Has Carbon Emissions Trading Reduced PM_2.5 in China?

Abstract

China today has an urgent need to develop low-carbon policies that also address local air pollution. This study uses a difference-in-differences model to estimate the extent to which China’s Emissions Trading Scheme (ETS), which directly addresses CO2 emissions, has also generated cobenefits by reducing PM2.5. Using monthly PM2.5 concentration and weather data for 297 Chinese cities from January 2005 to December 2017, we find that (1) China’s ETS has reduced PM2.5 concentrations by 4.8%, and this reduction effect is strongest in summer. The results are confirmed by robustness tests including propensity score matching, mahalanobis distance matching, two placebo tests, and controlling atmospheric policies. (2) The ETS pilots have positive spillovers on neighboring nonpilot cities within 300 km of the pilot cites, especially for those downwind neighboring nonpilot cities, and the ETS’s cobenefits are primarily a result of firms adopting abatement activities and adjusting industrial structure. (3) The cobenefits of China’s ETS pilots are greater in regions with larger carbon trading volume and higher carbon trading price. (4) The reduction in PM2.5 concentration caused by China’s ETS may have avoided 23,363 deaths and saved $41.38 billion annually in GDP.

Monitoring the CO2 Emission Trajectory and Reduction Effects by ETS and Its Market Performances for Pre- and Post-pandemic China

“…Since the ETS is a market-based mechanism for emission reduction, the reduction effects are bound to vary with the performances of pilot markets [See (33) for a recent review].…”

Carbon Emission Trading Scheme, Carbon Emissions Reduction and Spatial Spillover Effects: Quasi-Experimental Evidence From China

“…Most studies concluded that the ETS is an effective policy tool in carbon emissions reduction at provincial, municipal, and corporate levels (Gao et al, 2020;Shen et al, 2020;, The emission reduction effect increases annually with the implementation of the policy (Zhang and Zhang, 2019). Some researchers suggest that such action also reduces other pollutants such as PM2.5 and SO 2 , promoting China's low-carbon innovation and economic development and finally bringing in more environmental dividends (Feng et al, 2021b;Liu et al, 2021). Wang et al (2020) adopted the difference-in-differences (DID) model to demonstrate a positive correlation between the ETS and low-carbon economic transformation; however, researchers also argued that the ETS may improve the efficiency of emission reduction, but the actual effect remains relatively weak (Zhu et al, 2020).…”

“…Studies on the impact mechanism of the European Union Emissions Trading System (EU ETS) have argued that the EU ETS reduces carbon emissions mainly through technological innovation (Jaraitė and Di Maria, 2012;Calel and Dechezleprêtre, 2016). In a similar scenario, certain Chinese scholars have argued that China's ETS reduces carbon emissions by reducing energy consumption and optimizing energy structure, while the emission reduction effect of technological innovation is not significant (Xuan et al, 2020;Liu et al, 2021).…”

“…Some scholars used the DID model based on the historical data of the ETS pilot regions to test its positive spatial spillover effect. In particular, Liu et al (2021) adopted the DID model to investigate whether cities adjacent to pilot cities also benefit from the implementation of the ETS and if there is a positive spillover effect of the ETS observed in reducing air pollution. Significantly, Zhou et al (2020) shows that the ETS can lead to reverse carbon leakage.…”

Spatio-Temporal Evolution and Spatial Heterogeneity of Influencing Factors of SO2 Emissions in Chinese Cities: Fresh Evidence from MGWR

“…The evolution of air pollution can be explored based on big data from different time dimensions, such as hourly, weekly, quarterly, and annual perspectives [15]. Some researchers have discussed the impact mechanisms of the COVID-19 pandemic [16], urbanization [17], foreign direct investment [18], climate change [19], carbon emissions trading [20], meteorological conditions [21], and tourism development [22] on air pollution. The results of this research have shown a negative inhibition, positive promotion, or nonlinear effects.…”