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Carbon emission trading, carbon efficiency, and the Porter hypothesis: Plant-level evidence from China

Author

Listed:
  • Yu, Yanni
  • Zhang, Xinyi
  • Liu, Yunxiao
  • Zhou, Tao

Abstract

Focusing on large thermal power plants in China, we examine the causal effect of carbon emission trading scheme (CETS) on their carbon emission efficiency. Using the staggered installation of CETS pilots as a natural experiment, we show that carbon emission trading significantly improves power plants’ carbon efficiency. Specifically, the CETS leads to a 6.9 % increase in carbon efficiency. The carbon efficiency growth effects are stronger for plants that are not state-owned, large in scale, or plants located in regions with high level of marketization. Moreover, the improvement in carbon efficiency mainly comes from the reduction in carbon emission, not the improvement in power generation level. The mechanism analysis indicates that the implementation of CETS increases the number of granted patents by as much as 23 %, which provides supporting evidence for the Porter hypothesis.

Suggested Citation

  • Yu, Yanni & Zhang, Xinyi & Liu, Yunxiao & Zhou, Tao, 2024. "Carbon emission trading, carbon efficiency, and the Porter hypothesis: Plant-level evidence from China," Energy, Elsevier, vol. 308(C).
    • Handle: RePEc:eee:energy:v:308:y:2024:i:c:s0360544224026446
    DOI: 10.1016/j.energy.2024.132870
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