The Impact of Carbon Market Expansion on Steel Enterprises: A Case Study in Changzhou

Abstract

As China continues to expand its national carbon emissions trading system (ETS) to cover the steel industry, it becomes more important to look carefully at how firms respond to carbon constraints. In Changzhou, which is a major industrial city, steel enterprises are under increasing pressure to reduce emissions while also maintaining economic performance. In this project, we adopted a mixed-methods approach that brought together the SFIC framework and a stylized model, so that we could examine how enterprises respond under different carbon price levels and benchmark settings. Our results show that the current carbon price has only a limited effect on short-term production decisions and technology adoption. At the same time, it has a much clearer effect on firms’ allowance positions and their relative competitiveness. In this process, lower-emission firms are placed in a more favorable position, and this further widens structural differences within the industry. These results indicate that China’s carbon market now works more as a mechanism that imposes constraints and sorts firms by performance, rather than as a policy tool that strongly drives immediate technological change.