Exploring the effect of emission trading system on marginal abatement cost-based on the frontier synthetic difference-in-differences model

Evaluating the cost-effectiveness of emission trading system (ETS) will explore how to control the total emission amount while minimizing the economic cost. Most related studies employ the difference-in-differences (DID) and multi-period DID models. However, this research highlights the superiority of construction technique and estimation results in the synthetic DID model, and applies it to a new scenario for evaluating the cost-effectiveness of China's pilot ETS. From the construction technique, the synthetic DID model synthesizes more desirable control groups and allows more flexibility in matching treatment units with extreme values by setting weight combinations and intercept terms. From the estimation results, the treatment effects are considered more reliable because ideally satisfy the parallel trend assumption. Specifically, the synthetic DID model indicated that the pilot ETS effectively reduced the marginal abatement cost (MAC) by 24.39%, whereas the traditional DID and multi-period DID models may have overestimated the policy effects by 98.48% and 71.09%. The main reason was the MAC has shown a downward trend before the policy implementation. Moreover, the estimation results of heterogeneity analysis and mechanism test in different models were also different. The synthetic DID model integrates the strengths of the DID model and synthetic control method (SCM), making a methodologically grounded contribution to the existing policy evaluation system.

Does emission trading system improve the urban land green use efficiency? Empirical evidence from Chinese cities

Maximizing socioeconomic and environmental benefits with minimal investment in urban land resources is a key concern for sustainable urban development. The emission trading system is an important strategy of the Chinese government to control environmental pollution and promote green development, but whether it improves urban land green use efficiency is still unclear. Combining the concept of green development with urban land use efficiency, this paper uses the super-efficiency slack-based measure (SBM) model with undesirable outputs to measure the land green use efficiency of 261 prefecture-level cities in China from 2003 to 2017. In addition, the propensity score matching difference-in-differences (PSM-DID) method and the mediating effect model were used to test the impact of the China's emission trading system on urban land green use efficiency and behind the mechanism. According to the findings, China's emission trading system has significantly improved urban land green use efficiency, compared with that in nonpilot cities, urban land green use efficiency in pilot cities has increased by 10.40%. Moreover, the policy effect of the emission trading system is more significant in resource-based cities and cities with a high intensity of environmental regulations. Further mechanism analysis reveals that green technology innovation and industrial structure upgrading are effective transmission mechanisms for China's emissions trading policy to improve urban land green use efficiency. The findings provide policy implications for promoting the sustainable use of urban land resources and advancing the coordinated development of urban socioeconomic and ecological environments.

Will regulated firms benefit from carbon emission trading system? Evidence from a Market Power Perspective

The impact of the carbon emission trading system (ETS) on firms' market competitiveness has been a controversial issue with no consistent theoretical conclusions. The aim of this paper is to explore the impact of the carbon emission trading system on firms' markups using the latest robust staggered difference-in-difference estimation method. The results show that China's carbon emission trading system greatly contributes to the enhancement of firms' market power, as evidenced by a series of robustness tests. In addition, the analysis of the impact mechanism shows that the carbon emission trading system enhances the market power of firms through the low-carbon innovation effect and the market integration effect, while the impact of the environmental cost effect is not obvious. Moreover, the heterogeneity analysis shows that the impact of China's carbon trading system policy on firms' market power is more pronounced, especially for those firms that are actively involved in low-carbon transformation and upgrading, have a stronger cost-shifting capacity, and are more efficient in production. This study provides empirical evidence on how environmental regulations affect firms' market power and offers theoretical guidance for the construction of China's carbon market.

Will emission trading promote enterprise diversification? Evidence from China

This study examines the impact of the Chinese regional emission trading system (ETS) pilots on enterprise transformation from the perspective of diversification. We use data on Chinese A-share listed companies from 2004 to 2021, and adopt the staggered difference-in-differences (DID) and difference-in-difference-in-differences (DDD) models. The empirical results show that first, the ETS significantly increases the product quantity and revenue diversification of regulated firms. Second, the ETS promotes enterprise diversification through three channels: emission cost, emission risk, and market efficiency. Third, the ETS has a greater impact on the diversification of state-owned enterprises, firms with high business concentration, and firms with low innovation investment. Fourth, the ETS-driven diversification has not been successful as it has increased firms' costs and reduced their profitability. We recommend introducing industrial policies to guide the transformation of enterprises, encourage them to improve their innovation capabilities, and choose appropriate transformation strategies.

The effects of carbon pricing instruments on carbon emission reduction in China's refining industry: an evolutionary game between heterogeneous refineries

Carbon emissions from the refining industry are receiving increasing national attention. In view of long-term sustainable development, a carbon pricing mechanism oriented to carbon emission reduction needs to be developed. Currently, the two most common carbon pricing instruments are emission trading system and carbon tax. Therefore, it is important to study the carbon emission problems in the refining industry under emission trading system or carbon tax. Based on the current situation of China's refining industry, this paper constructs an evolutionary game model for backward and advanced refineries to explore which instrument is more effectively applied in the refining industry and identify the effective factors that can promote carbon emission reduction in refineries. According to the numerical results, if the heterogeneity of enterprises is small, the government's implementation of an emission trading system is the most effective measure, while carbon tax can only ensure that the equilibrium strategy solution is (1,1) when the tax rate is high. If the heterogeneity is large, the carbon tax policy will not have any effect, indicating that government implementation of an emission trading system is more effective than the carbon tax. In addition, there is a positive relationship between carbon price, carbon tax, and refineries' agreement to carbon emission reduction. Finally, consumers' preference for low-carbon products, R&D investment level, and R&D spillover effect have nothing to do with carbon emission reduction. Only by reducing refinery heterogeneity and improving the R&D efficiency of backward refineries can all enterprises agree to carbon emission reduction.

Environmental economic analysis of speed reduction measure onboard container ships

The International Maritime Organization (IMO) has concerned significant care to the reduction of ship emissions and improvement of energy efficiency through operational measures. One of those measures is ship speed reduction, which is classified as a short-term measure; in which the speed is reduced below its designed value. The present paper aims at evaluating the potential energy efficiency, and environmental and economic benefits because of applying speed reduction measures. The research methodology depends on establishing a simple mathematical model for technical, environmental, and economical aspects because of this concept. As a case study, container ships from different categories in a range of 2500-15,000 twenty-foot equivalent units (TEU) are investigated. The results show that a 2500 TEU ship can comply with the energy efficiency existing ship index (EEXI) by reducing the service speed to 19 knots. While for the bigger ships, the service speed must be 21.5 knots or below. Furthermore, the operational carbon intensity indicator (CII) has been evaluated for the case studies and found that the CII rating will keep its score between A and C levels if the service speed is equal to or below 19.5 knots. Moreover, the annual profit margin of the ship will be calculated based on applying speed reduction measures. Based on the economical results, the annual profit margin value, and its corresponding optimum speed change with the size of the vessel and the applicable status of carbon taxes.

The impact of emission trading system on clean energy consumption of enterprises: Evidence from a quasi-natural experiment in China

Research on the ability of environmental regulations to achieve an innovation-offset effect by increasing clean energy use is required. This study aims to verify this by analysing the impact of market-incentive environmental regulation on enterprises' clean energy consumption. Using China's sulfur dioxide (SO₂) emission trading system (ETS) for 2007 as a quasi-natural experiment, the difference-in-differences model and data obtained from the Chinese Industrial Enterprises Database and Chinese Industrial Enterprises Pollution Database were used to determine whether an ETS affects enterprises' clean energy consumption. The results show that an ETS encourages enterprises to utilise clean energy and has a significantly positive impact on enterprises' clean energy consumption. Moreover, this study finds that an ETS promotes clean energy consumption by improving the production of enterprises. This study verifies the rationality of China's SO₂ ETS design.

The effect of emission trading system on infant health: evidence from China

Although existing literature has explored the effect of the emission trading system (ETS) on economic growth and pollution emissions, little is known about the impact of the ETS on residents' heath, especially infant health. Based on a "big sample" data set from 1773 county-level administrative regions in China from 2001 to 2012 and a differences-in-differences (DID) strategy, for the first time, this paper investigates the effect of China's SO₂ ETS pilot policy on infant health measured by infant mortality. In particular, from the perspectives of pollution emission reduction and green and high-quality economic growth, we empirically identify the mechanism through which the ETS influences infant mortality. The results show that the implementation of the ETS pilot policy significantly reduces infant mortality, and with the implementation of the pilot policy, such a health improvement effect is strengthened. This finding is consolidated through a series of robustness checks, including employing the method of the propensity score matching combined by the DID, using the thermal inversion strength as the instrumental variable, excluding the impacts of other environmental policies, and conducting a placebo test. In addition, the results of the mechanism analysis indicate that the ETS pilot policy significantly lowers SO₂ emission density and PM2.5 concentration and raises energy efficiency and per capita GDP. Therefore, the ETS pilot policy can improve infant health by promoting pollution emission reduction and green and high-quality economic growth. This study provides some empirical evidence for the causal relationship between environmental regulation policies and infant health, as well as some reference for the formulation and improvement of related environmental regulation policies.

Urban carbon emission intensity under emission trading system in a developing economy: evidence from 273 Chinese cities

The international community has generally recognized the key role of developing countries' cities in reducing carbon emissions, an elemental way to mitigate climate change. However, few have empirically analyzed the impact of market-based instruments such as emission trading system on urban carbon emissions in developing economies. This paper examines the effect of China's pilot carbon trading markets, the first emission trading system in developing economies, on cities' carbon intensity. We also explore the mechanism by which the emission trading system achieves its influence. The PSM-DID method is used to analyze the panel data including China's 273 prefecture-level cities from 2010 to 2016. The results illustrate that the emission trading system significantly decreased pilot cities' carbon intensity and this effect endured; as time progressed, the reduction effect was increasing. Through mediating effect analysis, we find that the emission trading system reduced the carbon intensity via increasing the proportion of tertiary industry output value in GDP and decreasing the energy intensity. Overall, the empirical results suggest that the Chinese government should drive the establishment and improvement of a national carbon market, proactively adjust industry structure, and consider the possible influence caused by the potential energy rebound effect.