Energy rights trading policy, spatial spillovers, and energy utilization performance: Evidence from Chinese cities

Abstract

China initiated its first energy rights trading (ERT) pilot in 2016 and had plans to assess the policy's replicability in 2020. However, there is limited literature available that examines its influence on energy utilization performance (EUP). To complement this knowledge gap, the study investigates the impacts and mechanisms of ERT on EUP employing a spatial difference-in-difference (SDID) model. The findings reveal that: (1) ERT reduces local energy consumption significantly, increases green total factor energy efficiency, and enhances the EUP of neighboring cities within an 1100 km radius. (2) ERT indirectly enhances the EUP of local and neighboring cities through green innovation, transformation towards cleaner energy structures, and energy allocation. Notably, ERT boosts the local EUP via industrial structure upgrading but reduces the positive spillover effects on nearby cities due to the siphoning effect. (3) ERT exhibits more pronounced impacts and spillover effects on cities that are not resource-dependent and have higher levels of marketization. Interestingly, the central and western regions benefit more from the spillover effects of ERT. The findings of this study will serve as a valuable resource for advancing the implementation of ERT and offer critical insights for decision-makers focused on sustainable urban development.