Regional industrial redistribution and carbon emissions: a dynamic analysis for China

To facilitate and balance regional economic development and to reduce carbon emissions, China has implemented a series of policies to promote the redistribution of industries and economic activities across regions since 2000. This paper employs a logarithmic mean Divisia index (LMDI) to analyse the dynamic net effect on carbon emissions of Chinese policies promoting economic redistribution across sub-national regions, using a panel data of five sectors in 30 provinces during 1995-2017. The results of our analysis show that the redistribution of industry in particular, but also business and construction activities, leads to an increase in CO2 emissions, while the relocation of agriculture and transportation activities reduces emissions. We also find that the emission increase effect of the transfer of carbon intensive industries to new (host) regions is higher than the emission reduction effect induced by the agglomeration of clean industries in the original (home) regions. However, from 2014-2017, alongside the gradual industrial redistribution, China has also reduced aggregate CO2 emissions by 58.6 MT. In addition, the results show that population migration, which is due to redistribution of industry and other economic activity, has caused higher emission increases than emission reductions due to redistribution policies. We further calculate the marginal effect of industrial redistribution on CO2 emissions and draw out relevant policy implications.Key policy insightsIndustrial (and other economic activity) redistribution within a county can be not only an economic policy, but also an important policy instrument to mitigate CO2 emissions. This is the case in China.In the process of regional industrial redistribution, policymakers should aim to reduce the emission increase effect of transfer of carbon-intensive industries to host regions and to raise the emission reduction effect induced by an agglomeration of clean industries in home regions.Industrial redistribution is usually a long-term strategy for regional development within a county, and any reduction effects on CO2 emissions are likely to need time to appear.