Emissions trading scheme and energy consumption and output structure: Evidence from China

Abstract

Prior studies focus mainly on the influence of ETS on energy consumption, carbon emissions, and the economy; however, the effects on energy consumption and output structure still need to be discovered. This study employs a time-varying difference-in-differences approach to test whether China's ETS significantly affects energy structure represented by coal, oil, and natural gas consumption and renewable energy output. The results show that the ETS policy significantly reduced China's coal and oil consumption and increased natural gas consumption and renewable energy output. Besides, the influence of ETS on energy structure becomes increasingly significant over time. The results demonstrate that energy investment mediates the effects of ETS on energy consumption and output structure, and industrial structure mediates the effects on coal and fossil consumption. In addition, as economic development increases, the negative effects of ETS on coal and oil consumption decrease, the positive effect of ETS on natural gas consumption increases, and the positive effect of ETS on renewable energy output decreases. As the share of the secondary sectors increases, the negative effect of ETS on coal and oil consumption decreases, the positive effect of ETS on natural gas consumption decreases, and the contribution of ETS to renewable energy output increases.