Abstract
The carbon emission trading scheme (ETS) is an essential policy tool for accomplishing Chinese carbon targets. Based on the Chinese provincial panel data from 2003 to 2019, an empirical study is conducted to measure the effects of carbon emission reduction and spatial spillover effect by adopting the difference-in-differences (DID) model and spatial difference-in-differences (SDID) model. The research findings show that: 1) The ETS effectively reduced the total carbon emissions as well as emissions from coal consumption; 2) such effects come mainly from the reduction of coal consumption and the optimization of energy structure, rather than from technological innovation and optimization of industrial structure in the pilot regions; and 3) the ETS pilot regions have a positive spatial spillover effect on non-pilot regions, indicating the acceleration effect for carbon emission reduction. Geographic proximity makes the spillover effect decrease due to carbon leakage.
Highlights
Net zero is a necessary step to mitigate global warming and has become an international consensus
The estimated results of Emission Trading Scheme (ETS) abatement effects are shown in Table 2; columns 1–2 show the results of the baseline regression of the ETS on total carbon emissions
The results show that the coefficients of did in columns 1–2 are negative and statistically significant at the 1% level, suggesting that the ETS has significantly reduced the total carbon emissions
Summary
Net zero is a necessary step to mitigate global warming and has become an international consensus. Some scholars have demonstrated that carbon leakage is inevitable in China’s ETS using CGE model (Tan et al, 2018; Wang et al, 2018), but the simulation results of the ex ante analysis depend heavily on the model setup and the assumptions of the model (Yu et al, 2021) Such methods often underestimate or ignore the efforts of non-pilot regions in carbon emissions reduction. The main contributions of this research lie in the following three aspects: 1) we analyzed the impact of the ETS on total carbon emissions and those caused by coal consumption, focusing on the effects of the ETS on coal removal; 2) we adopted the DID model to evaluate the emission reduction effect and the impact mechanism of the ETS; 3) we adopted the SDID model to analyze the spatial spillover effect of the policy and its stimulating effect on carbon leakage. The rest of the paper is organized as following: Section 2 explains the model setup and the selection of variables; Sections 3, 4 show the empirical processes and results; and Section 5 concludes the paper and offers corresponding policy recommendations
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