Balancing through agglomeration: A third path to sustainable development between common prosperity and carbon neutrality in China

Carbon neutrality and common prosperity have been highlighted as key goals for the Chinese government in the coming decades. However, to date, no single study has examined the relationship between common prosperity and carbon emissions. This study addresses this gap by utilizing panel data from 31 provinces in China spanning from 2000 to 2021 and employing a fixed-effect spatial Durbin model to examine the direct and spatial spillover effects of common prosperity on carbon emissions. The results reveal a U-shaped relationship between common prosperity and carbon emissions within a local region, indicating a trade-off between achieving common prosperity and reducing emissions in the long term. Additionally, industrial agglomeration is found to have played a moderating role in this curvilinear relationship. Higher levels of industrial agglomeration can flatten the U-shaped curve and shift the turning point to the right, suggesting the potential for carbon decoupling of common prosperity—a scenario where economic growth and environmental sustainability can be achieved concurrently, making it a critical goal for polixy-makers. Furthermore, the study demonstrates an inverted U-shaped curve for the spatial spillover effect of common prosperity on carbon emissions. Promoting agglomeration in neighboring regions can mitigate the spatial spillover effects of common prosperity on carbon emissions. These findings emphasize the need for collaborative efforts among regions to achieve a win-win outcome of common prosperity and carbon neutrality.