How low-carbon innovation drives city's green development? Evidence from China

The development of a city's green infrastructure is increasingly being driven by low-carbon innovation (LCI). However, knowledge of how LCI affects green economic efficiency (GEE) in China is largely unknown. This study investigates the spatial effects of LCI on GEE in 285 Chinese prefecture-level cities. The empirical findings show that LCI exerts significant beneficial effects on its GEE but negative effects on its neighbors. The positive direct effects on GEE are offset by negative indirect effects due to the lack of spatial linkage effect and the existence of the siphon and crowding-out effects among cities. Using a mediating effect model, we have identified three channels of LCI that affect GEE: industrial structure, energy consumption structure, and human capital. A further heterogeneity analysis indicates that the impacts of LCI on GEE differ by region and city development level. Furthermore, LCI in the building, greenhouse gas treatment, transportation, and sewage and pollutant treatment categories could greatly enhance local GEE. The findings herein provide an empirical experience for accurately accessing the spatial effect of LCI on GEE, and offer a critical decision-making reference for implementing a cross-city green linkage development mechanism.