Carbon decoupling effects of energy consumption permit trading schemes: Evidence from China

Abstract

As a fundamental policy instrument for facilitating the profound transformation of China's energy sector, the carbon decoupling effect of the energy consumption permit trading scheme (ECPTS) is a crucial issue to be evaluated. This paper aimed to explore the carbon decoupling effect and mechanisms of China's ECPTS by utilizing the difference-in-differences (DID) estimator. The findings indicated that the ECPTS significantly enhanced the degree of carbon decoupling, and the dynamic effect tended to gradually expand this decoupling effect. This conclusion holds even after conducting several robustness tests. Moreover, heterogeneity is observed in the carbon decoupling effect of the ECPTS, with regions characterized by higher levels of economic development, lower carbon emissions, and higher resource endowments exhibiting more pronounced decoupling effects. Furthermore, the mechanism analysis revealed that the ECPTS primarily improves carbon decoupling through the optimization of the energy mix and the reduction of the energy use scale. Conversely, the role of industrial structure and technological innovation has yet to fully manifest. Consequently, it is imperative to continue promoting and refining the construction of the ECPTS market. Additionally, stimulating investment in optimizing industrial structures and fostering technological innovation, along with the formulation of regionally tailored policy measures, may propel the carbon decoupling effect of ECPTSs.