Does environmental regulation improve the structure of power generation technology? Evidence from China's pilot policy on the carbon emissions trading market(CETM)

Abstract

• CETM pilot policy improved the power generation technology structure. • CETM pilot policy had better effects on the eastern region of China. • Baseline method has consistently reduced enterprises’ carbon emissions in the CETM. The carbon emissions trading market(CETM) policy is a market incentive-based environmental regulation, and its implementation effect in a country that is transiting from a planned to a market economy needs to be thoroughly analyzed. This study uses China's power generation industry as a sample to examine the impact mechanism of the CETM pilot policy on the power generation technology structure from 2009 to 2017. The results show that (1) at the national level, the CETM pilot policy has improved the power generation technology structure. This policy has promoted and restrained the utilization level of low- and high-emission power generation technology projects, respectively. (2) At the regional level, the policy has had better effects on the eastern region. (3) Regarding the carbon quota allocation methods, the "baseline method" has consistently reduced enterprises’ carbon emissions in the CETM. This study does not only provide empirical evidence for the effect of implementing market incentive-based environmental regulations in China but also provides a decision-making reference for enhancing the construction of China's CETM and improving the structure of power generation technology.