Does the carbon emissions trading system reduce carbon emissions by promoting two-way FDI in developing countries? Evidence from Chinese listed companies and cities

Guangcheng Ma, Jiahong Qin and Yumeng Zhang

Energy Economics, 2023, vol. 120, issue C

Abstract: How developing countries can effectively promote cities’ carbon emission reduction through the carbon emission trading system (ETS) is a topic worthy of attention in the global carbon reduction campaign. Policy changes in China’s ETS provide a unique opportunity to measure whether ETS impacts carbon emissions through two-way FDI. Hence, this paper employs difference-in-differences (DID) method to test the causal impact of ETS pilot policy on emissions through two-way FDI. The specific results are shown below. We find that the ETS pilot policy’s emission reduction policy significantly inhibited pilot cities’ carbon emissions through two-way FDI. The emission reduction effect is evident in cities with higher administrative levels, better location advantages, and a higher degree of nationalization and energy demand. The mechanism test shows that ETS positively impacts urban carbon emission reduction through the scale, industrial structure, and technical effects of two-way FDI. Among them, the positive effects of technical effect and scale effect are relatively large. The conclusion of this study provides policy enlightenment for giving full play to the carbon reduction effect of the ETS policy. At the same time, it provides experience reference for other developing countries to design ETS for carbon emission control in opening to the outside world.

Keywords: Emissions trading system; Two-way FDI; Climate policy; Developing countries; Quasi-experiment (search for similar items in EconPapers)
JEL-codes: Q51 Q53 Q54 Q58 R11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988323000798
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:120:y:2023:i:c:s0140988323000798

DOI: 10.1016/j.eneco.2023.106581

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().