Porter effect vs cost effect: The impact of China's low carbon city pilot on carbon emissions and economic performance

• Published in: Journal of environmental management 2024-06, Vol.360, p.121015-121015, Article 121015
• Main Authors: Li, Zhenran, Lai, Aolin, Cao, Yaru, Wang, Qunwei
• Format: Article
• Language: English
• Subjects: Carbon; Carbon emission; China; Cities; climate; Cost effect; Economic performance; environmental management; Low-carbon economy; Porter effect
• ISSN: 0301-4797; 1095-8630
• DOI: 10.1016/j.jenvman.2024.121015

Building a low-carbon economy can help cities effectively mitigate climate risks, but it is challenging for developing countries. Using a difference-in-difference and event study model, we investigate the joint impact of China's Low-Carbon City Pilot (LCCP) on carbon emissions and economic performance. Our findings show that the LCCP significantly reduces carbon emissions and increases gross revenues, employee count, and fixed assets without compromising the net profit of manufacturing firms. The LCCP has a cumulative effect, with the positive joint impact increasing gradually over time. A heterogeneity analysis shows that the later pilot cities have not achieved better carbon emissions and economic performance than the early pilot cities. The reason for the positive joint effect of LCCP is that the Porter effect outweighs the cost effect. These findings contribute to knowledge about how developing countries can develop a low-carbon economy. •We conduct the first comprehensive investigation of the causal impacts of China's LCCP on carbon emissions and economic performance.•We analyzed the dynamics of policy effects and found that the LCCP has a cumulative effect.•The LCCP later-piloted cities did not achieve better carbon emissions and economic performance compared to the earlier-piloted cities.•Our results indicate that the Porter effect outweighs the cost effect, enabling a “win-win” goal of carbon reduction and economic improvement.