Is it the Goldilocks principle? The impact of environmental decentralization on total factor carbon productivity in China

The current severe carbon emissions situation in China increases the demand for a sound environmental governance system. Using provincial panel data from 2003 to 2017, this study investigates the spatial impact of different types of environmental decentralization (ED) on total factor carbon productivity (TFCP) and its internal mechanisms and explores the threshold effect of horizontal environmental decentralization (HED) and fiscal decentralization (FD) on this impact. The results indicate that the effect of ED on TFCP exists after considering the spatial dependence. An inverted "U-shaped" relationship exists between vertical environmental decentralization (VED) and TFCP, and a "U-shaped" relationship between horizontal environmental decentralization (HED) and TFCP; that is, excessive VED and insufficient HED will inhibit TFCP. Green technology innovation acts as a mediator in the impact of ED on TFCP, including VED and HED. The dynamic threshold panel model finds that both the increase of HED and FD improved the promotion effect of VED on TFCP, but the change in HED gradually reduced the promotion effect. China should adhere to the Goldilocks principle, strengthen vertical environmental centralization and promote horizontal environmental decentralization to create a superior institutional environment for stimulating green technological innovation to further weaken the "free rider" effect of environmental governance caused by externalities.