-
ide emissions by 0.2808 Mt and a decrease in intensity by 11.59% in participating
cities. Consequently, China’s 14th Five-Year Plan (2021–2025) is poised to achieve
40.28% of its targeted emission reductions, attributed to the efficacy of the low-carbon
city initiatives. (2) Conventional counties within China’s central and western regions,
particularly those under robust governmental administration, reap a more pronounced
carbon emission abatement from the low-carbon city pilot policy. (3) A synergistic
effect emerges between the ETS and the low-carbon city pilot policy, intensifying the
carbon emissions reduction impact. (4) An intriguing observation is the pronounced
efficacy of the inaugural round of the low-carbon city pilot policy, in contrast to its
subsequent iteration. This suggests that the policy’s impact on carbon emissions reduc-
tion might be susceptible to the public’s rational expectations. This study provides a
pivotal reference for the implementation of low-carbon urban management. It also
engenders several nuanced policy recommendations:
Firstly, COP27 underscores the imperative for nations to intensify their greenhouse
gas mitigation efforts. Our research indicates that the low-carbon city pilot policy
is an effective means to substantially reduce carbon dioxide emissions and carbon
emissions intensity. This provides an invaluable template for other emitting coun-
tries keen on adopting a “bottom-up” approach to climate mitigation. The various
initiatives across these low-carbon cities include sustainable energy frameworks, eco-
logical industry, and green transportation. Policymakers must prioritize establishing
foundational infrastructure to bolster the resilience of urban centers. Furthermore, the
convergence of low-carbon initiatives and innovative city development—employing
measures, reporting, and verification (MRV) systems—offers an enhanced method for
carbon emission management. Harnessing digital technology and data analytics in this
regard further reinforces climate mitigation objectives (Wu 2023).
Secondly, the crafting and execution of low-carbon city pilot policies should be
finely tuned to local nuances. This not only ensures alignment between governmental
directives and market dynamics but also optimizes emission reductions. Our study’s
heterogeneous and coupling effect estimations shed light on this. Policymakers need to
segregate cities based on distinctive criteria such as geographical disposition, energy
intensity, and bureaucratic oversight. This facilitates the deployment of bespoke poli-
cies tailored for optimal carbon reduction outcomes. It’s crucial for policymakers to
recognize that the combination of distinct environmental regulations can amplify car-
bon reduction effects, thus achieving collective emission reductions. As we progress
towards net-zero targets, a multifaceted, coordinated policy approach adapted to each
city’s specific climate policies is pivotal. Such an approach can magnify the efficiency
of climate directives and expedite the realization of net-zero pledges as championed
by COP27.
123
Lastly, COP27 rightly emphasized the importance of innovative regulation in cli-

mate action. Yet, there exists a lacuna in academic exploration regarding the potential
systematic deviations in policy outcomes due to public rational expectations. Our find-
ings, contrasting the effectiveness of the first and second rounds of the low-carbon city
pilot policy, underscore this concern. Policymakers should consider decisive, singu-
lar policy actions to temper public anticipations. The government is further advised
to promulgate detailed benchmarks in particular domains, such as evaluative metrics
and criteria for low-carbon city classification. Grounding these initiatives in lucid and
enforceable legislations is essential. Concurrently, a standardized technical system
for the comprehensive management of carbon emission data—spanning monitoring,
measuring, accounting, reporting, and verifying—is necessary. This infrastructure will
enhance the efficacy of the low-carbon city pilot policies, ensure rigorous oversight of
enterprise emissions, and underpin the overarching goal of transitioning to a net-zero
society.
Acknowledgements The authors extend their appreciation to the anonymous referees for their insightful
comments and suggestions. Lei Jiang thanks the support from the Fundamental Research Funds for the
Central Universities (# 63192403).
Declarations
Conflict of interest The authors declare that they have no known competing financial interests or personal
relationships that could have appeared to influence the work reported in this paper.
Appendix
See Tables 7, 8 and 9, Figs. 8 and 9.
123
Q. Wu et al.
Table 7 Robustness check: assessments on multi-round effect by excluding ETS
(1) (2) (3) (4) (5) (6)

Label R1| Non R2 | Non R2 | R1 R1| Non R2 R2 | Non R1 R2 | R1
R2 R1
Pilot_cities − − 0.1169 − 0.2992* − − 0.0128 − 0.1050

0.2491*** 0.1158***
(0.0369) (0.0779) (0.1563) (0.0229) (0.0494) (0.1004)
ETS − − − − 0.0814** 0.0128 0.0019
0.2934*** 0.7409*** 0.7283***
(0.0545) (0.1471) (0.1480) (0.0338) (0.0933) (0.0950)
_cons 1.3683*** 1.4635*** 1.4225*** − − −
12.6158*** 12.5241*** 12.5431***
(0.1164) (0.1264) (0.1299) (0.0722) (0.0802) (0.0834)
variables
N 11,632 9874 9435 11,632 9874 9435
R2 0.882 0.875 0.868 0.791 0.779 0.775
“Fixed Effects.” Robust standard errors are in parentheses for all regressions. Three scenarios are examined
here: (1) “R1| Non R2” means that only the cities included in the first-round low-carbon city pilot policy
are considered. (2) “R2 | Non R1” means that only the cities included in the second-round low-carbon city
pilot policy are considered, while the ones in the first round are excluded. (3) “R2 | R1” means that the cities
shared by first-round and second-round low-carbon city pilot policies are considered. This table contains
ETS as a control variable to exclude the administrative divisions treated by the China’s emissions trading
scheme pilots
123
Table 8 Robustness check: assessments on “R1| Non R2” effect considering the cities treated by the second
wave as control units
(1) (2) (3) (4)
Pilot_cities − 0.1962*** − 0.0842***

(0.0365) (0.0301)
Pilot_cities_no2nd − 0.2417*** − 0.1178***
(0.0357) (0.0218)
ETS − 0.2962*** − 0806**
(0.0538) (0.0329)
_cons 1.1709*** 1.3817*** − 12.4916*** − 12.5957***
(0.1034) (0.1129) (0.0852) (0.0691)
Control variables Yes Yes Yes Yes
N 9184 12,261 9184 12,261
R2 0.906 0.888 0.877 0.796
*, **, and *** indicate significance at 10, 5, and 1% statistical levels, individually. FE is abbreviated
for “Fixed Effects.” Robust standard errors are in parentheses for all regressions. Pilot_cities_no2nd is
assigned the value one if the counties or districts are regulated as the first-wave pilot cities, otherwise zero.
ETS indexes that the five provinces and three cities supervised with carbon allowances transaction between
2013 and 2016, executed in Shanghai, Tianjin, Shenzhen, Beijing, and Guangdong were carried out in
2013, Hubei and Chongqing followed before 2014, the last one is Fujian in 2016 (see details in Wu 2022).
This table contains ETS as a control variable to exclude the administrative divisions treated by the China’s
emissions trading scheme pilots. In column (1) and (3), the sample period is set to 2002–2012 to contain
the second wave cities as control units when solely assessing the first-wave cities. ETS is omitted for not
yet implemented during the sample period. In column (2) and (4), we take the second wave cities as control
units in 2000–2017 by generating a new variable Pilot_cities_no2nd when identifying the first-wave effect
123
Q. Wu et al.
Table 9 Robustness check: assessments on multi-round effect by PSM
(1) (2) (3) (4) (5) (6)

Label R1| Non R2| Non R2 | R1 R1| Non R2 R2 | Non R1 R2 | R1
R2 R1
Panel A
Pilot_cities − 0.1284 − 0.0172 − − 0.0058 − 0.0059
0.1478** 0.1596***
(0.0677) (0.1297) (0.3134) (0.0402) (0.0757) (0.1765)
ETS − − 0.3901 − 0.3501 − 0.0468 0.0826 0.0711
0.1758***
(0.0594) (0.2849) (0.2800) (0.0339) (0.1687) (0.1779)
_cons 1.6970*** 2.4514*** 2.0532*** − − −
12.5599*** 12.2264*** 12.2090***
(0.3343) (0.4789) (0.4737) (0.1923) (0.2796) (0.3089)
variables
N 2593 1694 1546 2552 1681 1527
R2 0.934 0.915 0.910 0.835 0.780 0.758
(1) (2) (3) (4) (5) (6)

R2 R1
Panel B
Pilot_cities − − 0.0926 − 0.2899* − − 0.0118 − 0.1025
0.2452*** 0.1188***
(0.0359) (0.0753) (0.1511) (0.0229) (0.0493) (0.1003)
ETS − − − − 0.0779** 0.0131 0.0026
0.2850*** 0.7302*** 0.7178***
(0.0529) (0.1423) (0.1431) (0.0338) (0.0932) (0.0950)
_cons 1.3395*** 1.4202*** 1.3767*** − − −
12.5909*** 12.4991*** 12.5188***
(0.1134) (0.1228) (0.1261) (0.0725) (0.0804) (0.0837)
variables
N 11,623 9865 9426 11,623 9865 9426
123
Table 9 (continued)
(1) (2) (3) (4) (5) (6)

R2 R1
R2 0.885 0.879 0.872 0.791 0.779 0.775
(1) (2) (3) (4) (5) (6)

R2 R1
Panel C
Pilot_cities − − 0.0926 − 0.2899* − − 0.0118 − 0.1025
0.2452*** 0.1188***
(0.0359) (0.0753) (0.1511) (0.0229) (0.0493) (0.1003)
ETS − − − − 0.0779** 0.0131 0.0026
0.2850*** 0.7302*** 0.7178***
(0.0529) (0.1423) (0.1431) (0.0338) (0.0932) (0.0950)
_cons 1.3395*** 1.4202*** 1.3767*** − − −
12.5909*** 12.4991*** 12.5188***
(0.1134) (0.1228) (0.1261) (0.0725) (0.0804) (0.0837)
variables
N 11,623 9865 9426 11,623 9865 9426
R2 0.885 0.879 0.872 0.791 0.779 0.775
*, **, and *** indicate significance at 10%, 5%, and 1% statistical levels, individually. FE is abbreviated for
"Fixed Effects." Robust standard errors are in parentheses for all regressions. Three scenarios are examined
here: (1) "R1| Non R2" means that only the cities included in the first-round low-carbon city pilot policy
are considered. (2) "R2 | Non R1" means that only the cities included in the second-round low-carbon
city pilot policy are considered, while the ones in the first round are excluded. (3) "R2 | R1" means that
the cities shared by first-round and second-round low-carbon city pilot policies are considered. This table
contains ETS as a control variable to exclude the administrative divisions treated by the China’s emissions
trading scheme pilots. Three matching methods, nearest neighbor matching (1:2) in panel A, quartic kernel
matching (bandwidth 0.06) in panel B, and radius matching (caliper 0.05) in panel C are considered
here.
123
Q. Wu et al.
Fig. 8 Dynamic effects of low-carbon city pilot policies on carbon dioxide emissions
Fig. 9 Dynamic effects of low-carbon city pilot policies on carbon emission intensities
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Empirical Economics

“Bottom-up” abatement on climate from the “top-down”

Qingyang Wu1 · Zhen Sun2 · Linhan Jiang3 · Lei Jiang2

Received: 8 January 2023 / Accepted: 17 August 2023

1 Institute of Economics, Tsinghua University, Beijing 100084, China

Keywords Low-carbon city pilot policy · Carbon emissions reduction · Coupling

Fig. 1 The influential mechanism of the low-carbon city pilot policy

its well-orchestrated coordination. Furthermore, policymakers should be cognizant

2 Policy background and research hypotheses

2.1 The establishment of low-carbon cities in China

2.2 Research hypotheses

2.2.1 Carbon emissions reduction of low-carbon city pilot policy

The promotion tournament mechanism in China encompasses not just economic

2.2.2 Coupling effect of climate change policies

government has implemented a combination of mandatory and market-driven envi-

H2 Each separate environmental policy’s capabilities of totally mitigating the climate

2.2.3 Obstacles effect of rational expectations

A pivotal challenge confronting the efficacy of environmental regulations lies in the

3.1 Data specification

3.2 Variable settings

3.2.1 The low-carbon city pilot

3.2.2 Other variables

3.3 Identification framework

yit β0 + β1 Pilot_citiesit + ϑ X + μ + δit (1)

4 Results and discussion

4.1 Baseline results

Label Variable Obs Mean Std. Dev. Median Min Max

Table 2 Impacts of low-carbon city policies on carbon emissions

Outcome CO2 ln CO2 /GDP

(1) (2) (3) (4)

Pilot_cities − 0.3614*** − 0.2808*** − 0.1316*** − 0.1159***

4.2 Testing the parallel trend assumption

4.3 Region-based placebo test

where ξ is the partial impact of unobserved factors on the explained

4.4 PSM-DID estimation

Table 3 Impact of low-carbon city policies on carbon emissions with PSM-DID

Outcome CO2 ln CO2 /GDP

(1) (2) (3) (4) (5) (6)

4.5 Heterogeneity analysis

4.6 Coupling effect

Table 4 Heterogeneity analysis across different regions

(1) (2) (3) (4) (5) (6)

Outcome ln CO2 /GDP

(1) (2) (3) (4) (5) (6)

administrators and individual entities, spotlighting the intrinsic willingness of these

Table 5 Effects that are coupled with market-oriented environmental regulations

Outcome ln CO2 /GDP

(1) (2) (3) (4)

Pilot_cities − 0.1070*** − 0.0941*** − 0.0941*** − 0.0941**

4.7 Obstacles effect of rational expectation

Table 6 Assessments on multi-round effect

Outcome CO2 ln CO2 /GDP

(1) (2) (3) (4) (5) (6)

Pilot_cities − − 0.1069 − 0.2934* − − 0.0129 − 0.1050

5 Conclusions and policy implications

Lastly, COP27 rightly emphasized the importance of innovative regulation in cli-

See Tables 7, 8 and 9, Figs. 8 and 9.

Table 7 Robustness check: assessments on multi-round effect by excluding ETS

Outcome CO2 ln CO2 /GDP

(1) (2) (3) (4) (5) (6)

Pilot_cities − − 0.1169 − 0.2992* − − 0.0128 − 0.1050

Outcome CO2 ln CO2 /GDP

(1) (2) (3) (4)

Pilot_cities − 0.3614* − 0.2808* − 0.1316* − 0.1159*

Pilot_cities − 0.1070* − 0.0941* − 0.0941* − 0.0941

Pilot_cities − 0.1962* − 0.0842*