Does carbon emission trading scheme really improve the CO2 emission efficiency? Evidence from China's iron and steel industry

Abstract

The carbon trading market is an effective way to mitigate the threat of climate warming. In the context of carbon neutrality, what is the carbon emission trading scheme's carbon reduction effect? This paper answers the question by examining the carbon efficiency of China's iron and steel industry. This study first constructs CO2 emission efficiency by employing the data envelopment approach. It then uses the synthetic control method to identify the impact of the carbon emission trading scheme on the CO2 efficiency of the iron and steel industry. The results show that CO2 emission efficiency in pilot provinces increased at a 5% significance level compared with the counterfactual scenario. The carbon trading market plays a vital role in industrial CO2 emission efficiency improvement in Guangdong, Shanghai, Tianjin, Hubei, and Chongqing. From a dynamic perspective, the policy effect of enhancing CO2 efficiency becomes more prominent over time. Moreover, the effectiveness degree of the carbon emission trading scheme varies across pilot provinces, caused of regional policy differences. Based on the findings, we put forward targeted suggestions for improving the newly-established national carbon trading market.