Can carbon trading policy and local public expenditures synergize to promote carbon emission reduction in the power industry?

Abstract

The power industry is the largest carbon-emitting sector in China, accounting for about 40% of the country's total carbon emissions. Studying the carbon emission reduction from the perspective of the power industry has important theoretical and practical significance for formulating targeted carbon emission reduction policies. This study examines the carbon reduction effect of the carbon trading policy, local public expenditure, and the synergistic scenario of the both in the power industry of 30 provinces in China from 2010 to 2019. The study shows that: (1) The carbon trading policy significantly promotes carbon reduction in the power industry, and the longer the carbon trading policy is implemented, the stronger the inhibitory effect. The carbon price, carbon market activity, and carbon market size in the carbon market mechanism have a significant negative correlation on the carbon emissions of the power industry. (2) In the overall period from 2010 to 2019, the carbon intensity of local public expenditure (CIPE) made the largest contribution to promoting carbon reduction in the power industry, with -175.581%, while the effect of public expenditure intensity on labor input (PO) contributed the most to the suppression of carbon reduction in the power industry, with 136.930%. (3) Under the synergy effect of carbon trading policy and local public expenditure, the share of local public expenditure (ALG) and per capita GDP (PGDP) can promote carbon reduction in the power industry. Paying attention to the timing, distribution, and complementarity of policies to promote the synergy effect of carbon trading policy and local public expenditure is a major feature of realizing carbon emission reduction in the power industry, green economic development, and improving China's unified carbon market.