IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i22p9715-d1516272.html
   My bibliography  Save this article

Assessing the Effectiveness of Market-Oriented Environmental Policies on CO 2 Emissions from Household Consumption: Evidence from a Quasi-Natural Experiment in Carbon Trading Pilots

Author

Listed:
  • Xiang Li

    (School of Business, Heze University, 2269 Daxue Road, Mudan District, Heze 274015, China)

  • Yuzhuo Huang

    (School of Business, Heze University, 2269 Daxue Road, Mudan District, Heze 274015, China)

  • Ken’ichi Matsumoto

    (Faculty of Economics, Toyo University, 5-28-20 Hakusan, Bunkyo-ku, Tokyo 112-8606, Japan)

Abstract

The enhancement of the carbon trading mechanism signifies a gradual transition in China’s environmental regulatory framework, shifting from a command and control approach to a market-based incentive model. Despite the significance of this shift, existing research has insufficiently explored the impact of market-oriented environmental policies on consumption-based emissions. This study leverages the carbon trading policies implemented in 2013 as a quasi-natural experiment, combined with a precise measurement of urban and rural household carbon emissions (HCE) during 2005–2021. Employing a difference-in-differences method, we evaluate the heterogeneous impact of these policies on urban and rural HCE. The results demonstrate a significantly negative effect of the policies on indirect HCE, a conclusion that remains robust across various placebo and robustness tests. Furthermore, we identify the transmission mechanisms through which carbon trading policies affect the reduction in HCE. The results indicate that the policy has a significant negative impact on indirect HCE, with a notable urban–rural difference. The effect of the policy is −0.829 for urban areas and −0.365 for rural areas, a conclusion that remains robust across various placebo and robustness checks. Additionally, we identified two transmission mechanisms through which carbon trading policies operate: financial deepening and employment effects. Lastly, we found that carbon trading policies can reduce carbon inequality between urban and rural areas by 46.8%.

Suggested Citation

  • Xiang Li & Yuzhuo Huang & Ken’ichi Matsumoto, 2024. "Assessing the Effectiveness of Market-Oriented Environmental Policies on CO 2 Emissions from Household Consumption: Evidence from a Quasi-Natural Experiment in Carbon Trading Pilots," Sustainability, MDPI, vol. 16(22), pages 1-25, November.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:22:p:9715-:d:1516272
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/22/9715/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/22/9715/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Yi Chen & Ziying Fan & Xiaomin Gu & Li-An Zhou, 2020. "Arrival of Young Talent: The Send-Down Movement and Rural Education in China," American Economic Review, American Economic Association, vol. 110(11), pages 3393-3430, November.
    2. Gao, Ming, 2023. "The impacts of carbon trading policy on China's low-carbon economy based on county-level perspectives," Energy Policy, Elsevier, vol. 175(C).
    3. Bin, Shui & Dowlatabadi, Hadi, 2005. "Consumer lifestyle approach to US energy use and the related CO2 emissions," Energy Policy, Elsevier, vol. 33(2), pages 197-208, January.
    4. Berman, Eli & Bui, Linda T. M., 2001. "Environmental regulation and labor demand: evidence from the South Coast Air Basin," Journal of Public Economics, Elsevier, vol. 79(2), pages 265-295, February.
    5. Zhang, Wei & Li, Jing & Li, Guoxiang & Guo, Shucen, 2020. "Emission reduction effect and carbon market efficiency of carbon emissions trading policy in China," Energy, Elsevier, vol. 196(C).
    6. Yu, Yanni & Zhang, Xinyi & Liu, Yunxiao & Zhou, Tao, 2024. "Carbon emission trading, carbon efficiency, and the Porter hypothesis: Plant-level evidence from China," Energy, Elsevier, vol. 308(C).
    7. Peters, Glen P., 2008. "From production-based to consumption-based national emission inventories," Ecological Economics, Elsevier, vol. 65(1), pages 13-23, March.
    8. Cha, Min-kyeong & Struthers, Cory L. & Brown, Marilyn A. & Kale, Snehal & Chapman, Oliver, 2024. "Toward residential decarbonization: Analyzing social-psychological drivers of household co-adoption of rooftop solar, electric vehicles, and efficient HVAC systems in Georgia, U.S," Renewable Energy, Elsevier, vol. 226(C).
    9. Dominik Wiedenhofer & Dabo Guan & Zhu Liu & Jing Meng & Ning Zhang & Yi-Ming Wei, 2017. "Unequal household carbon footprints in China," Nature Climate Change, Nature, vol. 7(1), pages 75-80, January.
    10. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LLC, vol. 4(3), pages 290-311, September.
    11. Zhichao Li & Bojia Liu, 2023. "Understanding Carbon Emissions Reduction in China: Perspectives of Political Mobility," Land, MDPI, vol. 12(4), pages 1-18, April.
    12. Stefano F. Verde, 2020. "The Impact Of The Eu Emissions Trading System On Competitiveness And Carbon Leakage: The Econometric Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 320-343, April.
    13. Hongxin Yu & Yaohui Jiang & Zhaowen Zhang & Wen-Long Shang & Chunjia Han & Yuanjun Zhao, 2022. "The impact of carbon emission trading policy on firms’ green innovation in China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-24, December.
    14. Wang, Chengjun & Wang, Rendong & Fei, Ximin & Li, Lei, 2024. "Price effects of residents' consumption carbon emissions: Evidence from rural and urban China," Energy Economics, Elsevier, vol. 135(C).
    15. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    16. Gezi Chen & Zhenhua Hu & Shijin Xiang & Ailan Xu, 2024. "The Impact of Carbon Emissions Trading on the Total Factor Productivity of China’s Electric Power Enterprises—An Empirical Analysis Based on the Differences-in-Differences Model," Sustainability, MDPI, vol. 16(7), pages 1-17, March.
    17. Hu, Yucai & Ren, Shenggang & Wang, Yangjie & Chen, Xiaohong, 2020. "Can carbon emission trading scheme achieve energy conservation and emission reduction? Evidence from the industrial sector in China," Energy Economics, Elsevier, vol. 85(C).
    18. Qin, Xiaodi & Wu, Haitao & Li, Rongrong, 2022. "Digital finance and household carbon emissions in China," China Economic Review, Elsevier, vol. 76(C).
    19. Fan, Jing-Li & Liao, Hua & Liang, Qiao-Mei & Tatano, Hirokazu & Liu, Chun-Feng & Wei, Yi-Ming, 2013. "Residential carbon emission evolutions in urban–rural divided China: An end-use and behavior analysis," Applied Energy, Elsevier, vol. 101(C), pages 323-332.
    20. Semykina, Anastasia & Wooldridge, Jeffrey M., 2010. "Estimating panel data models in the presence of endogeneity and selection," Journal of Econometrics, Elsevier, vol. 157(2), pages 375-380, August.
    21. Gao, Xue & Chen, Xuan & Liu, Lan-Cui, 2024. "Exploring the determinants of the evolution of urban and rural household carbon footprints inequality in China," Energy Policy, Elsevier, vol. 185(C).
    22. Chen, Zhelun & O’Neill, Zheng & Wen, Jin & Pradhan, Ojas & Yang, Tao & Lu, Xing & Lin, Guanjing & Miyata, Shohei & Lee, Seungjae & Shen, Chou & Chiosa, Roberto & Piscitelli, Marco Savino & Capozzoli, , 2023. "A review of data-driven fault detection and diagnostics for building HVAC systems," Applied Energy, Elsevier, vol. 339(C).
    23. Linlin Wang & Zixin Zhou & Yi Chen & Liangen Zeng & Linlin Dai, 2024. "How Does Digital Inclusive Finance Policy Affect the Carbon Emission Intensity of Industrial Land in the Yangtze River Economic Belt of China? Evidence from Intermediary and Threshold Effects," Land, MDPI, vol. 13(8), pages 1-17, July.
    24. Yip, Chi Man, 2018. "On the labor market consequences of environmental taxes," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 136-152.
    25. Khan, Muhammad Tariq Iqbal & Yaseen, Muhammad Rizwan & Ali, Qamar, 2019. "Nexus between financial development, tourism, renewable energy, and greenhouse gas emission in high-income countries: A continent-wise analysis," Energy Economics, Elsevier, vol. 83(C), pages 293-310.
    26. Roth, Jonathan & Sant’Anna, Pedro H.C. & Bilinski, Alyssa & Poe, John, 2023. "What’s trending in difference-in-differences? A synthesis of the recent econometrics literature," Journal of Econometrics, Elsevier, vol. 235(2), pages 2218-2244.
    27. Nan Zhou & Nina Khanna & Wei Feng & Jing Ke & Mark Levine, 2018. "Scenarios of energy efficiency and CO2 emissions reduction potential in the buildings sector in China to year 2050," Nature Energy, Nature, vol. 3(11), pages 978-984, November.
    28. Cao, Jing & Ho, Mun S. & Ma, Rong & Teng, Fei, 2021. "When carbon emission trading meets a regulated industry: Evidence from the electricity sector of China," Journal of Public Economics, Elsevier, vol. 200(C).
    29. Du, Zhili & Xu, Jie & Lin, Boqiang, 2024. "What does the digital economy bring to household carbon emissions? – From the perspective of energy intensity," Applied Energy, Elsevier, vol. 370(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuling Sun & Junsong Jia & Min Ju & Chundi Chen, 2022. "Spatiotemporal Dynamics of Direct Carbon Emission and Policy Implication of Energy Transition for China’s Residential Consumption Sector by the Methods of Social Network Analysis and Geographically We," Land, MDPI, vol. 11(7), pages 1-26, July.
    2. Weng, Zhixiong & Liu, Tingting & Wu, Yufeng & Cheng, Cuiyun, 2022. "Air quality improvement effect and future contributions of carbon trading pilot programs in China," Energy Policy, Elsevier, vol. 170(C).
    3. Xiao, De & Yu, Fan & Guo, Chenhao, 2023. "The impact of China's pilot carbon ETS on the labor income share: Based on an empirical method of combining PSM with staggered DID," Energy Economics, Elsevier, vol. 124(C).
    4. Tan, Xiujie & Wang, Banban & Wei, Jie & Taghizadeh-Hesary, Farhad, 2023. "The role of carbon pricing in achieving energy transition in the Post-COP26 era: Evidence from China's industrial energy conservation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 182(C).
    5. Yu, Fan & Zheng, Shilin & Zheng, Shuhong & Guo, Chenhao, 2024. "Does carbon ETS affect the distribution of labor's slice of the factor income pie? From the low carbon transition perspective," Energy Economics, Elsevier, vol. 134(C).
    6. Yulin Liu & Min Zhang & Rujia Liu, 2020. "The Impact of Income Inequality on Carbon Emissions in China: A Household-Level Analysis," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    7. Zhang, Ning & Wang, Shuo, 2024. "Can China's regional carbon market pilots improve power plants' energy efficiency?," Energy Economics, Elsevier, vol. 129(C).
    8. Jin, Chenfei & Tsai, Fu-Sheng & Gu, Qiuyang & Wu, Bao, 2022. "Does the porter hypothesis work well in the emission trading schema pilot? Exploring moderating effects of institutional settings," Research in International Business and Finance, Elsevier, vol. 62(C).
    9. Zhang, Junjie & Yu, Biying & Wei, Yi-Ming, 2018. "Heterogeneous impacts of households on carbon dioxide emissions in Chinese provinces," Applied Energy, Elsevier, vol. 229(C), pages 236-252.
    10. Ren, Shenggang & Yang, Xuanyu & Hu, Yucai & Chevallier, Julien, 2022. "Emission trading, induced innovation and firm performance," Energy Economics, Elsevier, vol. 112(C).
    11. Du, Zhili & Xu, Jie & Lin, Boqiang, 2024. "What does the digital economy bring to household carbon emissions? – From the perspective of energy intensity," Applied Energy, Elsevier, vol. 370(C).
    12. Zhang, Guidong & Wang, Jianlong & Liu, Yong, 2024. "“Carbon” suppresses “energy” - How does carbon emission right trading policy alleviate the energy trilemma?," Energy, Elsevier, vol. 307(C).
    13. Wu, Liangpeng & Zhu, Qingyuan, 2023. "Has the Emissions Trading Scheme (ETS) promoted the end-of-pipe emissions reduction? Evidence from China's residents," Energy, Elsevier, vol. 277(C).
    14. Ying Zhang & Yingli Huang, 2023. "Killing Two Birds with One Stone or Missing One of Them? The Synergistic Governance Effect of China’s Carbon Emissions Trading Scheme on Pollution Control and Carbon Emission Reduction," Sustainability, MDPI, vol. 15(13), pages 1-25, June.
    15. Mengmeng Qiang & Hangyi Lai & Zhenxi Lyu, 2025. "Carbon Emissions Trading and Employment: Evidence from China," Sustainability, MDPI, vol. 17(4), pages 1-19, February.
    16. Yan Li & Yigang Wei & Hanxiao Xu & Huanwen Liu & Julien Chevallier, 2023. "Carbon monoxide and multi‐pollutants flow between China and India: A multiregional input–output model," The World Economy, Wiley Blackwell, vol. 46(8), pages 2514-2537, August.
    17. Francesco Vona & Giovanni Marin & Davide Consoli, 2019. "Measures, drivers and effects of green employment: evidence from US local labor markets, 2006–2014," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 1021-1048.
    18. Pottier, Antonin, 2022. "Expenditure elasticity and income elasticity of GHG emissions: A survey of literature on household carbon footprint," Ecological Economics, Elsevier, vol. 192(C).
    19. Yechan Park & Yuya Sasaki, 2024. "Matching $\leq$ Hybrid $\leq$ Difference in Differences," Papers 2411.07952, arXiv.org, revised Feb 2025.
    20. Liu, Lan-Cui & Wu, Gang, 2013. "Relating five bounded environmental problems to China's household consumption in 2011–2015," Energy, Elsevier, vol. 57(C), pages 427-433.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:22:p:9715-:d:1516272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.