1. Introduction
Global warming presents a grave risk to both natural ecosystems and human societies, largely orchestrated by the emissions of greenhouse gases, notably carbon dioxide [
1,
2]. The task of realizing carbon emission reduction (CER) is a globally significant issue, particularly in the case of countries like China. This is due to the fact that China is the largest emitter of greenhouse gases globally, accounting for one-third of global emissions in 2023, and is distinguished by its extensive fossil energy usage and comparably slow-paced progression in green technology [
3]. Releasing CER requires the provinces, cities, and autonomous regions to increase investment in environmental protection, reduce energy consumption, and promote high-quality economic development [
4,
5,
6]. Green investment, as a form of direct regulatory environmental policy instrument, is a key component in promoting carbon emission reduction and environmental governance in the new era [
7]. Therefore, in the context of China’s “carbon peaking and carbon neutrality” strategy, clarifying the comprehensive impact of multi-governmental green investment (GGI) on CER is very important in the context of global efforts to reduce carbon emissions [
8,
9] and needs to be further studied.
In recent years, numerous indices have been developed from multiple perspectives to measure CER [
10,
11]. These indices often consider aspects such as the type of economic activity (e.g., energy production, industrial processes), the greenhouse gas involved (e.g., carbon dioxide, methane), and the emissions intensity (emissions per unit of output) [
12]. Some commonly used indices in the multidimensional CER process index system include total carbon dioxide emissions (CE) [
13], carbon emissions intensity (CEI) [
14], per capita emissions (PCE) [
15], carbon emissions decoupling, and so on. And previous international literature has scrutinized carbon emissions with different determinants [
16], such as the impacts of urbanization [
17,
18], energy use [
19], renewable energy consumption [
20,
21], foreign direct investments [
22], technological innovation [
23], economic growth [
24,
25,
26], population density [
27], green finance [
28,
29,
30], fractional vegetation coverage, nighttime light index [
14], and so on. Among these determinants, GGI holds a significant role in CER, which has been indicated in the previous study [
12,
31,
32]. Furthermore, they also demonstrate the varied impacts of GGI on the different CER indicators [
31]. On the one hand, multilevel GGI can directly promote CER, as well as play an educative role, such as funding projects that encourage green household consumption, thereby indirectly diminishing household consumption of carbon-intensive goods. On the other hand, governments could increase investment in strategically leveraging energy transformation, renewable energy technologies, among others, to mitigate carbon emissions [
33]. Consequently, GGI plays a complex yet pivotal role in CER [
12].
Previous studies have applied different methods from multiple spatial scales and multiple research angles to evaluate the complex relationship between different determinants and CER [
34,
35]. Among these methods are regression analysis, dynamic spatial panel models [
24], the Granger causality test, threshold effect models [
36], geographic weighted regression [
37,
38], quantile regression analysis [
39], partially linear functional-coefficient models [
32], and so on [
40]. Additionally, studies have utilized several decomposition methods, such as structural decomposition analysis, indicator decomposition analysis [
41], and other various econometric models [
42,
43], such as the LMDI equation [
44,
45], IPAT equation, PLS–STIRPAT model [
46]. Altogether, these investigations have played an indispensable role in shaping our understanding of the relationship between GGI and CER [
47], and they have also been instrumental in providing valuable policy recommendations that have greatly assisted governmental decision-making processes [
12]. However, statistical relationships may indeed change based on the different models, variables, spatial and temporal aspects, index measurement, sample selections, and so on, even sometimes, some contradictory conclusions may indeed emerge, implying the complexity of the relationship between GGI and CER [
48]. Possible reasons for such outcomes most likely stem from the failure of considering the data’s hierarchical nested structure, which can lead to misconstrued interpretations [
49,
50]. Taking into account the data’s hierarchical nested structure can provide a more accurate and nuanced understanding of the relationship between GGI and CER.
Most of the existing studies are based on the same level of data, such as national, regional, provincial, and prefectural city scales, to study the relationship between GGI and CER [
34,
51]. However, the panel data used in these prior studies exhibits a multi-layered, nested feature that is typical of a multi-governmental management system [
52,
53]. In such a system, economic and social development at the lower levels, such as prefectural cities, are influenced by policies and strategies set by the higher provincial level [
49]. The accuracy of the estimated results can be impacted negatively if we ignore these key characteristics. Moreover, when looking at different levels of administrative divisions, it is important to consider the possibility of interactive effects between variables at these different levels [
54]. This cross-level interactive impact of GGI on CER is often overlooked and should be taken into account in studies.
It is a crucial point to note that the effect of multi-level GGI on CER does not align with the assumptions of a normal distribution, variance homogeneity, and independent random errors between individuals [
55]. That means traditional linear regression models, which rely on these assumptions, are not adequate to handle panel data with multi-layer nested features. Such a situation calls for “multilevel analysis”, which includes analytical approaches such as random effects, random coefficient models, and mixed-effects models [
56]. Among them, the Hierarchical Linear Model (HLM), developed in the 1990s, has proven particularly suitable for accurately estimating panel data with nested features [
50,
57]. As a result, a considerable number of studies have adopted multi-level linear models to simulate the multi-level relationship of factors in various fields, such as education [
58], economic development [
59,
60], social management [
61], and environmental quality [
62]. HLM has made some progress in methodological innovation, such as advancing from two-level models to three hierarchical linear models [
56] or combining HLM with GWR to develop a hierarchical and geographically weighted regression (HGWR) model [
63]. The adaptability of the multi-level linear model is proposed to fit the situations where prefectural cities are nested in provinces [
64]. However, there has been a sparse application of the hierarchical linear model to analyze the multi-level relation between GGI and CER, unfortunately [
65].
The diversity of China’s regional characteristics—spanning natural resource endowments, social and demographic conditions, economic development, industrial structure, and characteristics of energy utilization—inherently results in a great variation in the CER process across different regions [
66]. Since the performance of the reform and opening up policy in mainland China, there has been a significant disparity in the pace and intensity of urban development and the quality of natural resources and environmental preservation across different provinces [
67]. These factors directly and indirectly affect the relationship between multi-level GGI and CER [
68,
69]. Therefore, it is important to examine whether and how this relationship varies across regions that differ in area sizes, terrain topography, and economic development levels [
47], which may facilitate the local contextualization of GGI to enhance its role in promoting sustainability. These examinations would provide new insights into the heterogeneous and cross-level interactive effects of GGI on CER, particularly with regard to the three indicators of CER.
In this study, three-level hierarchical linear models are used to investigate the interaction between multi-level GGI and CER. The core contributions of our study, distinguishing it from prior research, are threefold: (1) The creation of six hierarchical linear models aimed at examining GGI’s impact on three key CER indicators: CE, CEI, and PCE. (2) We conducted a comprehensive analysis to investigate the influence of both provincial and prefecture-level GGI on CER, and how provincial-level governmental green investment (GGI_prov) exerts an indirect impact on the prefecture cities’ CER via the prefecture-level governmental green investment (GGI_city). (3) We explored how the heterogeneous impact of GGI on CER differs across regions with different area sizes, terrain complexity, and levels of economic development. The research contributes to offering a point of reference for relevant departments to develop policies on GGI and CER, aiding governmental efforts in implementing CER policies tailored to different regions.
5. Discussion
5.1. Influence of GGI on CER
Based on our research, we found that both GGI_city and GGI_prov promote the CER of the prefecture-level cities. The primary reason is that GGI signifies governmental support for businesses engaged in environmental products and services [
12]. Such support expedites the transformation of traditional energy firms, prompting them to allocate more resources towards CER. Moreover, GGI mitigates the allocation of capital to polluting enterprises and reduces environmental litigation costs, thereby fostering increased social investment in green production and CER. An intriguing finding is that lnGGI_city and lnGGI_prov have differential impacts on different CER indicators. Specifically, lnGGI_city and lnGGI_prov exert a strong positive influence on lnCE and lnPCE, while they have a weak negative effect on lnCEI. Notably, the impact strength of lnGGI_prov on lnCE and lnPCE is more pronounced than that of lnGGI_city. Conversely, the influence of lnGGI_prov on lnCEI is less intense than lnGGI_city. Thus, it is imperative to consider a variety of CER indicators when evaluating the impact of GGI on these indicators. Furthermore, lnGGI_prov significantly moderates the effect of lnGGI_city on lnCE. The rationale underlying the interaction term lnGGI_city:lnGGI_prov is elucidated as follows: the GGI initiatives undertaken by provincial governments that enhance carbon emissions reduction (CER) in prefecture-level cities are pivotal. On the one hand, GGI_prov can extend the benefits to a wider demographic, allowing a greater number of citizens to partake in public utilities, thereby fostering CER at the prefecture level. Alternatively, the GGI activities by provincial governments facilitate the establishment of a closely integrated hierarchical organizational framework, which further supports CER efforts in subordinate jurisdictions.
Upon grouped analysis by provincial area size, terrain complexity, and economic development level, significant heterogeneous impacts on the effect of GGI on CER are observed. Based on provincial area differences, the effect of lnGGI_city on lnCE, lnCEI, and lnPCE is more pronounced in the large provincial area group. Conversely, in the large provincial area group, the effect of lnGGI_prov on lnCE and lnPCE is stronger, but for lnCEI, it is weaker. The interaction term lnGGI_city:lnGGI_prov has both reached statistical significance, indicating that lnGGI_prov significantly influences the effect of lnGGI_city on CER, with the patterns of influence varying across different indicators and groups. The reasons for this may include spatial limitations in larger provinces that often restrict the reach of many investment services, thereby reducing the extent of provincial investment support. These services may not fully extend to all prefecture-level cities. Furthermore, a lack of administrative efficiency and effective public management within the intricate hierarchical organization might introduce barriers to the delivery of public services.
Under the influence of provincial terrain differences, in the complex terrain group, the effects of lnGGI_city on lnCE and lnPCE are weaker, but for lnCEI, it is stronger. This is markedly different from the results based on provincial area differences. In the complex terrain group, the effect of lnGGI_prov on lnCE is weaker, but for lnCEI and lnPCE, the effects are stronger. The interaction term lnGGI_city:lnGGI_prov significantly influences lnCE, lnCEI, and lnPCE, which is consistent with the results based on provincial area differences. The reason may be that in regions with simple terrain, infrastructure such as transportation is convenient, and public services are efficient, which facilitates the radiating effect of lnGGI_prov.
Under the influence of economic development level, in the high economic development group, the effects of lnGGI_city and lnGGI_prov on lnCE and lnPCE are stronger, but for lnCEI, it is weaker. This aligns well with the findings related to provincial terrain differences. The interaction term lnGGI_city:lnGGI_prov significantly influences lnCE and lnCEI but not lnPCE. This differs notably from the impacts of provincial area size and terrain complexity. The reason may be that, in regions with higher economic development, the governmental green investment activities of prefecture-level cities are very active, while the relative scale of GGI_prov is relatively modest.
5.2. Policy Implications
Our findings emphasize that the three CER indicators each reflect issues at distinct levels. Consequently, tailored measures should be proposed for each specific CER objective. Furthermore, there is room to consider the development of a comprehensive indicator that captures the holistic picture of CER. Significantly, our findings highlight the interactive effects of cross-level GGI, taking into account the spatial nesting hierarchy of administrative divisions, which is often overlooked [
56]. It is essential for governmental green investments to not only persistently augment the scale of environmental protection expenditures but also to strategically consider the interplay between provincial and prefectural-level governments in shaping CER. This necessitates a thoughtful optimization of the allocation ratios of green investments by both provincial and prefectural-level governments to ensure the most effective environmental outcomes.
The influence of GGI on CER also needs to be adapted to local conditions and take into account regional disparities. When allocating GGI at the sub-provincial level, it is essential to consider local factors such as provincial area size, terrain complexity, and economic development level [
12]. Evidently, differences in provincial area, terrain, and provincial economic development level exert significant heterogeneous impacts on the effect of GGI on CER. This underscores the necessity of making differentiated arrangements for GGI based on different conditions. In provinces with larger areas, for lnCE and lnPCE, it is advisable to increase lnGGI_prov. For lnCEI, the focus should be on increasing lnGGI_city. In provinces with complex terrain, the effect of GGI on lnCE is relatively low, thus the emphasis should be on increasing GGI in the simple terrain group. For lnCEI, both lnGGI_city and lnGGI_prov should be increased. For lnPCE, the focus should be on increasing lnGGI_prov. In provinces with a low level of economic development, the effect of GGI on lnCE and lnPCE is relatively low, thus the emphasis should be on increasing GGI in the high-level development group. For lnCEI, both lnGGI_city and lnGGI_prov should be increased. If the aim is to leverage lnGGI_prov to stimulate lnGGI_city, the promotional effect will be stronger in the small provincial area group and the simple terrain group.
5.3. Limitations
There are some limitations in this study. Firstly, the acquisition of county-level data on GGI and CER presents notable challenges, which has resulted in the absence of a county-level analysis within this research framework. Secondly, the comprehensiveness of the control variables is potentially insufficient. This study has considered only eight control variables due to constraints in data collection, which may have overlooked other driving forces. Thirdly, the research has not taken into account the potential non-linear dynamics of the relationship between GGI and CER, such as the possibility of an inverted U-shaped relationship, nor has it examined the spatial spillover effects of governmental green investment on emissions. Fourthly, the lack of detailed and specific data is evident, as the terms GGI_city and GGI_prov have not been further broken down or subcategorized in a manner similar to GDP2 and GDP3, thereby limiting the depth and comprehensiveness of the analysis. Finally, the study discerns a significant influence of the temporal variable on CE and PCE and identifies a robust correlation with the GGI variables. Future research is encouraged to incorporate models that account for the temporal effects to provide a more nuanced understanding of these dynamics.