Effect of the Emissions Trading Scheme on CO2 Abatement in China

Qian Wang,Shuanping Dai,Cuiyun Gao

doi:10.3390/su11041055

Qian Wang, Shuanping Dai + Show 1 more

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https://doi.org/10.3390/su11041055

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Abstract

This article takes advantage of the pilot Emissions Trading Scheme (ETS) project to estimate the causal impact of the ETS on CO2 abatement in China. The CO2 emissions and CO2 intensities of each province are calculated by using the fossil fuel data of 30 provincial administration regions from 2006 to 2016. Then difference in difference (DiD) models and propensity score matching (PSM) with panel data are applied to estimate the causal impact of the pilot ETS project. Results show that the pilot regions reduce their CO2 emissions and intensities more than the non-pilot regions under the pilot ETS project. The pilot ETS project significantly induced 12% decreases in the nominal CO2 intensity and 7.6% decrease in the real CO2 intensity, after controlling for regional heterogeneity, but its reduction effects on CO2 emissions are insignificant. Decreasing the proportion of coal to total energy consumption may be the main channel of the pilot ETS project inducing CO2 abatement. The estimated results for control variables indicate that upgrading industrial structures, attracting FDI, and purifying the export structure have significant effects on CO2 abatement.

Highlights

China has become the world’s largest CO2 emitter and faces environmental problems due to its rapid GDP growth
We apply the difference in difference (DiD) models to estimate the causal effects of the pilot emissions trading scheme (ETS) project on improving energy consumption structure, to figure out the mechanism of the ETS reducing emissions
The results show that the average CO2 emissions and intensities in the pilot regions are lower than those in the non-pilot regions and the pilot regions substantially abate their CO2 emissions and intensities on a larger scale than the non-pilot regions under the pilot ETS project

Summary

Introduction

China has become the world’s largest CO2 emitter and faces environmental problems due to its rapid GDP growth. To maintain sustainable development and control air pollution, China has carried out many measures to control the emissions of greenhouse gases and has announced mitigation commitments. On 29 October 2011, the pilot emissions trading scheme (ETS) project in China was announced and seven pilot regions were designated. The pilot ETS in China are cap and trade systems. Unlike the European Union Emission Trading Scheme (EU ETS), China’s ETSs implemented diversified policy designs instead of using a uniform framework to provide experience for a national scheme by the end of 2017. Current research is to evaluate the causal impact of the pilot ETS project on CO2 abatement in China. The ETS policy is a relatively new instrument used in CO2/GHGs emissions control, especially in China; this empirical research would provide significant policy implications, such as providing data and theoretical support for climate policy design

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