In the relentless pursuit of rapid urban development, Chinese local governments have adopted nuanced land supply strategies that simultaneously fuel economic growth and exacerbate environmental concerns. The delicate balancing act between leveraging land as a financial resource and mitigating carbon emissions lies at the heart of this emerging urban challenge. As fiscal pressures mount and development competition intensifies, the distinct approaches taken by municipalities reveal a complex landscape where land serves not just as a physical asset but as a potent fiscal instrument underpinning urban expansion and infrastructure investment.
Central to the financing model employed by these local governments is the exploitation of land as a resource through dual channels: land-based fiscal revenue and land-based investment. Commercial and residential lands are monetized to generate substantial fiscal income, while industrial lands are often provided at subsidized rates to stimulate economic activity. This bifurcated strategy has given rise to a land-centered wealth accumulation paradigm, where the state’s monopoly over land supply creates powerful incentives and pronounced leverage effects that translate into unprecedented fiscal and financial gains. However, this model inherently ties urban growth to land transactions and financial mechanisms, such as urban investment bonds and bank loans issued by Local Government Financing Vehicles (LGFVs), thereby embedding land deeply in the financial apparatus of urban development.
The consequences of this land-centric development strategy extend beyond pure economics; they reverberate powerfully in environmental domains, particularly in carbon dioxide emissions. Urbanization inevitably spurs an increase in construction activity, transportation demand, and a significant encroachment upon ecological land, collectively intensifying CO₂ emissions. The study reveals how the competition among regions to emulate successful growth trajectories exacerbates this phenomenon, as cities tend to converge towards land supply strategies that prioritize rapid development even at the cost of environmental sustainability. The spatial spillover effects of these strategies highlight an alarming dynamic: land-based fiscal revenue, in particular, has a pronounced spillover effect, amplifying carbon emissions not only locally but also in adjacent areas, presenting a formidable regional coordination challenge.
The nuance between fiscal revenue from land and land-based investment is critical. While land-based fiscal revenues show a clear and robust connection to heightened carbon emissions in neighboring cities, the relationship between land-based investments and emissions is more intricate and varies significantly across regions. This variation reflects the complexity of policy interventions and the heterogeneity of economic landscapes, particularly evident in China’s western and less-developed cities. These regions tend to grapple with underdeveloped financial infrastructures, necessitating stronger low-carbon land supply policies to mitigate their disproportionate environmental impact. The financial distortions created by current land policies further complicate efforts to align land use with green transition ambitions, underscoring the pressing need to rethink the symbiosis between land governance and financial market development.
Notwithstanding these challenges, Chinese local authorities have not remained passive in addressing the environmental ramifications of their land supply strategies. Initiatives promoting the “ecological redline,” efforts towards constructing low-carbon cities, constraints on construction land supply, preserving ecologically sensitive areas, and comprehensive territorial spatial planning signify proactive steps towards sustainable land management. However, the study emphasizes that the prevailing “seeking development with land” model continues to potentiate CO₂ emissions, highlighting a tension between economic imperatives and climate goals. This underscores a crucial inflection point in China’s urban development trajectory, where innovative paradigms for land allocation must be forged under stringent carbon emission constraints to harmonize growth with ecological stewardship.
A pivotal insight from this study lies in the revelation that land-based fiscal revenue is more strongly associated with increased carbon emissions compared to land-based investment. This nuanced differentiation challenges prevailing assumptions about land’s role in urban sustainability and signals policymakers to scrutinize the underlying fiscal incentives that drive land transactions. Moreover, it suggests that traditional environmental regulatory frameworks may be weakening in their efficacy to curb carbon emissions within the context of land market dynamics. The insights from this research carry profound implications, providing a foundation for crafting scientifically informed land supply strategies that reconcile economic development with low-carbon urban futures.
The findings urge a strategic readjustment of the land supply structure towards industries characterized by low carbon footprints, high technology content, and heightened efficiency. Such a reorientation can pivot China’s land market towards sustainable development pathways, turning land use into a lever for climate-friendly growth. Additionally, the study advocates for a recalibration of local government performance metrics, emphasizing the integration of environmental quality assessment into promotion and evaluation criteria. By elevating the importance of low-carbon objectives within the bureaucratic reward system, local authorities could be dissuaded from channeling land resources indiscriminately towards high-energy-consuming enterprises, thereby aligning economic incentives with ecological responsibility.
The recent reform whereby the Ministry of Finance in China assumes direct control over land transfer fee collection marks a significant institutional shift. This policy indicates a decisive move away from the entrenched practice of local governments monetizing land transfers to fund rapid expansion, hinting at an impending transformation in land fiscal policies. The implications are manifold: local governments may need to extricate themselves from the “land for development” model, necessitating alternative fiscal strategies that decouple growth from carbon-intensive land transactions. Such reforms, while rife with challenges, also open a critical window of opportunity for embedding low-carbon principles into the architecture of urban land governance.
From the natural resource management perspective, regulating land transfers with an explicit goal of carbon emission reduction emerges as a powerful instrument in China’s broader climate strategy. Achieving carbon neutrality, however, transcends land use policies alone and demands a concerted, multifaceted approach. Market-based mechanisms like carbon taxes and emissions trading systems, energy sector restructuring, industrial upgrading, and breakthrough technologies such as carbon capture and storage (CCS) coalesce to form the backbone of this endeavor. The study’s elucidation of land’s central role in urban fiscal strategies enriches this mosaic, suggesting that comprehensive climate solutions must integrate land policy reforms as a core component to be effective.
Looking ahead, the study invites further inquiry into the potential efficacy of land marketization in resolving misallocations created by government-directed land distributions. The over-allocation of residential land juxtaposed with significant population declines in certain urban areas opens questions about urban land dynamics, demographic shifts, and sustainable planning practices. These unresolved issues present fertile ground for future research, which could shed light on optimizing land resources amid shifting economic and social paradigms.
In summation, the exploration of urban land supply strategies in China reveals a critical intersection of fiscal policy, urban development, and environmental sustainability. Local governments’ reliance on land as a fiscal and investment tool has propelled vast urban transformations but at the cost of intensified carbon emissions and ecological strain. Addressing this conundrum requires systemic reforms—restructuring land supply frameworks, realigning bureaucratic incentives, and implementing rigorous environmental assessments. As China strides toward its carbon neutrality commitments, this research underscores land policy’s indispensable role as both a challenge and opportunity in crafting resilient, sustainable urban futures. The path forward lies in harmonizing economic aspirations with planetary boundaries, a delicate endeavor demanding innovation, political will, and cross-sectoral collaboration.
Subject of Research: Urban land supply strategies and their impact on carbon emissions within Chinese cities, focusing on the roles of land-based fiscal revenue and land-based investment.
Article Title: Urban land supply strategies and carbon emissions in China: from the perspective of land-based fiscal revenue and land-based investment
Article References:
Deng, S., Zhang, L. Urban land supply strategies and carbon emissions in China: from the perspective of land-based fiscal revenue and land-based investment. Humanit Soc Sci Commun 12, 1519 (2025). https://doi.org/10.1057/s41599-025-05804-w
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