The drivers of carbon emissions in China: the perspective of fiscal decentralization

Fiscal decentralization determines government behavior considerably by being a major factor influencing China’s carbon emissions. We analyze the impact of fiscal decentralization on carbon emissions on basis of the dataset of 30 Chinese areas for the period 2008 to 2020. We reveal that fiscal decentralization significantly raises carbon emissions, but worsens carbon emission efficiency. The impact of fiscal decentralization on carbon emissions varies significantly by geographical location and economic development level shocks. Local governments increase the expenditure on economic services while reducing the expenditure on basic public services as a result of the fiscal decentralization scheme, which is an important reason why the carbon emission level cannot be effectively improved. As such, it is necessary to keep pace with the times, and build a service-oriented government, and capitalize on the capabilities of local governments in terms of their service duties so as to maximize carbon reduction.