Can a carbon trading system promote the transformation of a low-carbon economy under the framework of the porter hypothesis? -Empirical analysis based on the PSM-DID method

Global warming is one of the issues of great concern in the world. The large-scale use of fossil fuels has led to the continuous increase in carbon emissions, resulting in global energy shortages and environmental pollution. Reasonable and strict environmental regulation promotes technological innovation by enterprises to achieve a win-win situation between the economy and environment, which is the core idea of the Porter hypothesis. The choice of China, as the world's largest energy consumer and carbon emitter, is not only related to the country's own mode of economic growth but also determines the development of the world's low-carbon economy. We used the panel data from 2000 to 2016 of 30 provincial-level administrative regions in China and adopted the Propensity Score Matching-Difference in Differences method to test the impact of China's carbon trading pilot system on the transformation of a low-carbon economy. The empirical results show that under the constraints of the established resources and environment, there is a positive relationship to some extent between China's carbon trading system and low-carbon economic transformation. This relationship can realize the win-win situation of environmental and economic benefits as advocated by the Porter hypothesis and further verify the applicability of the Porter hypothesis.