Local government debt pressure and low-carbon economy: The mechanism based on the perspective of government behavior

Song Nie and Shihao Wang

Energy Economics, 2025, vol. 149, issue C

Abstract: Recently, China's local governments have been under significant debt pressure due to the slowing economic growth and fast-growing local debt. This fiscal burden will change the government's behavior and affect regional environmental performance to a certain extent. Therefore, will the local government debt pressure influence the low-carbon economy become an issue worthy of concern. However, the literature on how local government debt pressure affects carbon emission efficiency (CEE) is scarce. This paper verifies local government debt pressure's negative effect on CEE at the city level. This inhibitory effect acts through green innovation capacity and tax burden. Furthermore, Green finance, marketization, and environmental regulation can mitigate the negative impact of debt pressure on the CEE. The study helps to clarify the mechanism of local government debt pressure on CEE and provides policy basis for the government to governance environmental pollution, promote green transformation and develop low-carbon economy.

Keywords: Low-carbon economy; Local government debt pressure; Carbon emission efficiency; Tax burden; Green innovation capacity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325006334

DOI: 10.1016/j.eneco.2025.108806

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