Unfavorable weather, favorable insights: Exploring the impact of extreme climate on green total factor productivity

Abstract

Green total factor productivity (GTFP) evaluates the efficiency of economic output concerning environmental and resource input consumption, serving as a critical metric for sustainable economic development. Although existing literature has explored various determinants of GTFP, there is a lack of empirical studies examining the relationship between extreme climate (EC) and GTFP. This study investigates the impact of EC on GTFP using balanced panel data from 30 Chinese provinces from 2005 to 2022. Our findings indicate that EC significantly and negatively affects GTFP, a conclusion that remains robust after a series of tests. Significant regional heterogeneity exists in this impact, with western regions being the most severely affected. Extreme rainfall exerts the most pronounced negative effect among different extreme climate events. Mechanism tests reveal that EC reduces GTFP by undermining economic growth and diminishing knowledge spillovers. Further research indicates that the negative impact of EC on GTFP is predominantly observed in areas with high climate policy uncertainty and low human capital levels. The effect shifts from negative to positive in regions with high human capital. These findings underscore the urgent need for targeted climate resilience policies to safeguard and enhance regional GTFP.