Abstract
Energy policies have the potential to create an uneven distribution of benefits and responsibilities among different cities, but there is limited empirical research on this topic. We first employ the difference-in-differences (DID) model to assess the average impact of the ETS policy on the local economy. Then, we utilize the changes-in-changes (CIC) model to examine the distributional influence of the ETS policy on gross domestic product (GDP) across cities in China. The result shows that the ETS policy can effectively promote urban economic development. Moreover, mechanism analysis shows that the regressive beneficial effects of the ETS policy on innovation can surpass its regressive negative impact on foreign investment and industrial structure, further contributing to a regressive positive influence on GDP. This study indicates that the ETS policy could widen the gap between developing and developed cities, which raises the equity concerns of energy policy efforts.
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