Carbon mitigation and energy conservation effects of emissions trading policy in China considering regional disparities

Abstract

As an essential policy instrument for carbon mitigation and energy conservation, the effectiveness of China's pilot emissions trading scheme (ETS) since its implementation in 2011 requires investigation. This study explores whether and to what extent China's pilot ETS has affected carbon dioxide (CO2) emissions per capita and the efficiency of the policy regarding energy consumption per capita, also examining regional disparities. We use the difference-in-differences method to examine 31 Chinese provinces, autonomous regions and municipalities from 2000 to 2015. Three main findings emerge. First, the pilot ETS can effectively reduce local CO2 emissions, with reductions ranging between 15.96% and 18.94%. Second, the policy effect on carbon mitigation is significant and long-lasting, but gradually weakens, while the policy effect on energy consumption is not obvious and usually has a three-year lag. Third, considering regional disparities, the carbon mitigation effect is significant in eastern China but not in central and western China. This disparity is also evident for the energy conservation effect, but with a time lag. A placebo test also confirmed that the results are robust and significant. We propose policy suggestions to improve and prolong the efficiency of carbon mitigation and energy conservation and balance identified regional disparities.