Impacts and mechanisms of heterogeneous environmental regulations on carbon emissions: An empirical research based on DID method

Under intense pressure of carbon emissions reduction, it is crucial to formulate reasonable and effective decarbonisation strategies. In this essay, the low-carbon pilot (LCP) and carbon emission trading (CET) policies were regarded as command-and-control and market-based environmental regulations, respectively, China's prefecture-level cities during 2003–2017 were selected as research objects, then the difference-in-difference (DID) method was used to discuss the effect of heterogeneous environmental regulations on carbon emissions reduction. The findings showed that: (1) The LCP and CET both significantly decreased pilot cities' carbon emissions, but the effect of the CET was higher than the LCP, and various robustness tests confirmed the conclusion. (2) The LCP performed better in carbon reduction in the central and western regions, while the CET worked better in the eastern region. Both the LCP and CET only significantly reduced carbon emissions in non-old industrial base cities, and the CET worked better. The CET's effect on reducing emissions is superior to that of the LCP in both key cities of environmental protection and non-key cities of environmental protection. (3) The LCP reduced carbon emissions mainly by increasing foreign direct investment, green technology innovation played a negative mediating effect in the impact of the CET on carbon emissions. [Display omitted] •The effects of command-and-control and market-based regulations on China's carbon emissions are analyzed, the LCP and CET policies are taken as quasi-natural experiments.•Both the LCP and CET reduce carbon emissions, and the reduction effect of the CET is better than the LCP.•The impacts of the LCP and CET on carbon emissions are heterogeneous among different cities.•The LCP reduce carbon emissions mainly by increasing foreign direct investment, green technology innovation plays a negative mediating effect in the impact of the CET on carbon emissions.