Carbon Emission Trading Policy Research Articles

Governance effects of pollution reduction and carbon mitigation of carbon emission trading policy in China

China's carbon emission trading policy plays a crucial role in achieving both its “3060” dual carbon objectives and the United Nations Sustainable Development Goal 13 (SDG 13) on climate action. The policy's effectiveness in reducing pollution and mitigating carbon emissions holds significant importance. This paper investigated whether China's carbon emission trading policy affects pollution reduction (PM2.5 and SO2) and carbon mitigation (CO2) in pilot regions, using panel data from 30 provinces and municipalities in China from 2005 to 2019 and employing a multi-period difference-in-differences (DID) model. Furthermore, it analyzed the heterogeneity of carbon market mechanisms and regional variations. Finally, it examined the governance pathways for pollution reduction and carbon mitigation from a holistic perspective. The results indicate that: (1) China's carbon emission trading policy has reduced CO2 emissions by 18% and SO2 emissions by 36% in pilot areas, with an immediate impact on the “carbon mitigation” effect, while the “pollution reduction” effect exhibits a time lag. (2) Higher carbon trading prices lead to stronger “carbon mitigation” effect, and larger carbon market scales are associated with greater “pollution reduction” effects on PM2.5. Governance effects on pollution reduction and carbon mitigation vary among pilot regions: Carbon markets of Beijing, Chongqing, Shanghai, and Tianjin show significant governance effects in both “pollution reduction” and “carbon mitigation”, whereas Guangdong's carbon market exhibits only a “pollution reduction” effect, and Hubei's carbon market demonstrates only a “carbon mitigation” effect. (3) Currently, China's carbon emission trading policy achieves pollution reduction and carbon mitigation through “process management” and “end-of-pipe treatment”. This study could provide empirical insights and policy implications for pollution reduction and carbon mitigation, as well as for the development of China's carbon emission trading market.

Impacts of pilot carbon emission trading policies on urban environmental pollution: Evidence from China

The trading of carbon emissions is a crucial regulatory method to address environmental pollution issues. This study takes China's carbon emission trading pilot policy established in 2013 as a quasi-natural experiment and uses the DID model to empirically test the urban panel data from 2006 to 2019. The results show that the carbon emission trading pilot policy can effectively reduce urban environmental pollution, and this effect is more noticeable in mid-western cities, northern cities, cities with fewer resources, and large-scale cities. In addition, to address the urban environmental pollution problem through this policy, the government is encouraged to raise its environmental protection awareness and put more effort into the innovation of technology. In general, this study uses carbon emission trading policies from China to confirm that market-based incentive environmental regulation tools can effectively reduce environmental pollution in urban areas. These findings can provide more theoretical support and empirical evidence for the government to use mechanisms of the market to effectively solve pollution problems, improve ecological environment quality, and accelerate the realization of green economy.

Examining the emission reduction effect of carbon emission trading and carbon tax synergism and their impact mechanisms to reduce the carbon emission of company: based on 247 listed companies of China

ABSTRACT Using the panel data of Shanghai and Shenzhen A-share listed companies spanning from 2007 to 2021, we explore the impact of the synergism of carbon emission trading policy and carbon tax policy on the carbon emission level of enterprises through the difference-in-difference model, intermediary effect model, regulatory effect model. The research results show that: (1) Carbon emission trading and carbon tax both promote enterprises’ carbon emission reduction. (2) There are three paths for carbon emission trading and carbon tax policies to encourage enterprises’ carbon emission reduction actions synergistically: improving enterprises’ green technology innovation level, optimising energy structure, and accelerating industrial structure optimisation. (3) Mediated regulatory effect results show that the greater the company’s government support and R&D investment, the greater the synergism between carbon trading and carbon tax policies to drive green technology innovation and the better the carbon emission reduction effect of the company. (4) The synergism between carbon trading and carbon tax policies positively fosters public ownership companies’ carbon emissions reductions and heavily polluted industry companies.

Investigating the carbon curse of natural resource dependence: A carbon trading scheme

Fossil-based natural resources are carbon-intensive, and over-reliance on them often leads to persistent high carbon emissions at national or regional levels, resulting in the carbon curse. Based on the panel data of 114 resource-based cities in China from 2007 to 2020, this paper examines the carbon curse and solutions for these cities from the perspectives of total and intensity of carbon emissions. The results show that: Firstly, due to the different stages of urban development, resource endowment, degree of resource dependence, and policy background, there is a heterogeneity of carbon curse in China's resource-based cities. Secondly, the carbon emission trading policy can effectively mitigate the carbon curse in China's resource-based cities, and the robustness tests demonstrate the validity of this finding. Thirdly, under the carbon emission trading policy, industrial structure upgrading and digital transformation can play a secondary moderating role in resolving the carbon curse in resource-based cities, further strengthening the inhibitory effect of the carbon emission trading scheme on the carbon curse. In contrast, green technology innovation exhibits no enhancement in the impact of the policy. These findings contribute to the existing research on the carbon curse, offering valuable insights and policy implications for effectively addressing this challenge.

Effect Analysis of China's Carbon Emission Trading Pilot Policy on Carbon Emission Control

Many countries have achieved a fundamental consensus to decrease carbon dioxide emissions in order to address environmental and climate issues. China, as the foremost energy consumer and carbon emitter globally, has significantly contributed to the exacerbation of greenhouse gas issues. The most effective method for lowering carbon emissions is through the trade of carbon emissions. In 2011, China began the process of implementing pilot projects for pricing carbon emissions as a means of addressing environmental and climate-related issues. This study use the literature review approach to examine the current state of China's carbon emission trading pilot policies on carbon emission management. It also analyzes the technical and economic impacts of these pilot policies in comparison to non-pilot carbon emission trading policies. The objective of this study is to propose recommendations for the implementation of the national carbon emission trading market in 2021.

Can carbon emission trading improve regional eco-efficiency? Based on the environmental innovation perspective.

This paper uses green innovation and environmental pollution as the mediating variables to construct a mediating effect model to investigate whether China's carbon emission trading policy can improve regional eco-efficiency by reducing regional environmental pollution and stimulating green innovation. This study is based on panel data from 30 provinces and municipalities directly under China's central government and autonomous regions from 2003 to 2019. The eco-efficiency of these provinces is measured using the super-efficiency DEA model and the difference-in-difference method (DID). The results show that (1) China's emission trading policy significantly improves regional ecological efficiency and the per capita GDP. The improvement can effectively improve regional ecological efficiency. (2) The mediating effect of green innovation and environmental pollution is significant. That is, China's carbon emission trading policy further improves regional ecological efficiency by stimulating more green innovation and reducing the synergy brought by environmental pollution. (3) There are differences in the feedback of this impact mechanism between different regions: It shows the characteristics of the western region being more significant than the eastern region. The central region has no significant effect. The research conclusion can provide a policy reference for the subsequent unified promotion of the construction of a carbon emission trading market nationwide and a theoretical basis for helping to achieve the "dual carbon" goal.

Study on the Impact of Carbon Emission Trading Pilot on Green Land Use Efficiency in Cities

Under the overarching principle of sustainability, the reliance solely on expanding the landmass to meet the demand for high-quality economic growth is unsustainable. To address the need for harmonious ecological–economic development, this paper examines the influence of carbon emissions trading (CET) policies on the urban land green utilization efficiency (LGUE) from an environmental regulation perspective. Harnessing municipal panel data from 278 cities across China between 2011 and 2020, the study initially employs a super-efficient SBM model to estimate the urban LGUE. Further, a progressive difference-in-differences methodology is utilized to delve into CET’s impact on the LGUE. The main results are as follows. (1) Through the visual analysis of the time–space evolution trend, the LGUE displays pronounced spatial agglomeration, with the LGUE values being higher in the central and western regions compared to the east, and in the south versus the north. Over time, it follows a “U-shaped” change pattern. (2) The CET policy exerts a statistically significant positive influence on the LGUE, although this effect is accompanied by a temporal lag. Following a number of approaches to validate the results, the impact remains significant. (3) Regarding the heterogenous effects, the CET policy appears to have a greater impact on resource-based cities and those in the eastern part of China relative to non-resource-based and central–western cities. This research offers empirical evidence and countermeasure recommendations for the further refinement of the CET policy to enhance the urban LGUE.

The Impact of Carbon Emission Trading System on ESG of Agricultural Enterprises: Evidence from 24 Listed Agricultural Companies in China

With China’s dual carbon goals of carbon peaking and carbon neutrality, the carbon emission trading system will play a crucial role. In addition, agriculture, which is closely linked to carbon emissions, is a foundational industry in China. It is worth paying attention to how it responds to carbon emission trading policies. This study uses data from agricultural listed enterprises from 2009 to 2022, and employs the Difference-in-Differences (DID) method and the intermediary effect model. The evidence suggests that the the carbon emission trading system will significantly improve the the ESG evaluation of agricultural enterprises. Furthermore, green management innovation, green total factor productivity, and CSR information disclosure quality of enterprises will act as intermediaries. The study calls for the government to accelerate the establishment of a national carbon trading market, improve reward and penalty systems, and evaluation frameworks for green innovation in agricultural enterprises. It also emphasizes the need to strengthen pre-subsidies for small-scale enterprises, encourage environmental literacy training for management personnel in agricultural enterprises, intensify green innovation efforts, and establish relevant department assessments of corporate social responsibility.

Study on the Influence of International Economic Law of Carbon Emission Trading on Environmental Sustainable Development

With the continuous development of global economic and trade activities, environmental problems have become an important factor restricting the sustainable development of all countries. How to realize the coordinated development of international trade and environmental protection has become a major issue facing the international community. Since China joined the WTO, its share of international trade has been increasing continuously. In order to deeply analyze the influence of international carbon emission trading policy on domestic carbon emissions, we use an input–output model and a GTAP analysis method to theoretically calculate the carbon emissions of the international trade of various departments in Shandong Province. At the same time, the implicit carbon emission index of various industries in 2022 is calculated through the direct energy consumption coefficient. The results show that there are significant differences in the impact of the carbon tariff system on different industries. In terms of the carbon emission index, the food processing industry showed a decrease of 18.99 Mt, while the implied carbon emission of the tobacco, textile and leather manufacturing industry reached 30.56 Mt due to the continuous expansion of trade scale. In contrast, the implied carbon emission level of the metal product processing industry reached 5.3 Mt, while the carbon emission of traditional trading industries such as coal mining was almost unaffected by international trade, and its carbon emission index reached the highest level of 5.89 in 2020. In terms of trade impact, high-trade industries such as the food processing industry are significantly affected by the carbon tariff policy, and their share has dropped from 5.89% to 3.95% in the past decade. The carbon emissions generated by GDP growth established by the GTAP model are more convincing. This model can directly reflect the energy efficiency of a region from the side. Based on the present situation of international trade, this paper analyzes the inequality of the current carbon tariff system, and puts forward some policies to optimize the energy structure to reduce carbon emissions and expand domestic demand to reduce the dependence on international trade. Through the GTAP model, we put forward policy suggestions to optimize the energy structure to reduce carbon emissions and the dependence on international trade by expanding domestic demand.

Price Mechanism, Government Constraints and Carbon Trading Pilot Policy for Emission Reduction

ABSTRACT Based on the data of 247 cities at the prefecture level in China from 2007 to 2019, this paper analyzes the impact of the carbon emissions trading CET pilot policy on carbon emission reduction from the perspective of the price mechanism and government constraints. The results show that the carbon emissions and carbon intensity in the pilot areas are significantly reduced by adjusting the industrial structure and promoting green technology innovation. In terms of regions, the emission reduction effect of the pilot policy in regions with a high proportion of industry is obviously weaker than that in other regions. The aim of the carbon emission trading policy in China that achieve carbon emission reduction is by coordinating the carbon emission trading price that fail to fulfill this aim independently and the degree of government punishment for enterprises.

Are carbon emissions trading and green financial instruments synergistic? -Comprehensive quantitative research based on content analysis.

Coordinating policies is an essential guarantee for carbon emission reduction and sustainable development. Based on the theoretical framework of the policy paradigm, we quantitatively analyze 266 policy documents on promoting carbon emission trading and green financial policies from 2011 to 2022 using the content analysis research method. Based on the matching network of "policy objectives-policy tools," we analyze the synergistic characteristics of carbon emission trading policies and green financial policies in promoting carbon emission reduction targets and reveal the matching mode of "objectives-tools" of green financial policies by using social network analysis. It is found that, first, from the perspective of policy objectives, the main policy objectives of carbon emissions trading are to promote green innovation of enterprises, and the main policy objectives of green finance are to promote green development, which reflects the consistency and endogenous motivation of policy objectives. Secondly, command-control and market incentive policy tools are the main policy tools in the structure of policy tools. The proportion of public participation policy tools is small, and there is a structural asymmetry. Third, carbon emissions trading tools focus on supervision, adjustment, and platform construction. The green financial policy tools have the characteristics of guidance, public welfare, and externality. The two constitute a complementary, embedded, and integrated ' double synergy ' carbon emission reduction policy. Based on this, this paper puts forward some suggestions to promote policy coordination and provides a reference for China to achieve the dual carbon goal.

A Study on the Impact of Pilot Carbon Emission Trading Policies on Corporate Performance

This paper uses the carbon emission trading policy as a quasi-natural experiment to comprehensively investigate its impact on the financial and market performance of firms. The study uses data from A-share listed companies for the period from 2009 to 2022 and adopts the difference-in-differences model for a rigorous analysis. The mediating effect of financing constraints and the moderating role of managerial capabilities are examined with respect to the influencing mechanisms; heterogeneity was also analyzed in terms of carbon allowance allocation methods, carbon prices, environmental enforcement efforts, and type of industry. The results of the study show that the carbon trading policy has a significant effect on improving the financial performance of firms, while also inhibiting their market performance. The feasibility of the findings was further validated after conducting robustness tests such as propensity score matching and placebo tests. The mechanism analysis finds that financing constraints play a masking effect on the impact of carbon trading policies on firms’ financial performance; managerial competence can positively moderate firms’ market performance. Heterogeneity analysis shows that the inhibitory effect of emissions trading policies on market performance is more significant for firms in regions with a smaller share of free allowances. For companies in high carbon price regions, carbon trading policies have a more significant impact on financial performance. For companies located in regions with higher levels of environmental enforcement, the positive effect of carbon trading policies on financial performance is unchanged, but the dampening effect on market performance is more significant. Carbon trading policies have a stronger positive effect on the financial performance of high-polluting firms, but a more significant dampening effect on the market performance of low-polluting firms. The findings of this study enhance China’s research framework on the economic impacts of carbon trading policies on micro-enterprises, promoting sustainable business development and serving as a useful reference for policy sustainability.

Research on the impact of carbon emission trading on GTFP

Faced with the serious environmental pollution caused by greenhouse gas emissions, the Chinese government has put forward the target of controlling greenhouse gas emissions in the 12th Five-Year Plan and adopted a series of measures. Among them, the pilot policy of carbon emission trading is an important market-oriented instrument, which aims to control carbon dioxide emissions through the market mechanism. This paper studies the impact of this policy on GTFP, using the DID model to analyze the data of 30 provinces from 2004 to 2020. The study finds that the pilot carbon emission trading policy has significantly promoted the improvement of GTFP in the pilot areas. Moreover, the impact of policies on GTFP can be realized through two mechanisms: technological innovation and industrial structure upgrading. The impact of this policy is particularly significant in the central and western regions. These conclusions are of great significance for promoting green and low-carbon transformation, reducing carbon emissions and improving relevant carbon trading policies.

Sustainability of the Food Industry: Ecological Efficiency and Influencing Mechanism of Carbon Emissions Trading Policy in China

As an important factor affecting ecological sustainability, the food industry’s ecological efficiency (EE) deserves great attention and control. In 2013, China implemented a carbon emissions trading policy (CETP) to limit carbon emissions from various industries to promote the optimization of the ecological environment. To explore the ecological sustainability of China’s food industry, identify the factors affecting the EE of the food industry, and study the influence heterogeneity and influencing mechanisms, the impact of the CETP on the food industry, which emits high volumes of greenhouse gasses, requires evaluation. Many scholars have studied the policy’s effect from the perspective of EE, but they have ignored the food industry, which is the main carbon emitting sector, and there is a lack of heterogeneity analyses of the influencing factors. This study reviewed the implementation process and characteristics of the CETP in the past decades. Using provincial panel data from 2003 to 2019, this study measured the EE in the food industry through the difference-in-difference model, evaluated the emission reduction and economic effects of the CETP on the food industry, characterized the heterogeneity of the policy’s effectiveness, and analysed its mechanism using three-stage mediating regression. The results showed that (1) the CETP significantly affected the food industry’s EE, which increased by 38.3% on average in experimental provinces compared with non-experimental provinces. (2) For the food industry, the policy’s effect was most significant in the food manufacturing and tobacco subsectors, and these subsectors in the experimental provinces increased by 66.0% and 39.7%, respectively; meanwhile, the policy’s effect was not significant in agriculture and subsidiary food processing and beverage manufacturing. By industrial area, the policy’s effects were significantly higher in the eastern region compared with the central and western regions. The influence on the food industry’s EE in the eastern region was close to 150%, while in the central and western regions, it was not significant. (3) The CETP promoted the food industry’s EE by improving energy consumption structure and technological innovation. The proportion of coal consumption decreased by 6.34% on average, and the technological innovation level increased by 25.1% on average in the experimental provinces’ food industries. The research findings indicate that the CEPT is a good practice and worth spreading. For food industry enterprises with high carbon emissions, attention should be paid to low-carbon transformation through technological upgrading and management optimization. For policymakers, targeted policies are needed to establish a national unified carbon trading market so that the national carbon emissions can be controlled, and the gap between regional carbon emissions can be narrowed.

Supply chain behaviour under carbon regulations: an experimental study with system dynamic simulation

Carbon tax and emission trading policies have been introduced under the Kyoto Protocol to reduce greenhouse gas emissions. This paper examines the effect of these policies on supply chain behaviour to determine an optimal strategy for improving environmental performance via system dynamics simulation. For this purpose, a supply chain is considered under the carbon tax policy, where a supplier and a producer have both green and non-green methods for transportation and production. About the carbon tax, the question is what carbon price encourages the supplier and producer to use the green methods, and how each will behave at different carbon prices. Furthermore, to analyse emission trading policy, several supply chains are considered simultaneously and a method is developed to determine the carbon trading price in the market to maximise supply chains’ profit. The supply chains’ behaviour is simulated based on system dynamics and several experiments were conducted to analyse the effect of different scenarios of carbon regulations on the supply chains. Findings emphasise the need for tailored policies, challenging the notion of a one-size-fits-all approach to emission trading. This research provides valuable insights into the dynamic interplay between environmental sustainability and economic considerations in the context of evolving carbon policies.

Dynamic Analysis on Carbon Metabolism of the Northern Region of China Under the Background of Carbon Emission Trading Policy

The launch of the national carbon emissions trading market in China is a policy to carry out the Beautiful China initiative and to establish a low-carbon economic development system that promotes carbon emission and waste reduction. In order to detect the carbon metabolic processes of the pilot and nonpilot municipalities or provinces in the northern region of China， the theory of urban carbon metabolism and the methods of input-output analysis and ecological network analysis were introduced and used. The results showed that the direct carbon emissions of Beijing and Tianjin had decreased， but their embodied carbon emissions had increased since 2012. The direct and embodied carbon emissions of the pilot sectors in Beijing and Tianjin had the same trend； specifically， the emissions of the sectors of mining and washing of coal， extraction of petroleum and natural gas， and manufacture of non-metallic mineral products decreased significantly， but the sectors of production and supply of electric power and steam with high carbon emission increased. The same trend of the embodied carbon emission intensities of sectors with that of their embodied carbon emissions verified that the embodied added values were not growing with the promotion of the carbon emission trading market. Subsequently， the embodied carbon emission of the pilot sectors in all the municipalities and provinces of the northern region were all contributed mainly by the emissions embodied by a path length less than 6； therefore， it showed that more attention should be paid to the trade among sectors with a path length less than 6 and reducing their carbon emissions. Furthermore， from 2007 to 2012， products or service trading among sectors mostly concentrated on sectors within one municipality or province， and these products or services had the characteristics of low carbon emission. Since 2012， the integration development of the Beijing-Tianjin-Hebei urban agglomeration and the new regional economic patterns established in the northern region both promoted the trading across provinces and across sectors. This research is based on the background of the carbon emission trading policy and aims to build a methodology to identify the key actors and paths in a metabolic system. This could provide a scientific basis for regional policy implementation and regional long-term sustainable development.

The Role of Industrial Structure in the Impact of Environmental Regulation on Carbon Productivity

In the context of global climate change, China has proposed the "Carbon peaking and Carbon neutrality goals" goal of carbon emissions will reach carbon peak by 2030 and carbon neutral by 2060. As a market-based environmental regulation policy to promote greenhouse gas emission reduction, carbon emission trading policy is expected to reduce carbon emissions and improve carbon productivity, among which industrial structure plays a regulatory role in the impact of carbon emission trading policy on carbon productivity. Using the provincial data of China from 2006 to 2019, this paper evaluated the influence of carbon emission trading policy on carbon emission, taking the industrial structure as the regulating variable, studied the industrial structure in the influence of environmental regulation on carbon emission, and tested the regression results of DID model through parallel trend test, placebo test and PSM-DID model regression. After the above research process, the following conclusions are drawn: the carbon emission trading policy has a significant positive promotion effect on carbon emission reduction, and it is further concluded that the industrial structure has a significant negative regulatory effect on carbon productivity under the carbon emission trading policy.

Carbon neutrality endeavors: the impact of carbon emission trading policies on total factor carbon emission efficiency.

Deepening the carbon market allocation reform is a strong support for carbon peaking and carbon neutrality. China has been piloting carbon trading in batches since 2013. However, there is little literature on whether and how carbon emission trading (CET) improves total factor carbon emission efficiency (TFCEE). To fill this gap, this study first calculates urban TFCEE using an extended Epsilon-based model and then designs a quasi-natural experiment based on causal inference. The staggered DID model is adopted to investigate the impact of CET pilot policies on urban TFCEE and its impact mechanism. Our results show that (1) the CET policy has a significant promoting effect on TFCEE in pilot cities, and this conclusion is reconfirmed by adopting robustness tests. (2) The mediating effect models are employed to confirm the mediating role of green technology innovation, industrial structure upgrading, and resource allocation efficiency in CET policy promoting regional TFCEE. (3) The heterogeneity test of CET policy depicts a considerable positive impact on TFCEE in cities with abundant resources. Eastern and developed cities are more likely to experience better carbon efficiency promotion through this policy than other cities. This study provides evidence for the important role of CET in promoting the development of a low-carbon economy and carbon neutrality.

Green Finance and Health: How Does Implementing Carbon Emissions Trading Affect Mental Health?

The issue of environmental pollution is hindering the well-being of Chinese citizens, posing a critical challenge to economic development. Existing studies on the impact of carbon emissions trading policies have largely overlooked their potential effects on the mental health and life satisfaction of residents. Therefore, this paper aims to broaden the existing research by investigating the influence of Chinas carbon emission trading policy on mental health using a nationwide longitudinal survey and employing the Difference-in-Differences (DID) model. Moreover, it examines the moderating effect of government in this relationship. The results show that (1)policies involving carbon emissions trading can improve residents quality of life and lessen depressive symptoms; (2)the effects are more pronounced for rural residents than for urban residents, and (3)performance evaluation of the government is important in moderating the relationship between carbon emissions trading and residents mental health.

How do companies with different life cycles respond to carbon trading?—Analysis of the moderating role of government subsidies

Enterprises with diverse life cycles possess distinct survival and operational laws. Hence, it is crucial to comprehend whether all these enterprises can proficiently engage in green innovation under the guidance of carbon emissions trading (CET). This study leverages the quasi-natural experiment of CET policy, employing panel data encompassing A-share listed companies in Shanghai and Shenzhen spanning from 2008 to 2020. Through the application of the triple difference model, the research examines the influence of CET policy on the green innovation endeavors of enterprises characterized by various life cycles. The research outcomes reveal the following: 1) CET policy significantly impacts the green innovation of mature enterprises, and contributes to the enrichment of the quality of their green innovation endeavors. 2) Due to limitations pertaining to financing constraints and business expansion, CET policy fails to foster green innovation within the growth and decline phases of enterprises. 3) Government subsidies can overturn the unfavorable position of growth-stage enterprises in carbon emissions trading and propel them towards heightened green innovation. However, government subsidies do not yield a substantial moderating effect on the green innovation endeavors of maturity-stage enterprises. Simultaneously, even if declining-phase enterprises are subjected to government subsidies, these subsidies do not reverse their innovation disadvantage in carbon emissions rights trading. In addition, we also found that in areas with heightened public awareness of environmental protection and state-owned enterprises, the positive regulatory effect of government subsidies is more significant. The findings derived from this study bestow invaluable insights for decision-makers striving to optimize the implementation of the CET policy and effectively allocate government subsidies.