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Carbon Emission Trading System and Resource Misallocation in Emerging Markets

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  • Xiaoqi Li
  • Chao Feng

Abstract

Resource misallocation is an important factor that restricts a country’s economic growth. As a comprehensive environmental policy, the carbon emissions trading policy (CETP) provides a new perspective on resource allocation. This article utilizes multi-period difference-in-difference (DID) model and provincial panel data spanning from 2000 to 2021 to empirically examine the impact of CETP on resource misallocation in China. The study found that after addressing endogeneity issues and conducting a series of robustness tests, the CETP can improve resource misallocation by enhancing marketization and promoting green technology innovation (GTI). There is also evidence suggesting that the effect of CETP on improving resource misallocation exhibits spatial heterogeneity and varies with the operational characteristics of different carbon markets. The research conclusion provides empirical evidence for each region to scientifically optimize the CETP, alleviate barriers to the flow of production factors, and achieve high-quality economic development.

Suggested Citation

  • Xiaoqi Li & Chao Feng, 2026. "Carbon Emission Trading System and Resource Misallocation in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 62(3), pages 686-696, February.
    • Handle: RePEc:mes:emfitr:v:62:y:2026:i:3:p:686-696
    DOI: 10.1080/1540496X.2025.2544640
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