Does emission trading policy restrain economy? A county-scale empirical assessment from Zhejiang Province of China

Yingde Hu, Jixun Liu and Minhaz Ahmed

Energy Policy, 2022, vol. 168, issue C

Abstract: Despite extensive attention paid to emissions trading policy (ETP) approaches, the effect of ETP on economic performance is still ambiguous, and its mechanism and policy scenarios remains to be clarified. This study uses panel data at county level from 2002 to 2017 in Zhejiang province to explore the effects of China's ETP on the economic development. Adopting the difference-in-differences (DID) model, it reveals that 1) China's ETP has an aggregative negative impact on county economy. 2) gradual regression results shows that investment intensity inhibitory effect is proved and investment intensity has a strong mediating role, but innovation-boosting effect (Porter hypothesis) is not well supported as ETP does not spur the level of innovation and total factor productivity. 3) Further study shows the level of industrialisation, business environment and financial development in the county can significantly moderate the negative impact of ETP on regional economic development. This study extends the literature of environmental policy and economic development, by providing the empirical evidence at county level with 16-year time span, to generate the solid basis of ETP implementation. Overall, this study has important implications for the government to further evaluate policy effectiveness and promote ETP gradually.

Keywords: Emission trading policy; County economy; Innovation-boosting effect; Investment intensity inhibitory effect; Gradual DID method (search for similar items in EconPapers)
JEL-codes: L94 Q52 Q53 Q58 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003639

DOI: 10.1016/j.enpol.2022.113138

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