Does low-carbon city pilot affect the enterprise competitiveness in China? Based on a staggered difference-in-difference model

Abstract

China has recently instituted the low-carbon city pilot (LCCP) policy in target areas to control its greenhouse gas emissions. Studies examining those environmental regulations have not focused on how they affect enterprise competitiveness, especially emphasizing the LCCP's dynamic effect. Here, we use the quasi-experimental opportunities of the LCCP policy along with a staggered difference-in-difference model to evaluate and explain the influences and transmission mechanisms of the LCCP policy on enterprise competitiveness. The empirical results show that (1) the construction of low-carbon cities significantly reduces, by 3.56%, the average enterprise competitiveness. Also, capital-intensive and small firms are more susceptible to adverse effects from the LCCP policy, but those effects weaken with time. (2) The LCCP policy affects enterprise competitiveness by increasing operating costs and reducing R&D. (3) However, those adverse effects can be suppressed when a region's degree of marketization is high and industry competition is fierce. Although our results show that the LCCP policy indeed brings more significant economic costs, those economic distortions can weaken through market-based reforms and improved market competition.

Keywords: Enterprise competitiveness; Environmental regulation; Low-carbon city pilot policy; Staggered DID.