The role of green fiscal stimulus policy in enhancing the synergistic performance of air pollution control and carbon mitigation: evidence from 281 cities in China

Against escalating climate change and air pollution, economies need to explore viable policies for synergistic performance of air pollution control and carbon mitigation (SPPC). This under budget constraints and to achieve sustainable development. Existing research focuses mainly on market-based or command-based policies for SPPC, but the impact of green fiscal stimulus policies (GFSP) as incentive-based policies remains underexplored. This study used the energy saving and emission reduction fiscal pilot (ESER), a GFSP case, as a case study. Using non-radial directional distance function data envelopment analysis, it systematically measured urban SPPC efficiency based on data collected from 281 Chinese cities between 2007 and 2022. A staggered difference-in-difference method examines how GFSP influences SPPC. The results showed that GFSP significantly improved SPPC. This is because pilot cities enforced stricter environmental standards, signaling to enterprises the government’s commitment to environmental governance. When policy stability was assured, enterprises faced less climate policy uncertainty, which prompted greater investment in long-term clean technological innovation. As enterprises innovated, SPPC was realized. Meanwhile, affected by differences in incentive funding allocation, ESER had a more significant effect on SPPC in eastern, non-resource-based and non-industrial-based cities, as well as in cities with intense inter-jurisdictional competition. Moreover, the GFSP’s positive effects also spilled over to the non-targeted emission, methane; however, it did not have a significant impact on non-targeted pollutants. This study provides viable policy options for the realization of SPPC in other emerging economies with limited public budgets.