Does the setting of local government economic growth targets promote or hinder urban carbon emission performance?Evidence from China

Abstract

Abstract The management of growth targets drives China's rapid economic expansion and leads to potential carbon emission externalities. This paper empirically investigates the impact of economic growth target setting on carbon emission performance using panel data from 257 Chinese localities between 2004 and 2020. The analysis is conducted using 2SLS instrumental variable regression, cluster standard error regression, and the spatial Durbin model. The empirical findings indicate that local economic growth targets conditionally improve urban carbon emission performance, and moderate targets effectively enhance regional carbon emission performance, with moderate targets effectively enhancing regional carbon emission performance. However, aggressive economic growth targets do not contribute to the enhancement of regional carbon emission performance. The analysis of mechanisms shows that moderate economic growth targets enhance regional carbon performance by fostering innovation in green technology, while aggressive targets impede performance by encouraging increased investment in fixed assets and the growth of new cities. The analysis of heterogeneity indicates that cities in the eastern and western regions, characterized by larger populations and lower reliance on natural resources, have more effective economic development targets for enhancing local carbon performance. Additionally, the establishment of local economic development targets negatively affects the carbon emissions performance of neighboring regions, with the most significant negative spillovers observed at a spatial scale of 100 to 200 kilometers. This paper expands upon research concerning the environmental consequences of setting economic growth targets and the factors influencing carbon emission performance. It offers practical insights for achieving a balance between economic growth and carbon emission governance in emerging market countries.