Evaluating Climate Policy in Emerging Economies: Evidence from China's Low-Carbon City Pilot

Abstract

Having constructed a unique dataset of consumption-based CO2 emissions for 17 different types of fossil fuels, 46 sectors and 7 industrial processes at the city level for 285 Chinese prefectures and municipalities, we assess the causal impact of China’s Low-carbon City Pilot (LCCP) on city-level CO2 emissions and GDP CO2 intensity over the period 2005-2016. The idiosyncrasies of the policy design pose significant challenges for the empirical analysis, which we overcome by deploying state-of-the-art empirical methods. We therefore present credible and robust empirical evidence on the impact of climate policy in emerging economies. Contrary to previous contributions, our results suggest that the LCCP did in fact not have any significant impact on either of our outcome variables. Exploiting the richness of our data, we also present a series of additional results across fuels, and economic sectors. Our results highlight that policies based on voluntary compliance and without clear mandates are unlikely to achieve their stated objectives.

Keywords: Climate policy, China, Causal identification, Carbon emissions, Carbon intensity