The effectiveness of China's regional carbon market pilots in reducing firm emissions.
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2021-12
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China has implemented an emission trading system (ETS) to reduce its ever-increasing greenhouse gas emissions while maintaining rapid economic growth. With low carbon prices and infrequent allowance trading, whether China's ETS is an effective approach for climate mitigation has entered the center of the policy and research debate. Utilizing China's regional ETS pilots as a quasi-natural experiment, we provide a comprehensive assessment of the effects of ETS on firm carbon emissions and economic outcomes by means of a matched difference-in-differences (DID) approach. The empirical analysis is based on a unique panel dataset of firm tax records in the manufacturing and public utility sectors during 2009 to 2015. We show unambiguous evidence that the regional ETS pilots are effective in reducing firm emissions, leading to a 16.7% reduction in total emissions and a 9.7% reduction in emission intensity. Regulated firms achieve emission abatement through conserving energy consumption and switching to low-carbon fuels. The economic consequences of the ETS are mixed. On one hand, the ETS has a negative impact on employment and capital input; on the other hand, the ETS incentivizes regulated firms to improve productivity. In the aggregate, the ETS does not exhibit statistically significant effects on output and export. We also find that the ETS displays notable heterogeneity across pilots. Mass-based allowance allocation rules, higher carbon prices, and active allowance trading contribute to more pronounced effects in emission abatement.
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Cui, Jingbo, Chunhua Wang, Junjie Zhang and Yang Zheng (2021). The effectiveness of China's regional carbon market pilots in reducing firm emissions. Proceedings of the National Academy of Sciences of the United States of America, 118(52). pp. e2109912118–e2109912118. 10.1073/pnas.2109912118 Retrieved from https://hdl.handle.net/10161/24198.
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Jingbo Cui
Bio: Dr. Jingbo Cui is a tenured Associate Professor of Applied Economics at the Division of Social Sciences, Co-Director at the Environmental Research Center, and Director of Graduate Studies for the International Master of Environmental Policy (iMEP) program at Duke Kunshan University, Adjunct Professor and Ph.D. Supervisor at the School of Economics and Management at Wuhan University. Before the current position, he was a Chu-Tian Junior Scholar from the Department of Education in Hubei Province, an Associate Professor at the School of Economics and Management at Wuhan University, a Post-doctoral Research Associate, and a visiting scholar at Iowa State University. He holds a Ph.D. in economics from Iowa State University, an M.S. in economics from Wuhan University, and a B.S. in economics and mathematics from Huazhong University of Science and Technology, China.
Dr. Cui’s research centers on Environmental Economics, the Economics of Innovation, and the Economics of Climate Change. His recent research has delved into intriguing topics such as the drivers and obstacles to low-carbon innovation, the economic and environmental impacts of China's climate policy and risk. His scholarly contributions have been published in top-tier academic journals, including Proceedings of the National Academy of Sciences (PNAS), American Economic Review Papers and Proceedings, Journal of Environmental Economics and Management, American Journal of Agricultural Economics, Environmental and Resource Economics, Journal of Regional Science, The World Economy, and Energy Economics. He has served as a referee for leading journals in Environmental Economics, Agricultural Economics, and Economics of Innovation (i.e., JEEM, AJAE, JAERE, Nature Climate Change, and Research Policy), as Associate Editor for the Environment and Development Economics, and a member of the editorial council in JAERE. His research projects have been funded by the National Natural Science Foundation of China (General Program, Junior Program, and Urgent Program) and the Jiangsu Qinglan Project.
Junjie Zhang
Junjie Zhang is a professor in the Nicholas School of the Environment at Duke University and Director of the Initiative for Sustainable Investment at Duke Kunshan University. He founded and directed Duke Kunshan's Environmental Research Center and International Master of Environmental Policy Program. Before that, he was an associate professor in the School of Global Policy and Strategy at the University of California, San Diego. He was also a Volkswagen Visiting Chair in Sustainability in Schwarzman College at Tsinghua University. His recent research focuses on empirical issues in energy transition, climate change, and green finance. He has received funding from reputable sources, including the U.S. National Science Foundation, the U.S. National Oceanic and Atmospheric Administration, China National Natural Science Foundation, China’s Ministry of Ecology and Environment, China Council for International Cooperation on Environment and Development, the Energy Foundation, the World Bank, and Asian Development Bank. He holds a B.S. from the Renmin University of China, a B.S. and an M.S. from Tsinghua University, and a Ph.D. from Duke University.
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