Can carbon trading drive SDG success? Evidence from China's emissions trading pilot schemes

Yunfei An, Xueqi Zhai, Hao Ding and Dequn Zhou

Energy Economics, 2025, vol. 150, issue C

Abstract: The Paris Agreement and the Sustainable Development Goals (SDGs) represent two critical global initiatives, and their interconnections have profound practical implications. To investigate the overall impact of emissions trading system (ETS) on SDGs, this research uses China's emissions trading pilot schemes as a case study and employs the propensity score matching-difference-in-differences (PSM-DID) method to conduct an empirical analysis based on panel data from 266 cities. City-level heterogeneity is analyzed from the perspectives of economic development and resource endowment. The mediating role of energy transition in the impact of ETS on SDGs is further examined through the lenses of energy system performance and transition readiness. The findings indicate that: (a) the ETS significantly improved the overall achievement of SDGs in the pilot cities, (b) the ETS pilot schemes had a positive effect on the SDGs of a range of cities having different economic and resource endowment levels, with a more pronounced effect in cities characterized by lower economic development and higher resource endowment, and (c) the ETS pilots advanced cities' SDGs by enhancing energy system performance. This study recommends leveraging ETS as a strategic tool to advance the achievement of SDGs. It advocates for the development and ongoing enhancement of a broader national carbon trading mechanism, with strengthened oversight of economically underdeveloped regions and resource-dependent cities. Furthermore, support for corporate energy transitions should be intensified to accelerate the attainment of SDGs.

Keywords: Emissions trading system; Sustainable development goals; PSM-DID; Energy transition; Heterogeneity (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:s0140988325007042

DOI: 10.1016/j.eneco.2025.108877

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