Carbon emission trading policy and corporate green innovation: internal incentives or external influences

Practical effects of carbon emissions trading system on energy efficiency

The carbon emissions trading system (CETS) is a helpful policy instrument for separating carbon emissions from economic expansion, and it significantly impacts energy efficiency (EE). This study uses 30 Chinese provinces from 2007 to 2020 as its research samples, and classifies energy efficiency into single-factor energy efficiency (SFE) and total-factor energy efficiency (TFE), using the difference-in-differences model to examine the effect and mechanism of the CETS on EE. As an additional tool to assess the efficacy of the CETS, the corresponding evolution of the rebound effect of energy-related carbon emissions (RECE) is also calculated. This study shows that the CETS can significantly improve EE in China's pilot provinces. The influence mechanism indicates that the effect of the CETS on EE is influenced by the level of government governance, green innovation, and industrial structure optimization. Further study finds that after the CETS was carried out, the RECE in pilot provinces was higher than that in non-pilot provinces, and 31.4% of carbon emissions reduced by EE improvement rebounded. Therefore, the CETS has yet to realize its full carbon reduction potential. The study offers specific policy proposals for the enhancement of China's CETS in light of the aforementioned findings.

Influence of carbon derivatives on carbon capture investments in coal-based power sector, a China perspective

Coal-based power sector needs deep carbon emission reduction in the upcoming 20 years to fulfill China's carbon peaking and carbon neutrality pledge. Due to the low and fluctuating carbon price in the emission trading system, decarbonization projects are risky and face massive potential losses. To promote decarbonization investment, a lot of policies of subsidy have been set forth. However, market instruments, which could be efficient and motivating for market entities, should have received more attention. In this article, the influence of carbon derivatives on decarbonization investment and financing is analyzed for different technology progresses and price trajectories. Results show that carbon futures and options have de-risking ability, lowering expected variation and financial cost, and consequently, making decarbonization project feasible. For advanced technology and optimistic outlook, investment can be feasible with 42-66% debt share when options are available. For the base case and neutral price outlook, derivatives can pull subsidy down by around 1%.