Has China’s Emission Trading System Achieved the Development of a Low-Carbon Economy in High-Emission Industrial Subsectors?

• Main Authors: Haoran Zhang, Rongxia Zhang, Guomin Li, Wei Li, Yongrok Choi
• Format: Article
• Language: English
• Published: MDPI AG 2020-07-01
• Series: Sustainability
• Subjects: China; emissions trading systems (ETS); low-carbon economy; PSM-DID; DDD
• Online Access: https://www.mdpi.com/2071-1050/12/13/5370

An emission trading system (ETS) is a powerful emission reduction tool for achieving low-carbon economic development in the world. Focusing on the industrial subsectors, this paper comprehensively analyzes the environmental and economic effects of the pilot ETS in China from the perspectives of economic development, technological optimization, and innovation-driven development by using the propensity score matching–difference in differences (PSM-DID) model based on 2005–2017 provincial panel data. This paper compensates for the limitations of existing studies on the effects of ETS on different subsectors; furthermore, the triple difference model (DDD) model is used to discuss the impacts of differences in environmental responsibility and economic potential among subsectors on policy effects. The empirical results show that: (1) The pilot ETS produces a 14.5% carbon reduction effect on the covered subsectors while reducing GDP by 4.8% without achieving a low-carbon economy. Thus, production decline is the main reason for carbon emission reductions. (2) Economic development factors have significant positive impacts on carbon emissions, while technological optimization and innovation-driven development are key factors for achieving reductions in carbon emissions. (3) The pilot ETS produces a 60.1% carbon emission inhibition effect and 23.2% GDP inhibition effect on the subsectors with greater environmental responsibility. Therefore, the Chinese government should fully simulate the impact of technological innovation and utilize resource endowment differences in the environmental and economic aspects of different sectors to achieve low-carbon economic development.