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The Incremental Impact of China’s Carbon Trading Pilots on Carbon Abatement

Author

Listed:
  • Mei Lu
  • Michael G. Pollitt
  • Ke Wang
  • Yi-Ming Wei

Abstract

China has adopted the carbon emissions trading system (ETS) due to its advantages on efficiency and cost grounds. Preceding the establishment of the national carbon market, China conducted ETS pilots over eight years alongside the existing Energy Conservation and Carbon Abatement Target Responsibility System (ECCA-TRS) to accumulate experience with carbon markets. However, the incremental effects of these pilots on carbon abatement remain unclear. By utilizing province-industry-year level data from 2006 to 2019 and applying a triple-difference methodology, this study finds no significant evidence that the ETS pilots have generated additional carbon abatement effects after accounting for the influence of ECCA-TRS. Instead, this study suggests that the ECCA-TRS is the primary driver of carbon abatement. Consequently, establishing a binding target is imperative to permit ETS to act as the backstop emissions constraint. Moreover, it is crucial to explicitly consider the interaction between the ECCA-TRS carbon reduction targets and the carbon market cap. This involves shifting the focus of ECCA-TRS to non-covered sectors, allowing the ETS to better contribute to overall abatement goals cost-effectively. JEL Classification: Q54 - Climate; Natural Disasters and Their Management; Global Warming; Q50 - Environmental Economics: General

Suggested Citation

  • Mei Lu & Michael G. Pollitt & Ke Wang & Yi-Ming Wei, 2025. "The Incremental Impact of China’s Carbon Trading Pilots on Carbon Abatement," The Energy Journal, , vol. 46(6), pages 211-239, November.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:6:p:211-239
    DOI: 10.1177/01956574251367300
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    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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