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Carbon Emissions Trading and Environmental Protection: International Evidence

Author

Listed:
  • Jennie Bai

    (Georgetown University and NBER, Washington, District of Columbia 20057)

  • Hong Ru

    (Nanyang Business School, Nanyang Technological University, Singapore, Singapore 639798)

Abstract

We study how the implementation of emissions trading systems (ETSs) impacts emissions reductions and the usage of renewable energy using a panel sample of the largest 100 countries worldwide. Exploiting cross-country variations in ETS implementations, we show that ETS adoption materially reduced greenhouse gas (carbon dioxide) emissions by 12.1% (18.1%). Moreover, ETSs reduced overall emissions by cutting the usage of fossil fuels such as coal by 23.70% while boosting the usage of renewable energy by 61.59%, on average. In contrast, introducing carbon taxes has a less effective impact on emissions reduction. It fails to boost the usage of renewable energy, though elevating tax rates and expanding tax coverage may help enhance the efficacy of carbon taxes.

Suggested Citation

  • Jennie Bai & Hong Ru, 2024. "Carbon Emissions Trading and Environmental Protection: International Evidence," Management Science, INFORMS, vol. 70(7), pages 4593-4603, July.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:7:p:4593-4603
    DOI: 10.1287/mnsc.2023.03143
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    Cited by:

    1. Barroso, Raúl & Duan, Tinghua & Guo, Siyue (Sarina) & Kowalewski, Oskar, 2024. "Board gender diversity reform and corporate carbon emissions," Journal of Corporate Finance, Elsevier, vol. 87(C).
    2. Chang, Lulu & Fang, Senhui, 2025. "Bringing carbon emission reduction to fruition: Insights from city’s low-carbon policy intensity," Finance Research Letters, Elsevier, vol. 72(C).
    3. Xu, Xiaoping & Chen, Xinru & Cheng, T.C.E. & Choi, Tsan-Ming & Yang, Yuanyuan, 2025. "Should blockchain be used to eliminate greenwashing for green and live-streaming platform operations under carbon trading systems?," European Journal of Operational Research, Elsevier, vol. 324(3), pages 1017-1034.
    4. Glenk, Gunther & Maier, Rebecca & Reichelstein, Stefan, 2024. "Assessing the costs of industrial decarbonization," ZEW Discussion Papers 24-061, ZEW - Leibniz Centre for European Economic Research.
    5. Zhou, Sijie & Shi, Ye & Yu, Yugang & Liu, Jie, 2025. "Design of platform-labeling standards and competition strategy for retail platforms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 196(C).
    6. Zhang, Jintao & Lei, Xinghui & Su, Taoyong & Li, Ziyao, 2025. "Credit availability of energy-intensive industries in emerging economies: Do financially established firms have better access to credit?," Energy Economics, Elsevier, vol. 145(C).
    7. Liu, Maotao & Fang, Xubing, 2025. "How does green investor entry affect corporate carbon performance? Evidence from China," Renewable Energy, Elsevier, vol. 244(C).
    8. Zhao, Yang & Wang, Jianzhou & Wang, Shuai & Zheng, Jingwei & Lv, Mengzheng, 2025. "Using explainable deep learning to improve decision quality: Evidence from carbon trading market," Omega, Elsevier, vol. 133(C).
    9. Jia, Fu & Hu, Shoufeng & Chen, Lujie, 2025. "Impact of carbon border adjustment mechanism on the stock market value of high-polluting firms in China: The role of supply chain risk management and internationalization capabilities," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 197(C).
    10. Deng, Saiying & Duan, Tinghua & Li, Frank Weikai & Pu, Xiaoling, 2025. "Major customers and carbon footprints along the supply chain," Journal of Corporate Finance, Elsevier, vol. 92(C).

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