The impact of fiscal technology expenditures on innovation drive and carbon emissions in China

China's central government has identified the reduction of carbon emissions as an important strategic goal for achieving economic and social progress. Innovation is the main driver behind these goals, and fiscal technology expenditures are a crucial policy instrument that can influence such innovation. We use a panel of 277 Chinese prefecture-level cities from 2010 to 2019 and a fixed effects econometric model to assess the impact of fiscal technology expenditures on CO₂ and study the transmission mechanism underlying this relationship. Our results suggest that public support of research and development initiatives can effectively curb regional carbon emission intensity. Moreover, this effect is particularly strong in areas characterized by relatively low economic growth rates and fiscal pressure. In addition, the analysis of the underlying transmission mechanism suggests that public spending on science and technology can promote emission reduction via investment in digital and green innovation. Hence, it is imperative to increase fiscal technology expenditures in order to help curb carbon emissions at the local level.