Pollution Transfer or Industrial Upgrading: The Impact of Energy Conservation and Emission Reduction Fiscal Policy on Urban Green Total Factor Productivity in China

Jing Zhang, Jun Shen (), Zhifang Wu and Lei Nie
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Jing Zhang: Research Institute of Resource-Based Economic Transformation and Development, Shanxi University of Finance and Economics, Taiyuan 030006, China
Jun Shen: Research Institute of Resource-Based Economic Transformation and Development, Shanxi University of Finance and Economics, Taiyuan 030006, China
Zhifang Wu: UniSA Business, University of South Australia, Adelaide, SA 5001, Australia
Lei Nie: Research Institute of Resource-Based Economic Transformation and Development, Shanxi University of Finance and Economics, Taiyuan 030006, China

Sustainability, 2025, vol. 17, issue 20, 1-24

Abstract: The adoption of robust fiscal policies is a critical pathway for China to control pollution, promote green development, and advance ecological civilization. This study examines the “Comprehensive Demonstration City of Energy Conservation and Emission Reduction Fiscal Policy” pilot project as a quasi-natural experiment. Employing the Slack-Based Measure Directional Distance Function (SBM-DDF) model and a multi-period Difference-in-Difference (DID) approach, we assess the impact of the energy conservation and emission reduction fiscal policy (ECERFP) on urban green total factor productivity (UGTFP). The results indicate that ECERFP significantly enhances UGTFP. This finding remains robust across multiple tests, including parallel trends, placebo tests, and the Goodman–Bacon decomposition. Mechanism analysis indicates that ECERFP enhances UGTFP mainly through technological innovation and improved energy efficiency. However, its effectiveness varies by geographical location, resource endowment, and city size. While ECERFP can promote urban energy conservation and end-of-pipe pollution control, it also carries the potential risk of inducing a “pollution haven” effect. To maximize the fiscal policy’s leverage and the resource allocation effects, a comprehensive strategy is required—one that advances energy efficiency, stimulates technological innovation, tailors energy conservation measures to local conditions, and nurtures the development of new productive forces to support sustainable urban growth.

Keywords: fiscal policy; pollution transfer; industrial upgrading; SBM-DDF; multi-period DID (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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