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Energy use rights trading and carbon emissions

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  • Cheng, Zhen
  • Ding, Chante Jian
  • Zhao, Kunqian

Abstract

The Paid Use and Trading System for Energy Use Rights (PRTE) facilitates the efficient allocation of energy resources through market mechanisms, representing a crucial initiative to promote green development. The system is designed to optimize energy structures, reduce carbon emissions, and achieve balanced economic and environmental growth. Using data from 276 prefecture-level cities in China, this study treats PRTE implementation as a quasi-natural experiment and employs a difference-in-differences model to empirically assess the impact of PRTE on urban carbon emissions and its underlying mechanisms. The findings demonstrate that PRTE significantly reduces urban carbon emissions. This conclusion is robust, supported by various tests, including parallel trend tests, placebo tests, and instrumental variable methods. Mechanism analysis shows that PRTE drives urban carbon reduction by promoting industrial structure upgrades and technological innovation. Heterogeneity tests reveal that PRTE has a stronger inhibitory effect on carbon emissions in cities with higher degrees of fiscal decentralization, more advanced green financial development, resource-based economies, and higher levels of economic development. The study recommends expanding PRTE programs to encompass more industries and regions, while establishing transparent and efficient trading markets to ensure fair and sustainable policy implementation.

Suggested Citation

  • Cheng, Zhen & Ding, Chante Jian & Zhao, Kunqian, 2025. "Energy use rights trading and carbon emissions," Energy, Elsevier, vol. 315(C).
    • Handle: RePEc:eee:energy:v:315:y:2025:i:c:s0360544225000027
    DOI: 10.1016/j.energy.2025.134360
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