Energy subsidies and carbon emission efficiency in Chinese regions: the role of the FDI competition in local governments

Abstract

Based on the Data Envelopment Analysis, this paper examines the economic effects of energy subsidies on carbon emission efficiency in the Chinese regions from 2003 to 2018. The special roles are given to fiscal decentralization and foreign direct investment competition of local governments. It is observed that an increase in energy subsidies per capita negatively affects carbon emission efficiency. The green-growth-oriented local energy subsidies, targeted at clean energy and low-carbon industries, positively affect carbon emission efficiency. Therefore, local economies can balance economic growth and carbon emission reduction requirements. Given these results, policymakers should change the original performance evaluation mechanism with economic growth as the goal and promote local governments to implement green growth and low-carbon economic development policies.