The impact of carbon emissions trading policy on carbon emission efficiency in Chinese cities: Evidence from a quasi-natural experiment

Abstract

Based on a panel dataset spanning from 2003 to 2019 and encompassing 284 prefecture-level cities in China, this study treats the implementation of the carbon emissions trading policy (CETP) as a quasi-natural experiment. In addition, it employs a spatial difference-in-differences (DID) framework to quantify both the direct and spatially mediated impacts of CETP on urban carbon emission efficiency (CEE). The investigation further delves into the underlying channels of influence and variations within this context. The findings demonstrate that CETP effectively enhances CEE within the cities chosen for piloting; however, it concurrently dampens CEE in nonpiloting neighboring cities. These conclusions remain robust across diverse sensitivity tests. The analysis of mechanisms reveals that CETP’s influence on urban CEE primarily operates through the avenues of technological innovation and optimization of energy structure. Moreover, the study of variances discloses that CETP’s direct effect significantly advances CEE in eastern, old industrial base, and central cities. In terms of indirect effects, a pronounced adverse spatial spillover effect is observed in eastern and old industrial base cities, while noteworthy positive spatial spillover effects emerge in central cities. Notably, the spatial extent of CETP’s influence on urban CEE declines after reaching a distance of 900 km. These insights furnish valuable guidance for China in refining its nationwide carbon market and expediting the shift toward a low-carbon economy.