How does new energy demonstration city pilot policy affect carbon dioxide emissions? Evidence from a quasi-natural experiment in China

Energy transition policies are of great significance in adjusting the structure of energy supply and demand and coping with climate change. The new energy demonstration city pilot (NEDCP) policy, as an important pilot project in China's energy transition process, lacks a scientific assessment of the carbon reduction effect of the NEDCP policy and an in-depth explanation of the mechanism of the NEDCP. Based on panel data of 209 Chinese cities at the prefectural and higher levels from 2007 to 2019, this study takes the NEDCP policy as a quasi-natural experiment, using a difference-in-differences model combined with firm-level data to identify the impact of the NEDCP policy on urban carbon dioxide (CO2) emissions. This study analyzes the impact of heterogeneity of urban characteristics on the policy effect from multiple perspectives, and further investigates its mechanism. The conclusions are shown in the following aspects. (1) The implementation of the NEDCP policy decreases urban CO2 emissions significantly. Meanwhile, a series of robustness tests, including the instrumental variables method, propensity score matching difference-in-differences method, placebo test, exclusion of policy interference test, and machine learning method, support this conclusion. (2) The NEDCP policy achieves carbon reduction effects mainly through scale and structure effects. (3) The results of the heterogeneity test show that the NEDCP policy is more effective in cities with higher administrative levels, energy-demanding cities, cities in the southeast of Hu-line, and cities with a higher degree of nationalization. Therefore, the Chinese government should summarize the implementation experience of the NEDCP policy and expand its scope of application. The evaluation of the NEDCP policy in China has important reference value for the energy transition of other developing countries.