Carbon pricing or non-pricing for developing countries? A dual-track strategy for decarbonization in China

Abstract

ABSTRACT Unlike the decarbonization trajectories adopted by developed countries, some research suggests that non-pricing policies should be prioritized over pricing policies to mitigate carbon emissions in developing economies. This paper enriches the current literature on carbon pricing by empirically linking China’s carbon pricing and non-pricing policies, using a difference-in-differences approach. The results indicate the effectiveness of the carbon pricing strategy. Furthermore, by introducing an interaction effect model, we find that a higher carbon price will significantly increase the carbon emission abatement effects. In conclusion, the findings highlight the necessity of carbon pricing instruments for decarbonization in developing countries.