Emission reduction effect and carbon market efficiency of carbon emissions trading policy in China

• Published in: Energy (Oxford) 2020-04, Vol.196, p.117117, Article 117117
• Main Authors: Zhang, Wei, Li, Jing, Li, Guoxiang, Guo, Shucen
• Format: Article
• Language: English
• Subjects: Carbon; Carbon dioxide; Carbon emission reduction; Carbon emission trading system; Carbon market efficiency; Data envelopment analysis; Difference-in-differences; Economic analysis; Economic development; Economic growth; Efficiency; Emission analysis; Emissions control; Emissions trading; Energy management; Evaluation; Gaging; Impact analysis; Industrial emissions; Measurement methods; Operations research
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2020.117117

China has implemented its carbon emission trading system (ETS) in seven pilots since 2013. Many methods have been used to evaluate the effect and efficiency of the ETS in reducing carbon emissions. Evaluating the carbon ETS to determine whether it has co-benefited the economy and environment in the seven pilots is crucial for the development of China. Moreover, different methods of measurement reveal different results on how efficient the seven carbon emission trading markets (ETMs) are. We use the difference-in-differences (DID) method to evaluate the impact of carbon emissions and economic growth following ETS implementation. Based on the data of industrial carbon emissions in 30 provinces of China from 2008 to 2016, the impact of ETS on the carbon emission reduction and economic growth of enterprises is empirically tested. Data envelopment analysis (DEA) evaluates the operating efficiency of the carbon ETMs. Based on the seven carbon emission trading pilots conducted in China in 2014–2016, the carbon ETMs differentiation system in the pilot area is taken as the input index and the ETS implementation effect is used as the output index to construct the full DEA evaluation model for gauging the operation efficiency of the carbon ETMs. The results show that the implementation of the carbon trading policy increases the economic dividend (13.6%) generated by the gross industrial output value, but significantly reduces the emission (24.2%) of industrial CO2 in all seven carbon emission trading pilots. The average DEA efficiency of the seven carbon ETMs operations in China have increased annually. •The effect of carbon trading policy on carbon reduction in industrial enterprises are explored.•The operational efficiency for carbon ETMs in China are calculated.•DID method is used to explore the impact of ETS on CO2 emissions and total industrial output value.•The operation efficiency of the carbon ETMs are evaluated by DEA method from 2015 to 2017.•The conclusions can provide empirical support and policy recommendations for China’s ETS.