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A market instrument to achieve carbon neutrality: Is China’s energy-consumption permit trading scheme effective?

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  • Zhang, Yanfang
  • Guo, Siyuan
  • Shi, Xunpeng
  • Qian, Xiangyan
  • Nie, Rui

Abstract

The Chinese government implemented the energy-consumption permit trading scheme (ECPTS) pilot program in 2016, in order to achieve energy saving and carbon reduction. Based on the PSM-DID model, we attempt to test the effects of the ECPTS on energy consumption and energy intensity. With a counterfactual simulation, this paper also evaluates the potential gains and different mechanisms of this policy. The results show that, under the constraints of the established resources and policy efficiency, there is a positive relationship between the ECPTS and low-carbon economic transformation; the implementation of the above policy in the pilot provinces brought about an average energy saving of 43 Mtce during the period of 2016–2019. However, the potential gains of this policy need to be further increased to meet China’s energy control targets. Additionally, a complete mediating effect of the energy structure indicates that the impact of the ECPTS on energy consumption and energy intensity depends significantly on energy structure adjustments. Finally, this paper highlights the key policy implications associated with the empirical results.

Suggested Citation

  • Zhang, Yanfang & Guo, Siyuan & Shi, Xunpeng & Qian, Xiangyan & Nie, Rui, 2021. "A market instrument to achieve carbon neutrality: Is China’s energy-consumption permit trading scheme effective?," Applied Energy, Elsevier, vol. 299(C).
    • Handle: RePEc:eee:appene:v:299:y:2021:i:c:s0306261921007467
    DOI: 10.1016/j.apenergy.2021.117338
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    Cited by:

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    10. Jafar Hussain & Chien‐Chiang Lee, 2022. "A green path towards sustainable development: Optimal behavior of the duopoly game model with carbon neutrality instruments," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1523-1541, December.
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    13. Zhang, Yanfang & Gao, Qi & Wei, Jinpeng & Shi, Xunpeng & Zhou, Dequn, 2023. "Can China's energy-consumption permit trading scheme achieve the “Porter” effect? Evidence from an estimated DSGE model," Energy Policy, Elsevier, vol. 180(C).
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    More about this item

    Keywords

    Energy-consumption permit; Trading scheme; Energy consumption; Energy intensity; PSM-DID model;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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