Difference in the drivers of industrial carbon emission costs determines the diverse policies in middle-income regions: A case of northwestern China

Abstract Carbon reduction actions may cause regions that recently entered the middle-income threshold to fall into “ecological poverty”. Identifying the factors driving industrial carbon emission costs (ICECs) growth is difficult and important for achieving “peak carbon dioxide emissions” and “carbon neutrality” goals. This study considers the northwestern provinces (NWPs) of China as a case, innovatively adopts the ecological service value (ESV) to convert the physical cost of industrial carbon emissions (PCICE) to the cost value of industrial carbon emissions (CVICE). The logarithmic mean Divisia index decomposition method is employed to analyze the impacts of the carbon emission coefficient, energy intensity, industrial structure, population size and economic factors on ICECs. Consequently, PCICE and CVICE in NWPs are increased, and CVICE is faster. The energy intensity and population size factors inhibit the increase in CVICE, and the energy intensity factor effect is stronger, the average contribution rate is in [-14.63%, −111.91%]. The carbon emission coefficient factor has a significant positive effect on CVICE, the average contribution rate is in [75.91%, 409.72%]. The economic and industrial structure factors have different effects on the direction and average contribution rate of CVICE in different provinces, the economic factor effect is obvious. The results show that the factors driving ICECs changes in middle-income regions are different. This study provides a novel theoretical framework and ideas for formulating diversified carbon emission reduction policies. It has important practical significance for different middle-income regions worldwide to formulate carbon emission reduction policies based on actual industrial economic development.