The effectiveness of China's national emissions trading scheme in mitigating firm emissions

Ziyu Qin, Jianhui Ruan, Hui Yu, Jieyi Li, Chen Lyu, Bofeng Cai, Shouyang Wang and Ling Tang

Energy Economics, 2025, vol. 150, issue C

Abstract: China's national emissions trading scheme (ETS), announced in 2017, has become the largest carbon market worldwide, operating alongside pre-existing regional pilots. However, detailed assessments regarding the newly constructed national ETS, particularly in comparison with the regional pilots, remain limited. Using unit-level monitoring data from China's power sector and combining intermediary and moderate models, this study investigates the carbon mitigation impact of China's national ETS relative to pilot ETSs. We find that while both the national and pilot ETSs significantly reduce carbon intensities, the effect was more pronounced in pilots. A mechanism behind this reduction is the improvement in fuel quality, as evidenced by a decrease in carbon content. Regional economic growth and a higher share of industrial activity appear to offset the policy's overall effectiveness. Heterogeneity analysis shows that the mitigation effects were greater in smaller and older units compared to their larger or newer counterparts. Our unit-level empirical evaluation of China's national ETS not only advances theoretical understanding of emissions trading mechanisms but also provides actionable insights for refining or establishing carbon market policies in emerging economies.

Keywords: China's national ETS; Policy evaluation; Power firms; Carbon emissions; Mediation effect; Moderation effect (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006565

DOI: 10.1016/j.eneco.2025.108829

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