Carrot or Stick? Policy mix and its direct and spillover contributions to regional carbon emissions

The effective promotion of carbon emission reduction is a central issue of global concern. In response to the intricacy of the emerging challenges, policy interventions have evolved from one-dimensional, single measures to comprehensive, portfolio-type measures. Nevertheless, whether policy combinations have enhanced carbon emission reduction remains controversial and under-explored. This study takes prefecture-level cities in China as the research sample, constructs a spatial econometric model and empirically examines the carbon emission reduction effectiveness of the policy mix of subsidy-based Carrot policies and penalty-based Stick policies. The findings indicate that the implementation of Carrot and Stick policies leads to a reduction in carbon emissions by 0.452 and 0.46 units, respectively, while the policy mix does not result in the anticipated synergistic effects. Both Carrot and Stick policies exhibit positive spatial spillovers, and the policy mix is also found to synergistically contribute to carbon emission reductions in neighboring cities. Further analysis indicates that the synergistic effects of the policy mix are more likely to occur in cities with higher levels of development, greater marketization, or higher energy consumption efficiency. Consequently, it is imperative to apply appropriate Carrot or Stick policies or policy mix judiciously according to city characteristics, in order to promote regional carbon emission reduction more effectively.