The Green Effects of Industrial Policy—Evidence from China’s New Energy Vehicle Subsidies

Abstract

The development of new energy vehicles has become a common choice for countries worldwide to reduce greenhouse gas emissions and improve the global ecological environment, with China being no exception. However, challenges, such as finding charging stations, accessing residential areas, and highway charging, have hindered the green and high-quality growth of the new energy vehicle industry. This study, set against the backdrop of China’s 2018 policy to gradually redirect local purchase subsidy funds for new energy vehicles towards supporting the construction and operation of charging infrastructure, utilizes panel data from 282 prefecture-level cities from 2016 to 2021. A difference-in-differences model is constructed to compare the impact of infrastructure development on carbon emissions before and after the policy’s implementation. The study finds that policy has a negative effect on carbon emissions, especially in the second and third year after the policy’s implementation. Even after controlling for variables such as residents’ wealth levels, population size, environmental pollution, energy consumption, and government support, the results remain significant. Heterogeneity analysis reveals that the effect of the promotion of charging infrastructure on carbon emissions is greater in southern and central parts of China.