Can the Carbon Emissions Trading System Improve the Green Total Factor Productivity of the Pilot Cities?—A Spatial Difference-in-Differences Econometric Analysis in China

Dawei Huang,Gang Chen

doi:10.3390/ijerph19031209

Abstract

The carbon emission trading system (CETS) is an important market-oriented policy tool for the Chinese government to solve the problem of high emissions and achieve the growth of green total factor productivity (GTFP). This study makes up for the neglect of the spatial effect of CETS policy in previous studies and adopts the spatial difference-in-differences (DID) Durbin model (SDID-SDM) method of two-way fixed effects to scientifically identify the direct and spatial effects influencing the mechanisms and heterogeneity of CETS on urban GTFP based on the panel data of 281 cities in China from 2004 to 2017. It found that China’s CETS significantly improved the GTFP of pilot cities but produced a negative spatial siphon effect that restricted the growth of GTFP in surrounding cities. Benchmark results are robust under the placebo test, the propensity score matching SDID (PSM-SDID) test, and the difference-in difference-in-differences (DDD) test. The mechanism analysis shows that the CETS effect is mainly realized by improving energy efficiency, promoting low-carbon innovation, adjusting the industrial structure, and enhancing financial agglomeration. In addition, we find that policy effects are better in cities with high marketization, strong monitoring reporting and verification (MRV) capabilities, high coal endowment, and high financial endowment. Overall, China’s CETS policy achieves the goal of enhancing GTFP but needs to pay attention to the spatial siphon effect. In addition, our estimation strategy can serve as a scientific reference for similar studies in other developing countries.

Highlights

The climate problem is one of the most serious problems faced by mankind in the 21st century [1,2,3]
By observing the estimated coefficients of the core explanatory variables after the implementation of the policy, we find that the coefficients in the 1–3 years after the implementation of the carbon emission trading system (CETS) pilot policy were not significant, which means that within the first four years of the policy, CETS did not have an immediate policy effect on the promotion of urban green total factor productivity (GTFP)
The results show that after controlling for the two-way fixed effect of the city’s individual effect and the year-time effect, without considering the spatial effect, CETS showed a negative inhibitory effect on the GTFP of the pilot cities

Summary

Introduction

The climate problem is one of the most serious problems faced by mankind in the 21st century [1,2,3]. In response to the global climate crisis, countries around the world have taken the initiative to put “carbon peak” (many advanced economies have achieved “carbon peak”) and “carbon neutrality” on the agenda. As a major carbon emitter in recent years, China pledged at the United Nations Climate. More and more studies have shown that the carbon emission trading system (CETS) plays an important role in reducing carbon dioxide emissions; for example, the United States Regional Greenhouse Emission Reduction Initiative (RGGI) [9,10], the European Union’s Carbon Emissions Trading System [11,12], South Korea’s 2015 “Greenhouse. Gas Emission Allowance Allocation and Trading Act” [13] are important measures for advanced economies to achieve emission reduction targets, which are generally considered.

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Discussion

Conclusion