Carbon emission curbing effects and influencing mechanisms of China’s Emission Trading Scheme: The mediating roles of technique effect, composition effect and allocation effect

Abstract

Based on panel data from 2007 to 2016, this paper investigates the carbon abatement effect of China’s pilot Emission Trading Scheme (ETS) and the influencing paths of the policy at both national and regional level by using Difference in Differences model and parallel multiple mediator model. The results reveal that the policy has reduced the total carbon emission reduction by 13.39%, with an upward abatement trend annually. Secondly, a systematic framework containing technique effect, composition effect and allocation effect is proposed to further investigate the influencing mechanisms of the achieved emission curbing effect. It reflects that the policy has not yet promoted the low-carbon innovation completely, only innovation of high-quality played an effective mediating role. Meantime, two other influencing channels of industrial upgrading and optimized resource allocation are verified. Thirdly, policy’s heterogeneous impacts are detected by classifying China into three representative regions according to economic and geographical differences, where western China experiences the strongest emission abatement by 21.57%, whereas central China and eastern China is 9.83% and 6.65% respectively. Fourthly, assessments of the regional influencing mechanisms show that the mediating role of high-quality low-carbon technology innovation is only significant in the western region, while the other two regions tend to have rebound effect. Besides, the promotion of industrial upgrading is positively related to the development levels of regions, with the improvement of 18.01% in the eastern region, followed by 17.34% and 12.46% in the central and western region. Finally, the optimization of the resource allocation has not been promoted regardless of the regions. In general, although the current policy has a significant carbon reduction effect, there is still much space for potential abatement to be developed.