Toward circular economy: Implementing circular economy strategies to reduce carbon emissions in Chinese cities

Qiuzhen Ren, Jinkai Li and Johan Albrecht

Business Strategy and the Environment, 2025, vol. 34, issue 1, 914-931

Abstract: To avert the worst impacts of climate change, greenhouse gas emissions must be reduced by 45% by 2030 and reach net zero by 2050, as outlined in the Paris Agreement. The circular economy (CE) is expected to play a key role in achieving this goal by changing consumption and production patterns. However, the actual impact of CE on reducing carbon emission intensity remains unclear, especially in developing countries. This paper examines the effect of CE‐associated actions on reducing carbon emission intensity in Chinese cities, utilizing CE pilot policy experimentation. We employ difference‐in‐differences (DID) methods with data from 282 cities spanning 2002 to 2012 to analyze the average treatment effect of CE actions. Our results show a significant reduction in carbon emission intensity in CE pilot cities compared to non‐pilot cities after the implementation of CE practices. Moreover, our estimates indicate that the carbon reduction effect strengthens over time, driven by the improvements in green innovation capacity and industrial structure upgrades. The effectiveness of CE varies across city types, with more pronounced impacts observed in economically underdeveloped and resource‐based cities. However, while CE practices reduce carbon emission intensity in pilot cities, significant spatial spillover effects increase emissions in neighboring cities. In conclusion, our findings underscore both the effectiveness and complexity of the CE pilot policy in reducing carbon emission intensity in Chinese cities.

Date: 2025
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