Can Setting Up a Carbon Trading Mechanism Improve Urban Eco-Efficiency? Evidence from China

Abstract

The Carbon Emissions Trading Pilot Policy (CETP) has attracted more scholarly attention. However, most existing studies are only singularly focused on carbon emission reduction or economic development. More research is needed to determine whether it can promote green and sustainable urban development. Therefore, this paper takes the data from 284 prefecture-level cities in China from 2007 to 2016 as the research sample, uses ecological efficiency as the indicator to measure the sustainable green development of cities, and uses the difference method (DID) and the propensity score matching difference method (PSM-DID) to study whether CETP can achieve the sustainable green development of pilot cities. The results show that CETP can improve pilot cities' ecological efficiency and realize cities' green and sustainable development by optimizing the industrial structure and promoting technological innovation. In addition, the impact of CETP on different cities is also significantly different. Compared with small and medium-sized cities and non-provincial capital cities, CETP has a greater impact on large cities and provincial capital cities. Compared with central and western cities, CETP has a greater impact on eastern cities. CETP can improve the ecological efficiency of non-resource cities, but it cannot change the ecological efficiency of resource cities. Our models survive numerous robustness checks.