IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i11p4764-d1661828.html
   My bibliography  Save this article

Emission Reduction Effect of Carbon Trading Policy Based on Multi-Period DID and Synergy Effect

Author

Listed:
  • Ping Li

    (School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China)

  • Lijing Xu

    (School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China)

  • Xuesong Gu

    (School of Economics and Management, Beijing Forestry University, Haidian District, Beijing 100083, China)

  • Yiduo Chen

    (School of Economics, Fudan University, Yangpu District, Shanghai 200433, China)

Abstract

As a cornerstone of China’s climate governance framework, the carbon trading pilot policy provides critical insights into achieving Sustainable Development Goals (SDGs), particularly SDG 13 (Climate Action) which emphasizes carbon emission reduction. This paper used provincial panel data from 2002 to 2021 in China, it specifies a multi-period Difference-in-Differences (DID) model to evaluate the effects of carbon trading policies on carbon reduction. The results indicate the following: First, carbon trading policies generally have significant effects on carbon emission reductions in pilot regions compared to non-pilot regions. Second, from the perspective of operation mechanisms, carbon trading policy realizes emission reductions mainly through market-oriented incentives and the optimization of energy consumption structures, while the effects of cost pressures and technological innovation are not significant. Third, under the synergistic mechanism, the greater the market-oriented effects and cost pressure generated by carbon trading, the better the effect of optimizing the energy consumption on reducing carbon emissions. Fourth, the regional heterogeneity test shows that the differences in regional green development attention and green financial development level also make the effects of carbon trading policies heterogeneous, where the emission reduction effect is better in regions with higher attention to green development and green financial development levels. The primary contributions of this study lie in its systematic examination of the synergistic effects among market-oriented incentives, technological innovation dynamics, cost pressures, and energy structure optimization.

Suggested Citation

  • Ping Li & Lijing Xu & Xuesong Gu & Yiduo Chen, 2025. "Emission Reduction Effect of Carbon Trading Policy Based on Multi-Period DID and Synergy Effect," Sustainability, MDPI, vol. 17(11), pages 1-29, May.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:11:p:4764-:d:1661828
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/11/4764/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/11/4764/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Du, Zhili & Wang, Yao, 2022. "Does energy-saving and emission reduction policy affects carbon reduction performance? A quasi-experimental evidence in China," Applied Energy, Elsevier, vol. 324(C).
    2. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(4), pages 605-654.
    3. Egami, Naoki & Yamauchi, Soichiro, 2023. "Using Multiple Pretreatment Periods to Improve Difference-in-Differences and Staggered Adoption Designs," Political Analysis, Cambridge University Press, vol. 31(2), pages 195-212, April.
    4. Chen, Xing & Lin, Boqiang, 2021. "Towards carbon neutrality by implementing carbon emissions trading scheme: Policy evaluation in China," Energy Policy, Elsevier, vol. 157(C).
    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. Bolat, C. Kaan & Soytas, Ugur & Akinoglu, Bulent & Nazlioglu, Saban, 2023. "Is there a macroeconomic carbon rebound effect in EU ETS?," Energy Economics, Elsevier, vol. 125(C).
    7. Yang, Xinyu & Jiang, Ping & Pan, Yao, 2020. "Does China's carbon emission trading policy have an employment double dividend and a Porter effect?," Energy Policy, Elsevier, vol. 142(C).
    8. Nong, Duy & Nguyen, Trung H. & Wang, Can & Van Khuc, Quy, 2020. "The environmental and economic impact of the emissions trading scheme (ETS) in Vietnam," Energy Policy, Elsevier, vol. 140(C).
    9. Xingshuai Wang & Ehsan Elahi & Lianggui Zhang, 2022. "Mandatory Environmental Regulation and Green Technology Innovation: Evidence from China," Sustainability, MDPI, vol. 14(20), pages 1-13, October.
    10. Aleksandar Zaklan & Jakob Wachsmuth & Vicki Duscha, 2021. "The EU ETS to 2030 and beyond: adjusting the cap in light of the 1.5°C target and current energy policies," Climate Policy, Taylor & Francis Journals, vol. 21(6), pages 778-791, July.
    11. J. van den Bergh & J. Castro & S. Drews & F. Exadaktylos & J. Foramitti & F. Klein & T. Konc & I. Savin, 2021. "Designing an effective climate-policy mix: accounting for instrument synergy," Climate Policy, Taylor & Francis Journals, vol. 21(6), pages 745-764, July.
    12. Zha, Donglan & Jiang, Pansong & Zhang, Chaoqun & Xia, Dan & Cao, Yang, 2023. "Positive synergy or negative synergy: An assessment of the carbon emission reduction effect of renewable energy policy mixes on China's power sector," Energy Policy, Elsevier, vol. 183(C).
    13. Duan, Hongbo & Mo, Jianlei & Fan, Ying & Wang, Shouyang, 2018. "Achieving China's energy and climate policy targets in 2030 under multiple uncertainties," Energy Economics, Elsevier, vol. 70(C), pages 45-60.
    14. Xi Lin & Yongle Zhao & Mahmood Ahmad & Zahoor Ahmed & Husam Rjoub & Tomiwa Sunday Adebayo, 2021. "Linking Innovative Human Capital, Economic Growth, and CO 2 Emissions: An Empirical Study Based on Chinese Provincial Panel Data," IJERPH, MDPI, vol. 18(16), pages 1-18, August.
    15. Tang, Ling & Wu, Jiaqian & Yu, Lean & Bao, Qin, 2015. "Carbon emissions trading scheme exploration in China: A multi-agent-based model," Energy Policy, Elsevier, vol. 81(C), pages 152-169.
    16. Li, Zhiguo & Wang, Jie, 2022. "Spatial spillover effect of carbon emission trading on carbon emission reduction: Empirical data from pilot regions in China," Energy, Elsevier, vol. 251(C).
    17. Qiong Wu & Kanittha Tambunlertchai & Pongsa Pornchaiwiseskul, 2021. "Examining the Impact and Influencing Channels of Carbon Emission Trading Pilot Markets in China," Sustainability, MDPI, vol. 13(10), pages 1-18, May.
    18. Duan, Hongbo & Mo, Jianlei & Fan, Ying & Wang, Shouyang, 2018. "Achieving China's energy and climate policy targets in 2030 under multiple uncertainties," LSE Research Online Documents on Economics 86481, London School of Economics and Political Science, LSE Library.
    19. Xuemei Yuan & Shuai Jin & Haibin Zhang, 2023. "Optimal Green Technology Choice for Firms under an Emission Trading Scheme: End-of-Pipe vs. Cleaner Production," Sustainability, MDPI, vol. 15(23), pages 1-19, November.
    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. Chen, Xing & Lin, Boqiang, 2021. "Towards carbon neutrality by implementing carbon emissions trading scheme: Policy evaluation in China," Energy Policy, Elsevier, vol. 157(C).
    2. Li, Mingquan & Gao, Huiwen & Abdulla, Ahmed & Shan, Rui & Gao, Shuo, 2022. "Combined effects of carbon pricing and power market reform on CO2 emissions reduction in China's electricity sector," Energy, Elsevier, vol. 257(C).
    3. Kai Zhou & Ziyi Qu & Jun Wang & Jianli Chen & Junkai Zhang, 2025. "Policies for Achieving Carbon Reduction in China from 1995 to 2022: A Review and Content Analysis," Sustainability, MDPI, vol. 17(3), pages 1-20, February.
    4. Lessmann, Christian & Kramer, Niklas, 2024. "The effect of cap-and-trade on sectoral emissions: Evidence from California," Energy Policy, Elsevier, vol. 188(C).
    5. Han, Linzhi & Li, Jiawen, 2025. "Does green finance reform promote corporate carbon emission reduction? Evidence from China's green finance reform and innovation pilot zones," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 2091-2111.
    6. Song, Xiangnan & Pan, Chuwen & Yuan, Hongping & Wang, Zeyu, 2024. "Does emission trading system (ETS) deserve further promotion in the building sector? Evidence from China," Renewable Energy, Elsevier, vol. 237(PB).
    7. Hu, Yucai & Li, Ranran & Du, Lei & Ren, Shenggang & Chevallier, Julien, 2022. "Could SO2 and CO2 emissions trading schemes achieve co-benefits of emissions reduction?," Energy Policy, Elsevier, vol. 170(C).
    8. Wu, Jianxian & Nie, Xin & Wang, Han, 2023. "Curse to blessing: The carbon emissions trading system and resource-based cities' carbon mitigation," Energy Policy, Elsevier, vol. 183(C).
    9. Wu, Shu & Hu, Fangfang & Zhang, Zhijian, 2024. "Visible hand or invisible hand in climate governance? Evidence from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 204(C).
    10. Shanglei Chai & Ruixuan Sun & Ke Zhang & Yueting Ding & Wei Wei, 2022. "Is Emissions Trading Scheme (ETS) an Effective Market-Incentivized Environmental Regulation Policy? Evidence from China’s Eight ETS Pilots," IJERPH, MDPI, vol. 19(6), pages 1-18, March.
    11. Qiuyue Xia & Lu Li & Jie Dong & Bin Zhang, 2021. "Reduction Effect and Mechanism Analysis of Carbon Trading Policy on Carbon Emissions from Land Use," Sustainability, MDPI, vol. 13(17), pages 1-22, August.
    12. Garfield Wayne Hunter & Gideon Sagoe & Daniele Vettorato & Ding Jiayu, 2019. "Sustainability of Low Carbon City Initiatives in China: A Comprehensive Literature Review," Sustainability, MDPI, vol. 11(16), pages 1-37, August.
    13. Sun, Xiaohang & Duan, Haiyan & Song, Junnian & Zheng, Heran & Yang, Wei & Mi, Zhifu, 2024. "Carbon peaking trajectory links to development of a coupled urbanization-industrialization-energy system," Energy, Elsevier, vol. 309(C).
    14. Zheng, Jiali & Mi, Zhifu & Coffman, D'Maris & Milcheva, Stanimira & Shan, Yuli & Guan, Dabo & Wang, Shouyang, 2019. "Regional development and carbon emissions in China," Energy Economics, Elsevier, vol. 81(C), pages 25-36.
    15. Qiong Chen & Hongyu Zhang & Yui-Yip Lau & Tianni Wang & Wen Wang & Guangsheng Zhang, 2023. "Climate Change, Carbon Peaks, and Carbon Neutralization: A Bibliometric Study from 2006 to 2023," Sustainability, MDPI, vol. 15(7), pages 1-12, March.
    16. Guo, Dongmei & Li, Qin & Liu, Peng & Shi, Xunpeng & Yu, Jian, 2023. "Power shortage and firm performance: Evidence from a Chinese city power shortage index," Energy Economics, Elsevier, vol. 119(C).
    17. Enci Wang & Jianyun Nie & Hong Zhan, 2022. "The Impact of Carbon Emissions Trading on the Profitability and Debt Burden of Listed Companies," Sustainability, MDPI, vol. 14(20), pages 1-20, October.
    18. Lin, Boqiang & Wu, Wei, 2021. "The impact of electric vehicle penetration: A recursive dynamic CGE analysis of China," Energy Economics, Elsevier, vol. 94(C).
    19. Hu, Xing & Yu, Shiwei & Fang, Xu & Ovaere, Marten, 2023. "Which combinations of renewable energy policies work better? Insights from policy text synergies in China," Energy Economics, Elsevier, vol. 127(PA).
    20. 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).

    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:17:y:2025:i:11:p:4764-:d:1661828. 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.