Killing Two Birds with One Stone or Missing One of Them? The Synergistic Governance Effect of China’s Carbon Emissions Trading Scheme on Pollution Control and Carbon Emission Reduction

Abstract

Faced with the dual pressure from global climate change and increasing air pollution, China has gradually clarified the adoption of market-based tools to improve the ecological environment. Based on Chinese provincial panel data from 2006 to 2020, this paper analyzes the synergistic governance effect and influence mechanism of China’s carbon emissions trading scheme (ETS) on pollution control and carbon emission reduction by using a multiperiod difference-in-differences (DID) model. The empirical results show that China’s ETS has achieved the synergistic governance effect of pollution control and carbon emission reduction. The heterogeneity analysis shows that ETS can significantly enhance the synergistic governance effect in areas with higher total factor productivity (TFP) and stronger administrative intervention. More importantly, the mechanism analysis shows that China’s ETS promotes the synergistic governance effect of pollution control and carbon emission reduction mainly through industrial structure upgrading and energy structure transformation. The effect contribution values are 22.42% and 9.40%, respectively. This study contributes to deepening the effect of the carbon emissions trading scheme and also provides a reference for the design of a unified carbon trading market in China.