Is Emissions Trading Scheme (ETS) an Effective Market-Incentivized Environmental Regulation Policy? Evidence from China's Eight ETS Pilots.

Shanglei Chai,Yueting Ding,Wei Wei,Ke Zhang,Ruixuan Sun

doi:10.3390/ijerph19063177

Abstract

Climate change and environmental issues caused by carbon emissions have attracted the attention of governments around the world. Drawing on the experience of the EU, China is actively developing a national carbon emissions trading market, trying to encourage emission entities to incorporate carbon emissions reduction into production and consumption decisions through carbon pricing. Is this scheme an effective market-incentivized environmental regulatory policy? Since China successively launched ETS pilots in 2013, the effectiveness of reducing carbon emissions has become one of the current focus issues. This study uses the difference-in-differences (DID) method to evaluate the impact of ETS implementation on emissions reduction and employs the Super-SBM model in data envelopment analysis (DEA) to evaluate the emission-reduction efficiency of eight ETS pilots in China. We find that the carbon trading policy has achieved emission-reduction effects in the implementation stage, and the greenness of economic growth has a significant positive impact on regional GDP. The establishment of China’s unified carbon market should be coordinated with regional development. Some supporting measures for regional ecological compensation and the mitigation of regional development are yet to be adopted.

Highlights

Published: 8 March 2022Extreme climate change, characterized by warming, poses threats to human health, economic growth, and social development
Based on the above considerations, this study proposes two aspects of innovation in the efficiency analysis: one is to add the rate of reduction of carbon intensity per unit of GDP to evaluate the efficiency of the carbon market; the other is to add a reduction in energy consumption per unit of GDP to measure the efficiency of the carbon market
The scale efficiency (SCALE) efficiency values of Tianjin, Shanghai, Hubei, Guangdong, Chongqing, and Fujian in 2017 were all greater than or equal to one, indicating that the emission-reduction efficiency of the carbon trading market was effective in the above-mentioned carbon pilots

Summary

Introduction

Extreme climate change, characterized by warming, poses threats to human health, economic growth, and social development. Environmental pollution has become a major challenge to human economic and social development, drawing profound attention to communities. Emission reduction, and climate change have been incorporated into China’s development strategy. The Chinese government has actively adopted stronger policy measures, striving to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. Since the signing of the “Kyoto Protocol” in 1997, the establishment of a carbon market has been widely regarded as an effective means to control global carbon emissions [1,2]. As a policy tool to control greenhouse gas emissions, the carbon emissions trading mechanism can achieve the goal of reducing emissions while minimizing overall emissions reduction costs through market transactions.

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Results

Conclusion