IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v18y2025i5p1161-d1600972.html
   My bibliography  Save this article

Carbon Emissions Trading Policy and Regional Energy Efficiency: A Quasi-Natural Experiment from China

Author

Listed:
  • Xiangnan Zhai

    (Shandong Labor Vocational and Technical College, Jinan 250300, China
    These authors contributed equally to this work.)

  • Xue Yang

    (Department of Finance and Credit, Faculty of Economics, RUDN University, Moscow 117198, Russia
    These authors contributed equally to this work.)

  • Darko B. Vukovic

    (Department of Finance and Credit, Faculty of Economics, RUDN University, Moscow 117198, Russia
    Regional Geography, Geografski Institut Jovan Cvijic Srpske Akademije Nauka i Umetnosti, 11000 Beograd, Serbia)

  • Daria A. Dinets

    (Department of Finance and Credit, Faculty of Economics, RUDN University, Moscow 117198, Russia)

  • Qiang Liu

    (Shandong Labor Vocational and Technical College, Jinan 250300, China)

Abstract

The carbon emission trading system (ETS), as a market-based environmental regulation tool, remains the subject of ongoing theoretical debates and empirical gaps regarding its impact on energy efficiency and the underlying mechanisms. This study focuses on China’s carbon emission trading pilot policies, utilizing panel data from 30 Chinese provinces between 2003 and 2023. The SBM-undesirable model is employed to assess energy efficiency, and the difference-in-differences (DID) model is applied to identify the causal effects of the policy. Additionally, a mechanism-testing model is utilized to explore how the carbon emission trading policy enhances energy efficiency. The findings indicate the following: (1) overall energy efficiency in China has remained relatively stable over the past two decades, but high-efficiency regions exhibit significant regional clustering effects; (2) the carbon emission trading pilot policy has significantly improved energy efficiency in the pilot regions, with a dynamic trend of “shock–enhancement–stability”, reaching its peak effect in the third year post-implementation; (3) the mechanism analysis reveals that the policy primarily enhances energy efficiency through three channels: promoting green technology innovation, advancing the use of clean energy, and strengthening government environmental regulation. This study not only provides empirical evidence to support the optimization of carbon market policies but also offers a practical framework for developing countries to design emission reduction mechanisms that align with their economic structures and policy environments.

Suggested Citation

  • Xiangnan Zhai & Xue Yang & Darko B. Vukovic & Daria A. Dinets & Qiang Liu, 2025. "Carbon Emissions Trading Policy and Regional Energy Efficiency: A Quasi-Natural Experiment from China," Energies, MDPI, vol. 18(5), pages 1-20, February.
  • Handle: RePEc:gam:jeners:v:18:y:2025:i:5:p:1161-:d:1600972
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/18/5/1161/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/1996-1073/18/5/1161/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Victor Chernozhukov & Denis Chetverikov & Mert Demirer & Esther Duflo & Christian Hansen & Whitney Newey & James Robins, 2018. "Double/debiased machine learning for treatment and structural parameters," Econometrics Journal, Royal Economic Society, vol. 21(1), pages 1-68, February.
    2. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    3. Ockwell, David G. & Watson, Jim & MacKerron, Gordon & Pal, Prosanto & Yamin, Farhana, 2008. "Key policy considerations for facilitating low carbon technology transfer to developing countries," Energy Policy, Elsevier, vol. 36(11), pages 4104-4115, November.
    4. Zhou, Fengxiu & Wang, Xiaoyu, 2022. "The carbon emissions trading scheme and green technology innovation in China: A new structural economics perspective," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 365-381.
    5. Hong, Qianqian & Cui, Linhao & Hong, Penghui, 2022. "The impact of carbon emissions trading on energy efficiency: Evidence from quasi-experiment in China's carbon emissions trading pilot," Energy Economics, Elsevier, vol. 110(C).
    6. Charfeddine, Lanouar & Kahia, Montassar, 2019. "Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: A panel vector autoregressive (PVAR) analysis," Renewable Energy, Elsevier, vol. 139(C), pages 198-213.
    7. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
    8. Bhattacharya, Mita & Awaworyi Churchill, Sefa & Paramati, Sudharshan Reddy, 2017. "The dynamic impact of renewable energy and institutions on economic output and CO2 emissions across regions," Renewable Energy, Elsevier, vol. 111(C), pages 157-167.
    9. Zhe Deng & Dongya Li & Tao Pang & Maosheng Duan, 2018. "Effectiveness of pilot carbon emissions trading systems in China," Climate Policy, Taylor & Francis Journals, vol. 18(8), pages 992-1011, September.
    10. Teixidó, Jordi & Verde, Stefano F. & Nicolli, Francesco, 2019. "The impact of the EU Emissions Trading System on low-carbon technological change: The empirical evidence," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    11. Dong, Kangyin & Dou, Yue & Jiang, Qingzhe, 2022. "Income inequality, energy poverty, and energy efficiency: Who cause who and how?," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    12. Song, Malin & Zheng, Huanyu & Shen, Zhiyang, 2023. "Whether the carbon emissions trading system improves energy efficiency – Empirical testing based on China's provincial panel data," Energy, Elsevier, vol. 275(C).
    13. Hugo Bodory & Martin Huber & Lukáš Lafférs, 2022. "Evaluating (weighted) dynamic treatment effects by double machine learning [Identification of causal effects using instrumental variables]," The Econometrics Journal, Royal Economic Society, vol. 25(3), pages 628-648.
    14. Weko, Silvia & Goldthau, Andreas, 2022. "Bridging the low-carbon technology gap? Assessing energy initiatives for the Global South," Energy Policy, Elsevier, vol. 169(C).
    15. Haiqing Hao & Xue Yang, 2022. "China’s Carbon Market in the Context of Carbon Neutrality: Legal and Policy Perspectives," Sustainability, MDPI, vol. 14(18), pages 1-18, September.
    16. Abbasi, Kashif Raza & Shahbaz, Muhammad & Zhang, Jinjun & Irfan, Muhammad & Alvarado, Rafael, 2022. "Analyze the environmental sustainability factors of China: The role of fossil fuel energy and renewable energy," Renewable Energy, Elsevier, vol. 187(C), pages 390-402.
    17. Chen, Zhe & Song, Pei & Wang, Baolu, 2021. "Carbon emissions trading scheme, energy efficiency and rebound effect – Evidence from China's provincial data," Energy Policy, Elsevier, vol. 157(C).
    18. Ji, Zhengsen & Niu, Dongxiao & Li, Wanying & Wu, Gengqi & Yang, Xiaolong & Sun, Lijie, 2022. "Improving the energy efficiency of China: An analysis considering clean energy and fossil energy resources," Energy, Elsevier, vol. 259(C).
    19. Zhao, Aiwu & Wang, Jingyi & Sun, Zhenzhen & Guan, Hongjun, 2022. "Environmental taxes, technology innovation quality and firm performance in China—A test of effects based on the Porter hypothesis," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 309-325.
    20. William Nordhaus, 2019. "Climate Change: The Ultimate Challenge for Economics," American Economic Review, American Economic Association, vol. 109(6), pages 1991-2014, June.
    21. Wu, Haitao & Hao, Yu & Ren, Siyu, 2020. "How do environmental regulation and environmental decentralization affect green total factor energy efficiency: Evidence from China," Energy Economics, Elsevier, vol. 91(C).
    22. Tajudeen, Ibrahim A. & Wossink, Ada & Banerjee, Prasenjit, 2018. "How significant is energy efficiency to mitigate CO2 emissions? Evidence from OECD countries," Energy Economics, Elsevier, vol. 72(C), pages 200-221.
    23. Geller, Howard & Harrington, Philip & Rosenfeld, Arthur H. & Tanishima, Satoshi & Unander, Fridtjof, 2006. "Polices for increasing energy efficiency: Thirty years of experience in OECD countries," Energy Policy, Elsevier, vol. 34(5), pages 556-573, March.
    24. Mahapatra, Bamadev & Irfan, Mohd, 2021. "Asymmetric impacts of energy efficiency on carbon emissions: A comparative analysis between developed and developing economies," Energy, Elsevier, vol. 227(C).
    25. Lukáš Režný & Vladimír Bureš, 2019. "Energy Transition Scenarios and Their Economic Impacts in the Extended Neoclassical Model of Economic Growth," Sustainability, MDPI, vol. 11(13), pages 1-25, July.
    26. Hu, Yucai & Ren, Shenggang & Wang, Yangjie & Chen, Xiaohong, 2020. "Can carbon emission trading scheme achieve energy conservation and emission reduction? Evidence from the industrial sector in China," Energy Economics, Elsevier, vol. 85(C).
    27. Chen, Weidong & Geng, Wenxin, 2017. "Fossil energy saving and CO2 emissions reduction performance, and dynamic change in performance considering renewable energy input," Energy, Elsevier, vol. 120(C), pages 283-292.
    28. Gao, Yuning & Li, Meng & Xue, Jinjun & Liu, Yu, 2020. "Evaluation of effectiveness of China's carbon emissions trading scheme in carbon mitigation," Energy Economics, Elsevier, vol. 90(C).
    29. Cantore, Nicola & Calì, Massimiliano & Velde, Dirk Willem te, 2016. "Does energy efficiency improve technological change and economic growth in developing countries?," Energy Policy, Elsevier, vol. 92(C), pages 279-285.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weng, Zhixiong & Liu, Tingting & Wu, Yufeng & Cheng, Cuiyun, 2022. "Air quality improvement effect and future contributions of carbon trading pilot programs in China," Energy Policy, Elsevier, vol. 170(C).
    2. Li, Rui & Fang, Debin & Xu, Jiajun, 2024. "Does China's carbon inclusion policy promote household carbon emissions reduction? Theoretical mechanisms and empirical evidence," Energy Economics, Elsevier, vol. 132(C).
    3. Zhang, Guidong & Wang, Jianlong & Liu, Yong, 2024. "“Carbon” suppresses “energy” - How does carbon emission right trading policy alleviate the energy trilemma?," Energy, Elsevier, vol. 307(C).
    4. Li, Ge & Wang, Xiaoyu, 2024. "Energy quota trading policy and energy efficiency: The role of government supervision and public participation," Technological Forecasting and Social Change, Elsevier, vol. 206(C).
    5. Yan, Xiaolei & He, Taiyi, 2024. "Wish fulfilment or wishful thinking? – Assessing the outcomes of China's pilot carbon emissions trading scheme on green economy efficiency in China's cities," Energy Policy, Elsevier, vol. 192(C).
    6. Wu, Huihuang & Zhou, Yuhan & Wang, Xian & Hu, Xiurong & Zhang, Shihui & Ren, Yang & Liu, Junfeng & Liu, Ying & Tao, Shu, 2024. "The climate, health, and economic outcomes across different carbon pricing policies to achieve China's climate goals," Applied Energy, Elsevier, vol. 368(C).
    7. Guang Chen & Akira Hibiki, 2022. "Can the Carbon Emission Trading Scheme Influence Industrial Green Production in China?," Sustainability, MDPI, vol. 14(23), pages 1-22, November.
    8. Michael Peneder & Spyros Arvanitis & Christian Rammer & Tobias Stucki & Martin Wörter, 2022. "Policy instruments and self-reported impacts of the adoption of energy saving technologies in the DACH region," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(2), pages 369-404, May.
    9. Mengyao Liu & Yan Hou & Hongli Jiang, 2023. "The Energy-Saving Effect of E-Commerce Development—A Quasi-Natural Experiment in China," Energies, MDPI, vol. 16(12), pages 1-22, June.
    10. Da Gao & Chang Liu & Xinyan Wei & Yang Liu, 2023. "Can River Chief System Policy Improve Enterprises’ Energy Efficiency? Evidence from China," IJERPH, MDPI, vol. 20(4), pages 1-17, February.
    11. Lu, Yunguo & Zhang, Lin, 2022. "National mitigation policy and the competitiveness of Chinese firms," Energy Economics, Elsevier, vol. 109(C).
    12. Makram El-Shagi & Claus Michelsen & Sebastian Rosenschon, 2014. "Regulation, Innovation and Technology Diffusion: Evidence from Building Energy Efficiency Standards in Germany," Discussion Papers of DIW Berlin 1371, DIW Berlin, German Institute for Economic Research.
    13. Lei Zhang & Liang Xie & Xianzhong Mu & Guangwen Hu, 2025. "Trade and the Sustainable Energy Transition: Exploring the Impact of Trade on Total Factor Renewable Energy Efficiency," Sustainability, MDPI, vol. 17(4), pages 1-27, February.
    14. Najeh Bouchoucha & Mohamed Ghandri & Ismahen Yahyaoui, 2024. "Linking Non-renewable and Renewable Electricity and Government Expenditures to Environmental Degradation: Evidence of 10 Newly Industrialized Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 301-306, May.
    15. Chen, Zhongfei & Zhang, Xiao & Chen, Fanglin, 2021. "Do carbon emission trading schemes stimulate green innovation in enterprises? Evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 168(C).
    16. Gao, Yanyan & Zheng, Jianghuai, 2024. "The opposite innovation impacts of air and water pollution regulations: Evidence from the total emissions control policy in China," Journal of Asian Economics, Elsevier, vol. 92(C).
    17. Junsong Jia & Jing Lei & Chundi Chen & Xu Song & Yexi Zhong, 2021. "Contribution of Renewable Energy Consumption to CO 2 Emission Mitigation: A Comparative Analysis from a Global Geographic Perspective," Sustainability, MDPI, vol. 13(7), pages 1-23, March.
    18. Liu, Jing-Yue & Zhang, Yue-Jun, 2021. "Has carbon emissions trading system promoted non-fossil energy development in China?," Applied Energy, Elsevier, vol. 302(C).
    19. Hu, Yucai & Li, Ranran & Du, Lei & Ren, Shenggang & Chevallier, Julien, 2022. "Could SO2 and CO2 emissions trading schemes achieve co-benefits of emissions reduction?," Energy Policy, Elsevier, vol. 170(C).
    20. Chen, Xing & Lin, Boqiang, 2021. "Towards carbon neutrality by implementing carbon emissions trading scheme: Policy evaluation in China," Energy Policy, Elsevier, vol. 157(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:18:y:2025:i:5:p:1161-:d:1600972. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.