Is the provincial government better at high-carbon energy control?

To address the limitations of locally led environmental regulation in China, the Vertical Reform of Environmental Administration (VREA) has recentralized oversight to provincial governments in selected regions. Employing the VREA as a quasi-natural experiment and a staggered difference-in-differences design, this study assesses the efficacy of provincial governments in curbing high-carbon energy use. Contrary to its intended objectives, the VREA implementation correlates with an average annual increase of 11.95 kilotons of standard coal consumption for petrol, 4.23 kilotons for diesel, and 11.57 kilotons less for natural gas as a cleaner energy source. Mechanism analysis reveals that the VREA undermines local governments' environmental engagement, reducing green investment while escalating punitive measures, and leaving enterprises inadequately equipped to transition away from high-carbon energy. These results highlight a consequential gap between centralized policy design and implementation realities, underscoring critical trade-offs in environmental governance. The study offers practical implications for refining China's regulatory architecture and invites broader reflection on how policy instruments perform across varying institutional and industrial contexts. • The vertical reform of environmental administration (VREA) was assessed. • VREA increased the use of dirty energy by enterprises, which implies a failure of environmental regulation by the parent government. • The VREA was evaluated to assess the environmental regulatory capacity of provincial and local governments.