Does emission trading system (ETS) deserve further promotion in the building sector? Evidence from China

Although the emission trading system (ETS) has been widely applied and recognized in energy-production side, its impact on the energy-demand side is still ambiguous. Does ETS deserve promotion in energy-demand sectors? If so, what preparations are necessary? In response to these pressing but highly publicized issues, this paper, for the first time, focuses on the building sector which is the most typical energy-demand sector based on energy consumption data from public buildings across 26 regions in China spanning 12 years by employing the Synthetic Control Method (SCM). China, as the most representative developing country with more than ten years of ETS pilot practice for buildings, is a good evidence base. The results indicate that ETS has overall applicability to the building sector despite regional variations. And the government support, industrial structure and economic development orientation are the most determinant of its effect, rather than the conventionally perceived heterogeneous sectoral characteristics of buildings. Moreover, for buildings in the stage of rigid growth, the ETS should be adopted first and foremost to reduce its carbon intensity rather than the total amount. The findings provide practical recommendations on whether and how to promote ETS in future buildings, particularly in developing countries.