Restructure or Misallocation? Enterprises’ Carbon Emission Intensity under Market Integration

Incorporating urbanization with carbon efficiency into one analytical framework could be a new method for formulating the regional carbon emission reduction path. Based on the panel data from 2001 to 2014, the two-way fixed effects (TWFE) and continuous differences-in-differences (DID) methods are adopted to examine how the county-to-district upgrading policy (CDUP) affects the efficiency of an enterprise’s carbon emissions. The results show that the CDUP will significantly decrease the efficiency of an enterprise’s carbon emissions. The average carbon emissions of enterprises increased by 0.886 per unit of output by the CDUP, which remains significant after controlling for endogeneity. Heterogeneity analysis shows that the impact of the CDUP is significant for enterprises in low-level cities, but not in high-level cities, which is closely connected with regional governance and enterprise productivity. Moreover, market integration, regional carbon carrying capacity and industrial agglomeration is introduced to explain the phenomenon. The results suggest that the urbanization policy should coordinate the characteristics of industries and areas. Furthermore, the results can provide suggestions for enterprise production and local governance toward sustainable development.