Wish fulfilment or wishful thinking? – Assessing the outcomes of China's pilot carbon emissions trading scheme on green economy efficiency in China's cities

Abstract

Chinese authorities revived emission trading scheme in carbon emission (CETS) to address increasingly confliction between climate deterioration and economic growth. Therefore, we adopt the staggered difference-in-differences (DID) model to estimate the policy outcomes of the CETS on urban green economy efficiency relying on prefecture-year panel data from 2009 to 2019 in China. The results indicate that the implementation of CETS can significantly encourage pilot urban green economy efficiency, which remain credible after experiencing several robustness tests. Notably, channel analysis suggests that the pilot regional green economy efficiency (GEE) can be enhanced by the implementation of CETS through boosting technological innovation. Nevertheless, the CETS cannot promote industrial structure upgrading. Instead, its implementation has exacerbated industrial transfers, confirming the Pollution Haven Hypothesis existing between pilot and non-pilot regions. Unexpectedly, the moderating effect analysis reveals that market mechanisms responding with price mechanisms and scale effects fail to significantly promote urban GEE. Conversely, government intervention significantly contributes to the favourable outcomes of CETS on urban GEE. Additionally, we also reveal that CETS could achieve negative spillover effects on GEE for neighboring cities. Overall, our work has enriched research on the green economy effects of the CETS, systematically elucidating its operational mechanism.