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

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  • Hu, Yingde
  • Liu, Jixun
  • Ahmed, Minhaz

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.

Suggested Citation

  • Hu, Yingde & Liu, Jixun & Ahmed, Minhaz, 2022. "Does emission trading policy restrain economy? A county-scale empirical assessment from Zhejiang Province of China," Energy Policy, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003639
    DOI: 10.1016/j.enpol.2022.113138
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    Cited by:

    1. Jia, Zhijie, 2023. "The hidden benefit: Emission trading scheme and business performance of downstream enterprises," Energy Economics, Elsevier, vol. 117(C).
    2. Gao, Ming, 2023. "The impacts of carbon trading policy on China's low-carbon economy based on county-level perspectives," Energy Policy, Elsevier, vol. 175(C).
    3. Wang, Hong & Hu, Xuechen & Li, Hailing, 2023. "Regional production restriction policy and firms’ green transition: Evidence from Beijing-Tianjin-Hebei region," Energy, Elsevier, vol. 282(C).

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    More about this item

    Keywords

    Emission trading policy; County economy; Innovation-boosting effect; Investment intensity inhibitory effect; Gradual DID method;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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