Is Emissions Trading Scheme (ETS) an Effective Market-Incentivized Environmental Regulation Policy? Evidence from China’s Eight ETS Pilots

Abstract

Climate change and environmental issues caused by carbon emissions have attracted the attention of governments around the world. Drawing on the experience of the EU, China is actively developing a national carbon emissions trading market, trying to encourage emission entities to incorporate carbon emissions reduction into production and consumption decisions through carbon pricing. Is this scheme an effective market-incentivized environmental regulatory policy? Since China successively launched ETS pilots in 2013, the effectiveness of reducing carbon emissions has become one of the current focus issues. This study uses the difference-in-differences (DID) method to evaluate the impact of ETS implementation on emissions reduction and employs the Super-SBM model in data envelopment analysis (DEA) to evaluate the emission-reduction efficiency of eight ETS pilots in China. We find that the carbon trading policy has achieved emission-reduction effects in the implementation stage, and the greenness of economic growth has a significant positive impact on regional GDP. The establishment of China’s unified carbon market should be coordinated with regional development. Some supporting measures for regional ecological compensation and the mitigation of regional development are yet to be adopted.

Reduction effect of carbon markets: A case study of the Beijing-Tianjin-Hebei region of China

“…Similarly, other studies used a DID model to test China's carbon trading pilots' effect on reducing carbon intensity. Their findings are close to ours, showing that the carbon intensity in the carbon trading pilots decreased by 24.85% (Xuan et al, 2020) and 11% (Chai et al, 2022). Most studies focused on evaluating the effectiveness of the carbon trading policy at the national level.…”

“…Their studies commonly used a DID model to compare the policy group (treatment) and the nonpolicy group (control). Most of the research concluded that the carbon market is an efficient carbon mitigation way (Jotzo et al, 2018;Dong et al, 2019;Zhou et al, 2019;Chai et al, 2022). In the background of achieving carbon neutrality, some scholars proposed that the carbon trading policy has a significant and sustainable impact on achieving carbon neutrality (Wang et al, 2022).…”

Evaluating the Effect of China’s Carbon Emission Trading Policy on Energy Efficiency of the Construction Industry Based on a Difference‐in‐Differences Method

“…Wu et al confirmed that the carbon emission trading policy had a significant impact on agricultural ecological efficiency [22]. Chai et al called carbon emission trading policy an effective market-driven environmental regulation policy and demonstrated it from the perspective of carbon emission efficiency [11]. e fact that China's coal emissions trading policy improves regional energy efficiency was demonstrated in the article of Zhang et al [5].…”

“…is article focuses on the impact of the carbon emission trading policy on EECI, which fills this research gap. Furthermore, recent articles on the evaluation of carbon emission trading policy make extensive use of DID approach [1,3,4,11,20,22].…”

“…Using the DID approach, the net impact of policy implementation is estimated by comparing the intervention and control groups before and after the event [24]. PSM-DID has been also adopted by many researchers [3,4,11,23], and it can select more suitable samples to reduce the deviation caused by sample selection [25]. In this article, DID is used for benchmark estimation, and PSM-DID is used to further test the estimation results.…”