Emission Reduction Effect of Carbon Trading Policy Based on Multi-Period DID and Synergy Effect

Ping Li, Lijing Xu, Xuesong Gu () and Yiduo Chen
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Ping Li: School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China
Lijing Xu: School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China
Xuesong Gu: School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China
Yiduo Chen: School of Economics, Fudan University, Yangpu District, Shanghai 200433, China

Sustainability, 2025, vol. 17, issue 11, 1-29

Abstract: As a cornerstone of China’s climate governance framework, the carbon trading pilot policy provides critical insights into achieving Sustainable Development Goals (SDGs), particularly SDG 13 (Climate Action) which emphasizes carbon emission reduction. This paper used provincial panel data from 2002 to 2021 in China, it specifies a multi-period Difference-in-Differences (DID) model to evaluate the effects of carbon trading policies on carbon reduction. The results indicate the following: First, carbon trading policies generally have significant effects on carbon emission reductions in pilot regions compared to non-pilot regions. Second, from the perspective of operation mechanisms, carbon trading policy realizes emission reductions mainly through market-oriented incentives and the optimization of energy consumption structures, while the effects of cost pressures and technological innovation are not significant. Third, under the synergistic mechanism, the greater the market-oriented effects and cost pressure generated by carbon trading, the better the effect of optimizing the energy consumption on reducing carbon emissions. Fourth, the regional heterogeneity test shows that the differences in regional green development attention and green financial development level also make the effects of carbon trading policies heterogeneous, where the emission reduction effect is better in regions with higher attention to green development and green financial development levels. The primary contributions of this study lie in its systematic examination of the synergistic effects among market-oriented incentives, technological innovation dynamics, cost pressures, and energy structure optimization.

Keywords: carbon trading policy; sustainable development; carbon emission reduction; carbon emission intensity; multi-period DID; mediation effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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