Effect of the Emissions Trading Scheme on CO2 Abatement in China.

This article takes advantage of the pilot Emissions Trading Scheme (ETS) project to estimate the causal impact of the ETS on CO₂ abatement in China. The CO₂ emissions and CO₂ intensities of each province are calculated by using the fossil fuel data of 30 provincial administration regions from 2006 to 2016. Then difference in difference (DiD) models and propensity score matching (PSM) with panel data are applied to estimate the causal impact of the pilot ETS project. Results show that the pilot regions reduce their CO₂ emissions and intensities more than the non-pilot regions under the pilot ETS project. The pilot ETS project significantly induced 12% decreases in the nominal CO₂ intensity and 7.6% decrease in the real CO₂ intensity, after controlling for regional heterogeneity, but its reduction effects on CO₂ emissions are insignificant. Decreasing the proportion of coal to total energy consumption may be the main channel of the pilot ETS project inducing CO₂ abatement. The estimated results for control variables indicate that upgrading industrial structures, attracting FDI, and purifying the export structure have significant effects on CO₂ abatement. [ABSTRACT FROM AUTHOR]