The role of Chinese fiscal decentralization in the governance of carbon emissions: perspectives from spatial effects decomposition and its heterogeneity

Fiscal policy including fiscal revenue and expenditure is an important measure to deal with environment pollution and climate change by the Chinese government. This study investigates the impact of fiscal decentralization on carbon emissions and carbon intensity of 30 Chinese provinces over 1997 to 2017 using spatial econometric analysis, and the direct effect, indirect effect and total effect are derived. The empirical results indicate that fiscal decentralization has an inverted N-shaped relationship with carbon emissions and carbon intensity, and the impacts are mainly revealed through direct effects. Moreover, our analysis suggests that the influences of fiscal decentralization on carbon emissions and carbon intensity varies among different geographical regions, indicating that specific carbon emissions reduction policies should be formulated for different regions. This study links the carbon emissions with China's unique economic decentralization system, hereby providing practical support for the governance of carbon emissions in China.