Effect of local government decision‐making competition on carbon emissions: Evidence from China's three urban agglomerations

Xiaoyan Li and Hengzhou Xu

Business Strategy and the Environment, 2020, vol. 29, issue 6, 2418-2431

Abstract: Analyzing the effect of local government decision‐making competition on regional carbon emissions is important for reducing carbon emissions in rapidly urbanizing areas. Taking the energy rebound effect into account, this study analyzes the effect on carbon emissions of competition between local governments in decision making. Focusing on China's three urban agglomerations, this study further discusses how to avoid this influence. The results show that local government decision‐making competition is one of the main causes of the regional “green paradox”; the effect of local government decision‐making competition on carbon emissions has significant regional heterogeneity and spatial dependence, and the short‐term energy rebound effect is greater than the long‐term energy rebound effect; and local government decision‐making competition has three effects on carbon emissions that also have interaction and substitution effects between them: factor market distortion, investment bias, and the “race to the bottom” of environmental policies. However, four measures can reduce the effect of local government decision‐making competition on carbon emissions: one, improving the performance evaluation system of local governments; two, promoting the marketization of factor prices; three, improving both the energy efficiency and upgrading of industrial structures; and four, introducing macro emission reduction policies that allow the central government to intervene directly.

Date: 2020
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