The carbon emission reduction effect of green fiscal policy: a quasi-natural experiment

Carbon emission reduction is crucial for mitigating global climate change, and green fiscal policies, through providing economic incentives and reallocating resources, are key means to achieve carbon reduction targets. This paper uses data covering 248 cities from 2003 to 2019 and applies a multi-period difference-in-differences model (DID) to thoroughly assess the impact of energy conservation and emission reduction (ECER) fiscal policies on enhancing carbon emission (CE₁) reduction and carbon efficiency (CE₂). It further analyzes the mediating role of Green Innovation (GI), exploring how it strengthens the impact of ECER policies. We find that: (1) ECER policies significantly promote the improvement of carbon reduction and CE₂, a conclusion that remains robust after excluding the impacts of concurrent policy influences, sample selection biases, outliers, and other random factors. (2) ECER policies enhance CE₁ reduction and CE₂ in pilot cities by promoting green innovation, and this conclusion is confirmed by Sobel Z tests. (3) The effects of ECER policies on CE₁ reduction and the improvement of CE₂ are more pronounced in higher-level cities, the eastern regions and non-resource cities. This research provides policy makers with suggestions, highlighting that incentivizing green innovation through green fiscal policies is an effective path to achieving carbon reduction goals.