The long term effects of carbon trading markets in China: Evidence from energy intensive industries

• Published in: The Science of the total environment Vol. 806; no. Pt 1; p. 150311
• Main Authors: Tan, Ruipeng, Lin, Boqiang
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.02.2022
• Subjects: carbon; carbon dioxide; China; China's national carbon emissions trading scheme; CO2 emissions reduction; Economic development; energy; Energy intensive industries; environment; environmental law; research and development; China; China's national carbon emissions trading scheme; Energy intensive industries; Economic development; CO2 emissions reduction
• ISSN: 0048-9697; 1879-1026; 1879-1026
• DOI: 10.1016/j.scitotenv.2021.150311

Carbon trading scheme is an instrument adopted in many countries of the world to reduce CO2 emissions. As an important way of environmental regulation, whether it can reduce the emissions and promote the economic development at the same time needs further investigation. This paper tests whether the Porter Hypothesis is true in China's carbon emissions trading scheme for energy intensive industries. Using provincial-level, industrial-level and firm-level data, we construct a DEA model that can incorporate the emissions trading behavior among different decision making units to show that the carbon emissions trading scheme can only reduce the CO2 emissions but cannot increase the output significantly. That is, the carbon intensity is decreased. The reason is that the carbon trading scheme is conducive to the improvement of the production efficiency, and firm-level research and development input increases after carbon trading scheme. These findings are robust to several robustness checks. Our paper demonstrates the effectiveness of the carbon emissions trading scheme in reducing emissions. An external technological breakthrough is needed if the win-win situation of reducing CO2 emissions and promoting economic development simultaneously is wanted to be achieved. [Display omitted] •A model to analyze the impacts of carbon trading on output and CO2 emissions is constructed.•The mechanisms of the impacts of carbon trading are investigated.•Porter Hypothesis is not true in China's carbon trading scheme.