Estimating the impacts of emissions trading scheme on low-carbon development

Abstract

As the main climate policy, emissions trading scheme (ETS) has been proved by scholars to have significant impacts on carbon dioxide (CO2) emissions and energy consumption reduction worldwide. However, existing studies have focused mainly on the simulated impacts of ETS and few studies have poured specific attention into the actual impacts and their dynamical change, which may lead to an ambiguous understanding of ETS's performance. Here, taking China as the case study, this study investigated the net dynamic impacts of ETS policy on low-carbon development with respect to CO2 emissions, carbon intensity, energy consumption and energy intensity using a difference-in-differences method. The findings indicate that there is a positive relationship to some extent between carbon trading system and low-carbon transformation. The effect of ETS policy on low-carbon development will gradually increase over the time. When the variables population, gross domestic product, ratio of the secondary industry, technical level, and income level are controlled, these conclusions are also robust. In addition, common trend hypothesis and counterfactual test were used to confirm the reliability of the conducted difference-in-differences models. The findings are conductive to the future ETS policy-making and the research framework proposed in this study is also applicable to the assessment of global climate policy.