Spatial carbon emission and fiscal incentive: Considering spatial spillover boundaries and industrial linkages

This study utilizes the “National Comprehensive Demonstration of Energy Saving and Emission Reduction Fiscal Policy” (the ESERF policy) as a quasi-natural experiment to offer insights into how fiscal incentives facilitate carbon emissions reduction. To fulfill the existing research, this study employs a spatial difference-in-differences (SDID) model across 274 Chinese cities from 2005 to 2022 to explore the spatial effect of the ESERF policy on carbon emissions, its mediating and heterogeneous mechanisms, and delve into the performance of spatial spillover boundaries and production linkages. Results show that: (1) The ESERF policy promotes carbon emissions reduction both in demonstration cities and neighboring cities, confirmed by various robustness tests. (2) The ESERF policy facilitates spatial carbon emissions reduction mainly by the industrial structure changes in neighboring cities. Demonstration cities with less financial pressure and higher political hierarchy, perform typical fiscal demonstration effects and significantly promote carbon emissions reduction in neighboring cities. (3) The attenuation boundary of spatial spillover effect is 800 km, with this effect shifting from a Siphoning Effect to a Radiation Effect as geographical distance increases. (4) With the newly established industrial linkages weight matrix, the ESERF policy is reconfirmed to initially lead to an increase in carbon emissions in neighboring cities with strong industrial linkages, while a long-term decline is expected to result from deeper industrial collaboration, with this effect shifting from a short-term Pollution Haven effect to long-term Pollution Halo effect.¹.