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How does China's energy quota trading policy affect regional energy transition?

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Listed:
  • Hu, Yushang
  • Liu, Yaqing
  • Wang, Zanxin

Abstract

Market-based energy policies have become increasingly important for advancing the energy transition to address climate change and enhance energy security. In this context, the Chinese Energy Quota Trading (EQT) policy has been shown to effectively reduce regional energy intensity. However, its contribution to promoting energy transition remains underexplored. Based on panel data from 277 Chinese cities between 2006 and 2021 and using a difference-in-differences approach, this study estimates how the policy affects regional energy transition. The findings demonstrate that the EQT policy significantly promotes regional energy transition, with mechanism analysis revealing that the EQT policy positively affects it through industrial structure upgrading. Moreover, higher levels of informatization and public transportation infrastructure strengthen the EQT policy's facilitating effects. Additionally, the policy effects exhibit significant heterogeneity across cities of different sizes and geographical locations. Notwithstanding these positive contributions, the EQT policy also generates negative spillover effects that hinder energy transition in neighboring regions.

Suggested Citation

  • Hu, Yushang & Liu, Yaqing & Wang, Zanxin, 2026. "How does China's energy quota trading policy affect regional energy transition?," Utilities Policy, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:juipol:v:100:y:2026:i:c:s0957178726000305
    DOI: 10.1016/j.jup.2026.102171
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