China's emissions trading scheme, firms’ R&D investment and emissions reduction

Yu, J; Liu, P; Shi, X; Ai, X

China's emissions trading scheme, firms’ R&D investment and emissions reduction

Yu, J Liu, P Shi, X

Ai, X

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Publisher:: ELSEVIER
Publication Type:: Journal Article
Citation:: Economic Analysis and Policy, 2023, 80, pp. 1021-1037
Issue Date:: 2023-12-01

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Field	Value	Language
dc.contributor.author	Yu, J
dc.contributor.author	Liu, P
dc.contributor.author	Shi, X https://orcid.org/0000-0001-9653-7395
dc.contributor.author	Ai, X
dc.date.accessioned	2024-03-18T09:34:56Z
dc.date.available	2024-03-18T09:34:56Z
dc.date.issued	2023-12-01
dc.identifier.citation	Economic Analysis and Policy, 2023, 80, pp. 1021-1037
dc.identifier.issn	0313-5926
dc.identifier.uri	http://hdl.handle.net/10453/176874
dc.description.abstract	As the world's largest energy consumer and carbon emitter, China accounts for approximately one-third of global carbon dioxide (CO2) emissions. Launched in 2021, China's national emissions trading scheme (ETS) has become a well-established market-based instrument in the country's efforts to peak CO2 emissions and achieve carbon neutrality. This study, viewed as a quasi-natural experiment, examines the impact of China's ETS pilots. We evaluate the carbon emissions reduction effects and associated mechanisms of China's pilots using a propensity score-matched difference-in-differences model (PSM-DID) and Chinese State Administration of Tax (SAT) data. The findings show that the ETS pilots have led to a 4.3% and 7.5% reduction in the carbon emissions intensity and total carbon emissions of firms, respectively. Firms in the ETS pilot regions reduce carbon emissions and intensity mainly by increasing firms’ willingness and investment in R&D. Further investigation reveals heterogeneity in carbon emissions reduction among firms of different sizes, leverage ratios, and ownership. The findings suggest that in order to fully realize the emissions reduction potential of the ETS pilots, the government should expand the range of entities covered and improve the liquidity of the carbon market.
dc.language	English
dc.publisher	ELSEVIER
dc.relation.ispartof	Economic Analysis and Policy
dc.relation.isbasedon	10.1016/j.eap.2023.09.039
dc.rights	info:eu-repo/semantics/embargoedAccess
dc.subject	14 Economics
dc.subject.classification	3801 Applied economics
dc.subject.classification	3802 Econometrics
dc.subject.classification	3803 Economic theory
dc.title	China's emissions trading scheme, firms’ R&D investment and emissions reduction
dc.type	Journal Article
utslib.citation.volume	80
utslib.for	14 Economics
pubs.organisational-group	University of Technology Sydney
pubs.organisational-group	University of Technology Sydney/DVC (International)
pubs.organisational-group	University of Technology Sydney/DVC (International)/Australia-China Relations Institute
utslib.copyright.status	embargoed	*
utslib.copyright.embargo	2025-12-01T00:00:00+1000Z
dc.date.updated	2024-03-18T09:34:55Z
pubs.publication-status	Published
pubs.volume	80

Abstract:

As the world's largest energy consumer and carbon emitter, China accounts for approximately one-third of global carbon dioxide (CO2) emissions. Launched in 2021, China's national emissions trading scheme (ETS) has become a well-established market-based instrument in the country's efforts to peak CO2 emissions and achieve carbon neutrality. This study, viewed as a quasi-natural experiment, examines the impact of China's ETS pilots. We evaluate the carbon emissions reduction effects and associated mechanisms of China's pilots using a propensity score-matched difference-in-differences model (PSM-DID) and Chinese State Administration of Tax (SAT) data. The findings show that the ETS pilots have led to a 4.3% and 7.5% reduction in the carbon emissions intensity and total carbon emissions of firms, respectively. Firms in the ETS pilot regions reduce carbon emissions and intensity mainly by increasing firms’ willingness and investment in R&D. Further investigation reveals heterogeneity in carbon emissions reduction among firms of different sizes, leverage ratios, and ownership. The findings suggest that in order to fully realize the emissions reduction potential of the ETS pilots, the government should expand the range of entities covered and improve the liquidity of the carbon market.

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http://hdl.handle.net/10453/176874