Evaluation on the effectiveness of China's pilot carbon market policy

As an economic means to cope with climate change, carbon trading has become an important measure to reduce carbon emissions in China. It has been over seven years since the initiation of seven pilot carbon markets, but has the implementation achieved the goal of controlling carbon emissions in the region? Are the effects really resulted from the carbon market other than other energy-saving and emission reduction policies? Based on the provincial panel data of China from 2005 to 2016 this paper conducts an empirical study on the emission reduction effects of pilot projects using the Difference-in-differences model (DID). The results show that: (1) The implementation of carbon markets in Beijing, Shanghai and Hubei exhibited a significant inhibitory effect on local carbon emissions, but a promoting effect in Guangdong, and no significant effect was found in Tianjin; (2) In terms of time lag effect, no significant inhibiting effect on the local carbon emissions is found during the first year of opening of Shanghai carbon market but the effect grew significantly from 2015 to 2016; while for Hubei and Beijing, significant effect was shown from the first year of running. Being an experimental program to see whether the carbon trading policy would work in China or not and if it does, under what conditions and settings the policy becomes effective, the 7 pilot markets provide important experiences and lessons to the upcoming nationwide market in China. Based on the empirical result that the carbon trading system in Beijing, Shanghai and Hubei effectively reduced carbon emissions, it is suggested that the national carbon market should actively learn from the experiences of these three pilot markets particularly. (C) 2019 Elsevier Ltd. All rights reserved.