Dual-circulation: influence mechanism of ETS's carbon reduction and its spatiotemporal characteristics based on intensity modified SDID model

Abstract

Traditional DID models overlook variations in policy intensity, causing estimation deviations from the actual situation and a limited understanding of the influence mechanism. In response, the Intensity Modified SDID Model is built to examine the influence mechanism of ETS's carbon reductions. Moreover, through model extensions, the study explores the spatiotemporal characteristics and heterogeneities of ETS’s effects. Results show that: (1) "Dual-circulation" influence mechanism is confirmed, where ETS directly contributes to carbon reductions (2.70% to 10.0% impact) through external pathways, and internal pathways continuously strengthen reduction effects, comprehensive mechanisms are thereby formed and enhanced based on interaction among internal and external pathways. (2) Reasonable ETS levels are estimated and proposed to achieve "Dual Carbon Target", constraining nationwide carbon quotas by 20 billion tons/year, increasing carbon trading volumes by 80 thousand tons/year, and elevating the carbon trading prices by 100 RMB (14 USD) per ton. (3) ETS's carbon reduction effects are identified with temporal and spatial characteristics, temporally, effects peak in the 4th period (Event+4) but diminish in the 5th period (Event+5), spatially, effects peak in areas distancing around 1000 km but disappear beyond 1500 km. (4) ETS also has synergistic effects with atmospheric pollution reduction, including industrial emissions of sulfur dioxide and smoke (dust), but are insignificant to industrial emissions of wastewater and solid waste.