Is Emissions Trading Scheme (ETS) an Effective Market-Incentivized Environmental Regulation Policy? Evidence from China's Eight ETS Pilots.

Climate change and environmental issues caused by carbon emissions have attracted the attention of governments around the world. Drawing on the experience of the EU, China is actively developing a national carbon emissions trading market, trying to encourage emission entities to incorporate carbon emissions reduction into production and consumption decisions through carbon pricing. Is this scheme an effective market-incentivized environmental regulatory policy? Since China successively launched ETS pilots in 2013, the effectiveness of reducing carbon emissions has become one of the current focus issues. This study uses the difference-in-differences (DID) method to evaluate the impact of ETS implementation on emissions reduction and employs the Super-SBM model in data envelopment analysis (DEA) to evaluate the emission-reduction efficiency of eight ETS pilots in China. We find that the carbon trading policy has achieved emission-reduction effects in the implementation stage, and the greenness of economic growth has a significant positive impact on regional GDP. The establishment of China's unified carbon market should be coordinated with regional development. Some supporting measures for regional ecological compensation and the mitigation of regional development are yet to be adopted.

Monitoring the CO2 Emission Trajectory and Reduction Effects by ETS and Its Market Performances for Pre- and Post-pandemic China.

The COVID-19 pandemic has caused great shocks on economic activities and carbon emissions. This paper aims to monitor the CO2 emission trajectory in China before and after the pandemic outbreak, and analyze the emission reduction effects by ETS and its market performances, which are important determinants underlying the trajectory and key drivers for emission reductions. We firstly find out a rather consistent trajectory of CO2 emissions in pre- and post-pandemic China over a 2-year time horizon, using the near-real-time datasets of daily CO2 emissions by Carbon Monitor and applying the Cox-Stuart trend test and mean equality test. We then examine the emission reduction effects by China's carbon ETS and its pilot market performances, using the methodologies of DID and PSM-DID as well as pre-pandemic region-level emission datasets by CEADs. Furthermore, it's found that the ETS pilot markets, which are immature with defects, have been performing more vulnerably in terms of liquidity and transaction continuity under pandemic shocks, thus undermining the emission reduction effects by ETS. These findings are providing insights into further mechanism design of the carbon ETS to the end of steady emission reductions even under shocks for post-pandemic China. It's of particular importance now that the nationwide market has been launched and needs to be enhanced based on lessons learned.