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Does an Emissions Trading Policy Improve Environmental Efficiency? Evidence from China

Author

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  • Yifei Zhang

    (School of Economics, Zhejiang University of Technology, Hangzhou 310014, China)

  • Sheng Li

    (Gulf Coast Research and Education Center, University of Florida, Wimauma, FL 33598, USA)

  • Fang Zhang

    (Belfer Center for Science and International Affairs, Harvard Kennedy School, Cambridge, MA 02138, USA)

Abstract

An emissions trading system is a market instrument for pollution control that has been used in China for many years. The Ministry of Environmental Protection of China has approved the implementation of emissions trading pilot projects in 11 provinces since 2007, yet the effectiveness of the policy has not been comprehensively estimated. With panel data from 29 provinces and cities in China between 2003 and 2012, this study uses the data envelopment model-slack based measurement (DEA-SBM) method to measure environmental efficiency indicators and a difference in difference (DID) model to examine the impact of the emissions trading system on environmental efficiency. The results indicate that the policy has significantly improved environmental efficiency in the pilot provinces. However, the effects are heterogeneous with different efficiency levels across the diverse regions. Higher impacts were found in the central and western regions. Some suggestions for the optimization of the emissions trading system are suggested in this study.

Suggested Citation

  • Yifei Zhang & Sheng Li & Fang Zhang, 2020. "Does an Emissions Trading Policy Improve Environmental Efficiency? Evidence from China," Sustainability, MDPI, vol. 12(6), pages 1-16, March.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:6:p:2165-:d:331287
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    4. Shen, Jun & Tang, Pengcheng & Zeng, Hao & Cheng, Jinhua & Liu, Xiuli, 2023. "Does emission trading system reduce mining cities’ pollution emissions? A quasi-natural experiment based on Chinese prefecture-level cities," Resources Policy, Elsevier, vol. 81(C).

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