Can China’s policy of carbon emission trading promote carbon emission reduction?

Abstract

Empirical evidence shows that the market-oriented trading mechanism is an important means for the Chinese government to control environmental pollution. It also has a significant effect on enterprises’ carbon technology level and low-carbon energy investment. Based on a quasi-natural experiment of China’s carbon emission trading pilots, this study adopts a difference-in-difference model to explore the effect of carbon emission trading policies on carbon emission reduction. It also examines the mediating effects of total energy consumption, technical research level, and the energy consumption structure. The results show that a carbon emission trading policy, economic development, technical research level, and opening to the outside world can significantly reduce carbon dioxide emission intensity and promote carbon emission reduction. By contrast, the industrial structure and environmental protection planning hinder the carbon emission reduction process, while the forest coverage rate has no significant effect on carbon emission reduction. Additionally, when implementing carbon emission trading policy, local governments have remained focused on reducing total energy consumption and optimizing the energy structure, but they have not actively conducted technical research.