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This study explores the impact of political uncertainty on sustainable urban development by examining carbon emission trading systems (ETS) in four major markets in China (Beijing, Shanghai, Guangdong, and Hubei) from 2014 to 2022. As an alternative to carbon taxes, carbon ETS markets have become increasingly popular due to their success in reducing greenhouse gas emissions. However, their effectiveness is often hindered by political instability and uncertainty. Utilising logistic regression and AR(1)-GARCH estimations, we identify a negative relationship between political uncertainty and carbon trading volume. Our study also reveals significant variations in the responses of these markets to political uncertainty. The paper contributes to the understanding of how ETS markets operate in a complex and constantly changing political environment. We suggest that policymakers need to consider the impact of political uncertainty on carbon trading when designing and implementing urban policies that promote sustainable development. Additionally, our research contributes to the development of urban policies that can be effectively implemented in both developed and developing regions. • Local government official turnovers are used as the measurement of political uncertainty. • Daily transaction data from four carbon ETS markets (Beijing, Shanghai, Hubei and Guangdong) in China • Considered the probability and proportion of zero transaction day • Logistic regression and AR(1)-GARCH estimations • A negative relationship between political uncertainty and carbon transaction volume [ABSTRACT FROM AUTHOR]

To cope with global warming, China has promulgated Enhanced actions on climate change : China ’ s intended nationally determined contributions and will start the national carbon emissions trading market in 2017. Carbon emissions are distributed by the form of free quota and paid quota. However, few literatures have focused on how the economy and the environment would be changed by the change of free quota ratio. This paper establishes the 10 scenarios of different free quota ratio of carbon emissions rights and uses a dynamic, recursive computable general equilibrium (CGE) model to simulate the carbon emissions trading market, to explore the relationship between free quota ratio and carbon trading price, and the impact of carbon trading scheme (ETS) on China’s economy and environment. The results show that free quota ratio will not have a direct impact on gross domestic product (GDP) and other economic and environment indicators but carbon trading prices. The prices and the rate of free payment in the current pilot cities in China are still relatively conservative. It is possible to reach emission peak, 8.21 billion ton, in 2025 and accumulative CO 2 reduction from 2017 to 2030 is 20.02 billion tons, or 59.60% of 2010 world’s total CO 2 emission. Cement, minerals, electricity and nonferrous metals under ETS will suffer great losses, so subsidy should be considered. Finally, we suggested that China should reduce the total carbon rights to increase the carbon price in 2017, and gradually reducing the proportion of free quota, from 90% in 2017 to 50% or less in 2030, by which the peak year of CO 2 emission can meet in 2025. We also suggest that ETS is an effective strategy for CO 2 reduction and the ratio should be gradually reduced in ETS to prevent violent fluctuation of carbon price in China. [ABSTRACT FROM AUTHOR]