Evaluation of effectiveness of China's carbon emissions trading scheme in carbon mitigation

In response to climate change issues, China has set clear targets to reduce emissions. The establishment of a carbon emissions trading scheme (ETS) has an important role in China's achievement of these targets. China designed its ETS in 2011 and implemented it in pilot regions in 2013. This study investigated whether the ETS reduces carbon emissions and how it influences carbon leakage. First, the production-based emissions, consumption-based emissions, and carbon leakage of 28 industries in 30 provinces during 2005–2015 were calculated based on provincial environmentally extended input–output tables. Then, the difference-in-differences and difference-in-difference-in-differences models were used to evaluate the effectiveness of ETS. The following conclusions were derived. (1) ETS contributes to emissions mitigation in pilot regions and industries. (2) ETS has greater effect on the mitigation of production-based emissions than consumption-based emissions. (3) ETS encourages outsourcing of emissions from pilot areas to non-pilot areas, resulting in carbon leakage (or “pollution haven” effect), which aggravates the imbalance of emissions transfers among China's provinces. The success of China's ETS in promoting emissions mitigation can serve as an example for other emerging economies.