The impact of fiscal transfer payments on energy conservation and emission reduction in China: Does the development stage matter?

Abstract

Fiscal transfer payments (TRANS) are the institutional supplement of Chinese-style fiscal decentralization, which is of great significance to economic development. However, the relationship between TRANS and energy conservation and emission reduction (ECER) remains to be further discussed. Using panel data of 30 provinces in China from 2003 to 2020, this study empirically examines the impact of TRANS on energy-environmental performance (EEP) from the perspectives of influence mechanism, regional heterogeneity and nonlinearity. The results show that the influence of TRANS on ECER presents an obvious U-shaped relationship, and this influence has regional heterogeneity. At the same time, the investment-driven effect, infrastructure effect and industrial structure effect are important channels through which TRANS affect ECER. The partially linear functional coefficient models show that TRANS have different effects in different development stages. With the continuous improvement of economic level and urbanization level, the promotion effect of TRANS on ECER is more and more obvious. These results indicate that the government should increase fiscal investment in ECER, and pay attention to the development stage of different regions.

Keywords: Development stage; Energy conservation and emission reduction; Fiscal transfer payments; U-shaped relationship.