Does the setting of local government economic growth targets promote or hinder urban carbon emission performance? Evidence from China

Growth target management drives China’s economic expansion, leading to potential carbon emission externalities. This study examines the impact of economic growth target setting on carbon emission performance in 257 Chinese localities from 2004 to 2020. Using cluster standard error regression, 2SLS instrumental variable regression, and the spatial Durbin model, the results show that moderate growth targets improve urban carbon emission performance. Conversely, aggressive targets do not enhance regional carbon emission performance. Moderate growth targets foster innovation in green technology, while aggressive ones encourage investment in fixed assets and new city growth, impeding performance. Cities in the eastern and western regions, with larger populations and less reliance on natural resources, benefit more from effective economic development targets. The establishment of local targets negatively affects neighboring regions’ carbon emissions performance, particularly at a spatial scale of 100 to 200 km. This paper contributes to understanding the environmental consequences of growth target setting and offers insights for balancing economic growth with carbon emission governance in emerging market countries.