Can a low-carbon development path achieve win-win development: evidence from China’s low-carbon pilot policy

Low-carbon pilot (LCP) policy aims to not only achieve economic development but also address climate change problems in China. With a difference-in-difference (DID) approach, this study provides empirical evidence to support the policy’s implementation by analysing its impacts on green total factor productivity (GTFP). We find that the implementation of the low-carbon pilot policy has a significant positive impact on GTFP. The low-carbon pilot policy significantly improves the GTFP in the year following implementation, and its efficacy diminishes over time. In terms of mechanism analysis, the policy enables China to achieve win-win development through industry structure adjustment and foreign direct investment (FDI) inflows. Innovation does not immediately improve GTFP, although the low-carbon pilot policy promotes regional innovation. Our results provide strong support for China’s recent third set of low-carbon pilot policies. As for global mitigation strategy, countries should incorporate the low-carbon development path into their strategic planning. In particular, developing countries should enforce more efforts on low-carbon development as such development path may improve their green productivity. It helps narrow the gap between developing and developed countries.