The Carbon Emission Trading Policy of China: Does It Really Boost the Environmental Upgrading?

Rabia Shahid, Shijie Li (), Jian Gao, Muhammad Ahsan Altaf, Atif Jahanger and Awais Shakoor
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Rabia Shahid: Management School, Hainan University, Haikou 570228, China
Shijie Li: School of Economics, Hainan University, Haikou 570228, China
Jian Gao: College of Management and Economics, Tianjin University, Tianjin 300072, China
Muhammad Ahsan Altaf: College of Horticulture, Hainan University, Haikou 570228, China
Awais Shakoor: Department of Environment and Soil Sciences, University of Lleida, 25198 Lleida, Spain

Energies, 2022, vol. 15, issue 16, 1-13

Abstract: China’s rapid industrialization has led to massive resource consumption, and the country has recently been highlighted as the World’s top carbon emitter. To pursue a sustainable economy via environmental upgrading, reductions in carbon emission levels are of great concern. The carbon emission reduction policy (CETP) is an environmental regulation aimed at cutting emissions and achieving environmental protection. Based on panel data of pilot and non-pilot regions, this study investigated the policy impact of the CETP on carbon emission reduction through difference-in-differences (DID). The findings, based on pooled OLS (ordinary least squares) and LSDV (least square dummy variable) regressions, revealed that the carbon emissions of the pilot regions (Beijing, Tianjin, Shanghai, Guangdong, Chongqing, and Hubei) had reduced by 12 percent more than the non-pilot regions. Thus, this implies that the CETP causes environmental upgrading. The results were further verified using a number of robustness checks, including parallel trends, placebo test, Granger causality test, and DID regression with a longer sample period. Based on the study findings, it was concluded that to achieve higher upgrade levels related to the environment, the CETP needs to be encouraged and improved for nationwide implementation. Furthermore, sustainable economic development in China also needs strict environmental regulations and policy measures.

Keywords: carbon emissions; environmental regulations; process upgrading; opening policy; environmental protection (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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