Research on the Impact and Mechanism of China’s Free Trade Zone Policies on Carbon Emissions: An Empirical Study Based on Data from 21 Pilot Provinces

Gefei Hou, Yansong Zhang () and Jianming Xu
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Gefei Hou: Faculty of Social Science & Public Policy, King’s College London, London WC2R 2LS, UK
Yansong Zhang: LNU & CAITEC China Business Development Institute (Beijing), Beijing 100710, China
Jianming Xu: School of Earth Sciences and Resources, China University of Geosciences (Beijing), Beijing 100083, China

Sustainability, 2025, vol. 17, issue 1, 1-18

Abstract: This study aims to investigate the impact of China’s Free Trade Zones (FTZs) on carbon emissions and their underlying mechanisms, addressing the following research questions: (1) Do FTZs significantly affect carbon emissions? (2) Are there spatial differences in the carbon reduction effects of these FTZs? (3) What mechanisms underlie the carbon reduction effects of FTZs? (4) Are there moderating factors that influence the effectiveness of these FTZs? Using a difference-in-differences (DID) model, this study measures the net effect of FTZ implementation on carbon emissions in 21 pilot provinces and cities in China. Additionally, it examines whether the FTZ effect shows mediating effects and introduces interaction terms to test for moderating effects. The findings are as follows: (1) The regression coefficient of FTZs on carbon emissions is −0.162, indicating that FTZs significantly reduce carbon emissions. (2) The effect of FTZs on carbon emissions varies significantly across regions, with the carbon reduction effects increasing progressively from the eastern to the central and western regions. (3) The mediating effect indicates that FTZs reduce carbon emissions by enhancing technological levels. (4) Industrial structure has a significant moderating role in the carbon emission effects of FTZs, with optimizing the industrial structure helping to suppress the increase in carbon emissions. Based on these findings, the study suggests accelerating the replication and promotion of advanced FTZ practices, strengthening carbon reduction policies driven by technological progress, and leveraging regional industrial layout adjustments to facilitate overall industrial structure upgrading.

Keywords: China’s pilot free trade zones (FTZs); carbon emission reduction; difference-in-differences (DID); heterogeneity; mechanism analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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