Can market-oriented and government-led spatial agglomeration of factories reduce carbon emission intensity? Evidence from China.

ABSTRACT

Both market-oriented and government-led spatial agglomeration of factories profoundly affect China's carbon emission intensity. However, few studies have comprehensively examined the effect of spatial agglomeration of factories driven by different motivations on carbon emission intensity, and often ignore the moderating effect of local government attention to the environment. This study attempts to incorporate market-oriented and government-led spatial agglomeration of factories into the same analytical framework and examine their interaction effects on carbon emission intensity. We first calculate an Agglomeration Index based on the geographic coordinates of micro-factories to measure market-oriented agglomeration of factories, and take development zone policies as a proxy for government-led agglomeration of factories. Based on city-level data from 1998 to 2013, we empirically analyze their impacts on carbon emission intensity and further explore regional heterogeneity and mechanisms. The results show that both the market-oriented and government-led spatial agglomeration of factories can significantly reduce carbon emission intensity through scale effect, innovation effect and structure effect. However, the agglomeration of factories caused by government forces has weakened the original effect of market-oriented agglomeration of factories in reducing carbon emission intensity. Heterogeneity analysis indicates that government-led agglomeration of factories is more effective in reducing carbon emission intensity in less-developed regions. Furthermore, the improvement of the governments' attention to the environment can further exert the positive effect of spatial agglomeration of factories on carbon emission intensity. Our study deepens the understanding of the effects of spatial agglomeration of factories caused by different motivations, and provides a reference for China and other developing countries to formulate relevant policies for reducing carbon emission intensity.