Carbon Emission Trading Scheme Research Articles

A novel intervention effect-based quadratic time-varying nonlinear discrete grey model for forecasting carbon emissions intensity

In the context of severe global warming, accurately exploring the trend of carbon emissions intensity (CEI) changes is of great significance for mitigating climate change issues. The implementation of China's Carbon Emissions Trading Scheme (ETS) in 2013 is a policy intervention aimed at influencing CEI. The impact of intervention events makes forecasting a complex problem, which poses significant challenges to the construction of forecasting models. We first develop a quadratic time-varying nonlinear discrete grey model (QDNDGM(1,1)) to assess the intervention effect of the ETS policy. Then, a novel intervention effect-based quadratic time-varying nonlinear discrete grey model (IE-QDNDGM(1,1)) is developed to conduct the prediction under intervention effect, including an intervention term. The Whale Optimization Algorithm (WOA) is used to calculate a nonlinear parameter. We assess the intervention effect of the ETS policy in China and find that it can indeed reduce CEI. We verify the IE-QDNDGM(1,1) model’s superiority by comparing its predictive performance with that of three grey models, one statistical technique, and one artificial intelligence model. The comparative study shows the proposed model’s excellent fitting and prediction performance. An ablation experiment is conducted to validate the design of the IE-QDNDGM(1,1). Policy implications of the ETS intervention effect are discussed.

Does carbon ETS affect the distribution of labor's slice of the factor income pie? From the low carbon transition perspective

The carbon emission trading scheme (hereafter ETS) impacts firms' production decisions and promotes them to achieve low-carbon transition. This transition entails the movement of both labor and capital factors and consequently triggers re-distribution of factor income. To analyze the impacts of the carbon ETS on factor income distribution, we first theoretically incorporate carbon emission permit as a new factor into the general equilibrium model, shedding light on the potential mechanism. Utilizing city-level panel data from 2003 to 2019 and employing a staggered difference-in-differences (DID) model, we find that the carbon ETS is inclined to benefit labor at the expense of capital, exhibiting a progressively strengthening dynamic effect. Furthermore, we verify the intra-industry and inter-industry low carbon transition are valid mechanisms. Overall, these findings imply that implementing carbon ETS contributes to increasing the labor share of factor income. This study suggests that market-based climate policies have the potential to mitigate excessive reliance on capital and fossil fuels through low-carbon transition. Furthermore, it offers insights into mitigating the declining trend of labor income share.

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.

Blockchain and Digital Asset Transactions- Based Carbon Emissions Trading Scheme for Industrial Internet of Things

Blockchain and Digital Asset Transactions- Based Carbon Emissions Trading Scheme for Industrial Internet of Things

The heterogenicity features revealed based on the regional and sectoral carbon metabolic system: An empirical analysis of heavy-polluted cases in China

The Chinese government has made a positive response and policies to address global climate change, regions and sectors has become more important in reducing carbon emission. This study used the indicator of carbon emission intensity to evaluate the reduction effect of carbon emission of heavy-polluted regions and sectors, and also their features in China. The results indicated firstly, the aggregated carbon emission intensity of regions was primarily influenced by their embodied added value. From 2012 to 2015, the regions’ embodied added value increased more than 2 times. Secondly, the embodied carbon emission of the manufacture of chemical products sectors in regions were dominated by emission implied in metabolic path length greater than five, which took the proportion of more than 30% of emission. This showed that emission reduction policies for heavy-polluted sectors should focus on controlling the emission implied in trading with downstream sectors, and also demonstrated that the heavy-polluted sectors drove the reduction of carbon emission of other sectors. Thirdly, the carbon emission of heavy-polluted sectors in coastal regions fell due to implementing the carbon emission trading scheme policy, while heavy-polluted sectors in the inland regions radiated to their upstream and downstream sectors. This study analyzes regional and sectoral carbon emission reduction effect and provides theoretical and practical bases for urban development.

Power play in carbon trading market: How status of executives with R&D background incentives companies’ low-carbon innovation

Utilizing the phased initiation of carbon trading pilot projects in eight provinces and municipalities in China from 2013 to 2016 as a quasi-natural experiment, this study matches micro-level data on low-carbon patents and financial information of publicly listed companies from 2009 to 2019. Employing a staggered difference-in-differences framework, it assesses the impact and mechanisms through which the distribution of executive power, among those with R&D backgrounds, influences firms' low-carbon innovation capabilities against the backdrop of a carbon emission trading scheme. The status of executives with R&D backgrounds is characterized by their relative ranking within the team, as denoted in the companies' financial statements. Findings indicate that the carbon emission trading significantly fosters the output of low-carbon patents by firms, with executives possessing R&D backgrounds further enhancing the level of low-carbon innovation. This effect is more pronounced in privately-owned and small to medium-sized enterprises. Further analysis suggests that increasing R&D investment and personnel ratios, correcting managerial overconfidence and myopia, and enhancing corporate attention to green strategies are channels through which R&D-oriented executives lead to an improvement in firms' low-carbon innovation capabilities. The paper proposes government tax incentives and funds for R&D staff, stricter ESG standards for executive accountability, and regulations mandating green goals in company planning.

The impact of the carbon trading market on urban coordinated development in China.

Evaluating the effects of China's carbon emission trading scheme (ETS) is crucial for the coordinated development of Chinese cities. Therefore, based on the panel data of 242 cities in China from 2008 to 2019, this paper uses the multi-period difference-in-difference (DID) model to comprehensively evaluate the impact of carbon market on the coordinated development of cities from the perspectives of carbon market policy and carbon market efficiency, and then analyzes the mechanism and heterogeneity of the effect of carbon market efficiency. The results show that both carbon market policy and carbon market efficiency can promote the coordinated development of cities. Science and education expenditure plays a significant intermediary role in the impact of carbon market efficiency on the coordinated development of cities. The heterogeneity test finds that the stricter the performance penalty system, the higher the level of urban coordinated development, and the stronger the effect of carbon market efficiency. The findings of this paper provide policy recommendations for further improving the construction of China's pilot and national ETS and enhancing the coordinated development of Chinese cities.

Assessing capital allocation efficiency under environmental regulation

Utilizing data from 2010 to 2021 from listed firms, this study examines the relationship between environmental regulation and capital allocation efficiency. The empirical findings reveal that the implementation of carbon emissions trading scheme pilots plays a pivotal role in diminishing capital misallocation within firms. This effect is more pronounced in state-owned enterprises, firms facing high financial constraints, those operating in highly competitive markets, and organizations that are not part of the high-tech or high-pollution industries. These findings highlight the significant role of macro-level environmental regulations in improving micro-level organizational capital efficiency.

The impact of market-based environmental regulation on corporate ESG performance: A quasi-natural experiment based on China's carbon emission trading scheme

At present, there are few studies exploring the impact of market-based environmental regulation on ESG performance based on the perspective of carbon emission trading scheme (CETS). This paper aims to supplement this research field through empirical analysis. Taking Shanghai-Shenzhen A-share listed companies from 2012 to 2022 as the research object, this paper studies the impact of CETS, a market-based environmental regulation tool, on the ESG performance of enterprises by constructing a time-varying DID model and examines the mediating roles of green technology innovation, agency cost and analyst attention. The results show that the implementation of CETS can significantly boost ESG performance, and green technology innovation, agency cost, and analyst attention play a partial intermediary role between the two, while the mediating effects of green total factor productivity and green total factor energy efficiency are not significant. In terms of heterogeneity analysis, the study shows that CETS implementation has a more substantial promotion effect on ESG performance in non-state-owned enterprises, non-politically connected enterprises and non-high-tech enterprises. In this paper, the robustness test was carried out through PSM-DID, placebo test and replacement of explained variables, and the test results further supported the hypothesis in this paper. This study enriched the research on the impact of market-based environmental regulation on ESG from the perspective of CETS. It provided enlightenment for enterprises to improve ESG performance to a strategic level, improve the level of green technology innovation, and the government to implement differentiated environmental governance policies.

The impacts of carbon emissions trading scheme on green finance: evidence from China.

China enacted and implemented a carbon emissions trading pilot policy in 2011, and whether this carbon emissions trading scheme (ETS) can promote the development of green finance is crucial to realizing a win-win situation for both environmental and economic performance. Based on the panel data of 30 provinces in China from 2007 to 2019, this study constructs a multi-period double-difference model (DID) to explore the impact of carbon ETS on the development of green finance and uses the spatial Durbin model (SDM) to test whether there is a spatial spillover effect of the carbon ETS on the development of green finance. The results show that (a) the implementation of carbon ETS significantly promotes the development of green finance, and this conclusion still holds through a series of robustness tests; (b) the promotion effect of the carbon ETS on the development of green finance is more significant in eastern and western provinces, non-resource-based provinces, and provinces with a high level of openness to the outside world; (c) industrial structural upgrading and green innovation play pivotal roles in achieving the desired outcomes of carbon ETS; (d) carbon ETS have spatial spillover effects on the development of green finance, with the indirect effects being more significant than the direct effects. The findings of this study can serve as a valuable reference for expediting the establishment of a unified national carbon market and the development of a robust green financial system. This holds immense significance in effectively implementing the "dual-carbon" strategy.

Computable general equilibrium analysis of neutral carbon trading scheme and revenue recycling impacts on income distribution in China

Utilizing a dynamic computable general equilibrium (CGE) model, this paper critically assesses the potential distortions and efficacy of various revenue-neutral carbon emission trading schemes (ETSs) in China, through government subsidies and value-added tax (VAT) relief strategies aimed at achieving peak carbon emissions before 2030. The analysis reveals that reallocating market revenues to the production sector, either through government subsidies or VAT reductions, can feasibly attain carbon peaking before 2030, with minimal impact on GDP. Notably, both government subsidies and VAT cuts foster output growth in the oil, gas, and ETS-covered sectors. Moreover, directing carbon market revenue toward ETS-covered industries via VAT relief emerges as the most effective approach to reducing income disparities. In contrast, redistributing carbon market revenue to non-ETS-covered industries via VAT relief is found to be the least effective in promoting social equity. The study emphasizes that the reallocation of carbon market revenues to ETS-covered sectors is paramount. This strategy not only regulates the overall energy consumption effectively but also steers the nation towards a more sustainable and optimized energy consumption pattern. In light of these findings, this paper offers detailed insights and tailored policy recommendations, aiming to assist policymakers in striking a balance between environmental goals and economic and social imperatives.

Does carbon emission trading policy induce financialization of non-financial firms? Evidence from China

The carbon emission trading scheme influences firms’ operation costs, which may induce resource diversion to financial investments. By using a sample of Chinese A-share non-financial listed firms that are subject to carbon emission trading pilot programs in China, this paper employs a differences-in-differences analysis to test the impact of carbon emission trading on firms’ financial asset allocation. We find that carbon emission trading significantly increases corporate financialization, especially long-term financial assets. The effect is stronger in firms with stronger profit-seeking incentives and weaker governance, suggesting the mechanism of capital profit-seeking and management opportunism under increased operation costs and risk. Further heterogeneity analysis indicates that the positive association between carbon emission trading and corporate financialization is more pronounced in non-state-owned enterprises, carbon-intensive firms, and firms in regions with developed financial markets or more volatile carbon markets.

Do creditors price climate transition risks? A natural experiment based on China's carbon emission trading scheme

The pursuit of carbon neutrality by China signifies the country's resolute commitment to proactively tackle climate change. However, traditional energy firms, which function as the pillars of the domestic economy, surely face a significant challenge in the form of "decarbonization." In light of climate transition risks, this study employs the difference-in-difference (DID) model to investigate the impact of China's carbon emission trading scheme (ETS) on the debt financing costs of listed high-carbon firms (HCFs). The findings indicate that the significant increase in debt financing costs of HCFs under ETS can be attributed to the "dual vulnerability" that HCFs exhibit, consisting of heightened credit risk and a diminished environmental reputation. Specifically, the implementation of ETS regulations results in elevated operating costs and future cash flow risks for firms, which subsequently escalates credit risk. This is especially true for establishments situated in regions characterized by high carbon emissions and high scores on the Low Carbon Economic Transition Assessment Index. Such data suggests creditors are progressively placing greater emphasis on the reputation of low-carbon environmental practices. Additional study suggests that firms that possess inferior qualification endowments, less external financing capabilities, and weaker risk-diverting capabilities are more susceptible to the effects of ETS and are subjected to more transformation pressure. The findings of this research hold substantial importance in terms of advancing ETS initiatives in a concentrated, phased, and clustered fashion, guaranteeing technological advancements and seamless transitions for HCFs throughout the carbon peak cycle, and eventually bolstering society's climate adaptability as a whole.

Does Carbon Trading Lead to Green Technology Innovation: Recent Evidence From Chinese Companies in Resource-Based Industries

The carbon emission trading scheme (ETS) is critical to China's ability to reach the established carbon dioxide (CO₂) emissions reduction goal by 2030 and carbon neutrality by 2060. To determine whether the pilot ETS policy promulgated in China in 2011 has induced green technological innovation, we conducted a multidimensional empirical test to assess the financial and green patent licensing data of Chinese A-share (publicly listed) enterprises in Shanghai and Shenzhen from 2004 to 2019. Using a difference-in-difference model with robustness checks, we did not find that the pilot ETS has had green innovation effects on entire industries or all manufacturing. However, we did identify significant green innovation improvements in some resource-based industrial enterprises, and the promotion effect led to more green utility models than green invention patents. Furthermore, the policy's greatest green-innovation effects are reflected primarily in new patents/utility models for low-carbon, energy-saving, and alternative energy technologies, particularly among large and nonstate enterprises. The impact mechanism tests indicate that the pilot policy encourages green innovation primarily through four policy instruments: increasing benefit income for resource-based industrial enterprises, reducing financial constraints, granting subsidies, and increasing incentives for enterprise R&D. Therefore, this article not only confirms the effectiveness of carbon emission trading market policy, but also provides scientific guidance for the realization of green technology innovation.

Market potential and the industrial sectors inclusion sequence in China's national carbon emission trading: From the perspective of maximizing gains

The carbon emission trading scheme (CETS) has been gradually introduced in China to control carbon emissions and boost economic and social development. The existing literature has evaluated the market potential of pilot CETSs or a certain industry, yet no study has focused on the industrial sectors to be covered in the national CETS to analyze trading flexibility and the sector inclusion sequence. This study presents an analytical framework for estimating market potential (i.e., potential gains and carbon emission reduction potential) and industrial sector inclusion sequences for China's national CETS using by-production models. Three simulation scenarios (i.e., no-trading scenario, power sector trading scenario, and multiple-industry trading scenario) and two trading modes (i.e., contemporary and intertemporal trading mode) are simultaneously considered. The novel evidences are: (i) There would be 39.93% (27.7 trillion CNY), 65.26% (273.0 trillion CNY) and 159.42% (666.7 trillion CNY) national aggregated potential gains of CETS in intertemporal power sector trading scenario, contemporary multiple-industry trading scenario and intertemporal multiple-industry trading scenario, and they would help save 3.60%, 5.18% and 6.05% of CO2 emissions reduction, respectively. (ii) CO2 emission permits would transfer from nonmetal minerals, ferrous metals, and electricity, to paper making, non-ferrous metals, petrochemicals, and chemicals under the intertemporal multiple-industry trading simulation. (iii) Based on the principle of potential gain maximization, it is recommended that the sector of smelting and processing of non-ferrous metals should to be included as the next sector in national CETS. The results show that national CETS has great market potential for achieving China's joint carbon control and economic growth goals.

Did carbon emission trading scheme improve energy use in China? An integrated approach based on SCM and threshold regression.

The analysis of energy use not only sheds light on lightening the increasing pressures from energy systems but also improves the flexibility and reliability of power systems. As the highest carbon emission country in the world, detailed evaluation of China's carbon emission trading scheme (ETS) on the energy use is sensitive to energy sectors and highlights the importance of energy utilization in current society. Yet, because of the presence of a possible discontinuity caused by policy implementation, this study uses synthetic control method (SCM) to confirm whether there is a cutoff for energy use after the ETS implementation. Furthermore, threshold regression model is integrated to estimate the causal relationship when there is a discontinuity. SCM is used to verify which has caused the discontinuity for threshold regression model, and threshold regression model is used to quantify and estimate the causal relationship which SCM cannot evaluate. Through the data analysis, it is found that ETS makes effect on energy use deduction in most of pilot ETS regions while the effect is affected by economic development, population, industry, and research. Some suggestions on how to reduce energy use conclude this paper.

Synergistic effects of a carbon emissions trading scheme on carbon emissions and air pollution: The case of China.

Facing the dual pressures of the exacerbation of global climate change and the deterioration of the domestic environment caused by pollution, China has clearly adopted environmental regulatory measures to improve the climate environment. One measure is the carbon emissions trading scheme (CETS), which serves as a notable example of the country's efforts to improve the climate environment. We gathered panel data from 285 prefecture-level cities in China from 2005 to 2018 and used the Difference-in-Differences (DID) model to empirically examine the synergistic effects of the CETS on carbon emissions and air pollution. The results indicate that CETS have been effective in reducing urban carbon emissions by approximately 9.8%. Additionally, the schemes have caused a simultaneous reduction in particulate matter (PM)2.5 emissions by 11.7% and sulfur dioxide (SO2 ) emissions by approximately 9.7%, mitigating urban air pollution in China. It demonstrates that the scheme has significant synergistic effects on carbon emissions and air pollution. To achieve synergistic effects of CETS, effective measures include reducing energy intensity and upgrading the industrial structure. The implementation of CETS had heterogeneity in different conditions, and the synergistic effect of the scheme is more significant in eastern regions, large cities, and the final industrial stage. Our findings offer innovative solutions for the integrated management of carbon emissions and air pollution and provide valuable insights for policymakers to enhance China's CETS. Integr Environ Assess Manag 2023;00:1-13. © 2023 SETAC.

Evolutionary game analysis of prefabricated buildings adoption under carbon emission trading scheme

Prefabricated buildings (PBs) have attracted significant attention in the global construction field due to their remarkable environmental and social benefits. How to internalize the carbon emission reduction benefits brought by PBs into economic benefits, and then transform the PB promotion from government departments or state-owned enterprises to the whole market is an urgent problem to be solved. To find a market-oriented tool for internalizing the carbon emission reduction benefits, and to explore the impact of the current prevailing carbon emission trading scheme (ETS) on the construction industry, this study establishes a tripartite evolutionary game model for PB adoption and simulates the dynamic strategy evolution of the government and heterogeneous developers through numerical simulation. Findings indicate that low-carbon market demand, low-carbon synergy and carbon price have a positive impact on PB adoption. Meanwhile, it is recommended to include the construction industry in the ETS when carbon prices reach 110 RMB/t. Under the ETS, while the government could eliminate subsidies for PBs to alleviate financial pressure, the behavior of developers participating in the ETS needs to be monitored. Research findings provide insights for developers to participate in carbon trading markets and for governments to develop carbon trading mechanisms applicable to PBs.

Is single or synergistic environmental permit trading system more effective? A study based on Chinese industry

Under the ambitious pledge of carbon peaking and carbon neutrality, China is facing the stringent pressure of energy conservation and emissions abatement. The environmental permit trading such as the carbon emissions trading scheme (CETS) and the energy-use permit trading scheme (EPTS) have been implemented. However, it is unclear that whether the synergistic trading system is more effective compared with the single trading scheme and which trading system is applicable for different entities. We established three non-parametric optimization models for single and synergistic trading scenarios to estimate the potential industrial outputs, energy conservation and carbon emissions reduction of different regions and sectors. The results indicate that the synergistic trading system generates more potential outputs and energy savings, but the CETS can generate greater emissions reduction potential. The central and the eastern regions can respectively choose the synergistic trading system and the single trading system. The high-emission and high energy-use industries have more synergistic environmental potential and thus the synergistic trading system is more appropriate. However, negative environmental potential implies that moderate governance and supervision from the government is necessary. The methodological and analytical novelty of the study can support the proposal targeted policy recommendations, accelerate the construction of synergistic trading system and adopt system suiting local conditions.

How does carbon emission trading scheme affect enterprise market value? A roadmap towards natural resources sustainability

China has committed to establishing a unified national carbon emissions market to achieve carbon reduction goals. The Carbon Emission Trading Scheme (CETS) internalizes emission reduction costs, which may affect enterprise market value (EMV), but this has seldom received attention. Therefore, based on A-share listed enterprises data from 2009 to 2019, this study not only focuses on investigating the direct and heterogeneous impact of CETS on EMV but also identifies the effective market mechanism design by constructing a unified research framework including carbon emission quota allocation schemes, penalty mechanisms, and EMV performance. The empirical results are as follows: (1) The CETS can significantly enhance the EMV of covered enterprises, indicating that China's CETS supports the Porter hypothesis. Compared with state-owned and small enterprises, the CETS has a more significant effect on promoting the EMV of non-state-owned and large enterprises. (2) The mixed carbon quota allocation scheme (the combination of free and auction schemes) is more effective in improving EMV than the pure free quota allocation system. Meanwhile, the mixed penalties combining economic and non-economic measures can effectively encourage CETS-covered enterprises to participate in carbon trading activities, thus enhancing overall EMV. (3) The results of the mediation effect test indicate that the mixed schemes improve EMV by promoting low-carbon technology innovation, and mixed carbon quota allocation schemes have a more significant effect through this channel. These findings have important reference value for improving EMV under the CTEs, achieving the carbon peak and carbon neutrality goals, and promoting sustainable economic development.