Agricultural insurance subsidies and agricultural carbon emissions in China: evidence from provincial multi-period DID, 2005–2019

Abstract

Against the backdrop of the “dual carbon” goals, low-carbon production transformation has become a critical imperative for promoting sustainable agricultural development. Studying how agricultural insurance subsidies affect Agricultural Carbon Emissions is practically significant for ensuring food security and facilitating the low-carbon transition of agriculture. Using provincial panel data from China spanning 2005–2019, this paper constructs a Multi-period Difference-in-Differences model based on whether a region is a pilot area for Agricultural Insurance Subsidy Policy, and examines the impact of Agricultural Insurance Subsidy Policy on Agricultural Carbon Emissions. The empirical results reveal that agricultural insurance subsidies significantly reduce Agricultural Carbon Emissions by approximately 3.4% on average. Heterogeneity analysis, grouped by geographical location, agricultural development level and grain production function, demonstrates that the emission-mitigating effect of the policy is more pronounced in eastern regions, areas with advanced agricultural economies, and major grain-producing areas. Mechanism analysis provides preliminary evidence consistent with theoretical expectations, suggesting that agricultural insurance subsidies may curb carbon emissions by boosting the adoption of green technologies and optimizing the agricultural industrial structure. Our findings align with micro-level evidence that agricultural insurance reduces chemical inputs, yet diverge from the classic moral-hazard prediction of increased input use. This divergence likely reflects the policy-oriented nature of China’s agricultural insurance, which is coupled with green technology extension services. The regional heterogeneity in policy effects suggests that emission reductions are contingent upon local agricultural modernization and institutional capacity, rather than automatic. This implies that insurance subsidies should be embedded within broader green technology promotion and industrial restructuring programs to effectively serve sustainable food systems. To fully unlock the emission reduction potential of agricultural insurance subsidies, strengthen agricultural carbon sequestration capacity, governments ought to roll out targeted measures: further prioritizing green incentives in agricultural insurance subsidy frameworks, integrating low-carbon production standards into subsidy design, and rolling out differentiated subsidy schemes across regions to jointly fulfill the dual objectives of food security and agricultural carbon abatement. Limitations include the use of provincial-level data, measurement uncertainty in carbon accounting and mechanism variables, and the absence of direct tests for food security indicators, which await future research.