Energy quota trading can achieve energy savings and emission reduction: evidence from China's pilots

Climate change mitigation and adaptation are common global challenges, and how to accelerate carbon neutrality and green recovery is a major global issue. Market-oriented emission reduction policy has been widely concerned for its unique advantages, but most of the current market-oriented emission reduction policies are based on the consideration of end-of-pipe governance and lack of effective control of source reduction. Energy quota trading (EQT) is an innovation of an energy-saving and emission reduction system. which is based on the idea of source reduction. However, it is unknown about the evaluation of the effect of the EQT policy from the macro perspective. Based on the related statistical data of energy consumption, combined with the ARIMA model, STIRPAT model, and the synthetic control method (SCM), this paper analyzes the energy consumption distribution in China from 2001 to 2020 and comprehensively evaluates the effect of EQT in the pilots. The results show that: (1) The overall energy consumption in China shows a steady upward trend, and its distribution is unbalanced. (2) In absolute perspective, EQT can realize the double control of the total amount and intensity in energy saving and emission reduction, and the intensity control effect is better than the total amount control effect (3) In relative perspective. EQT can enhance the potential of energy saving and emission reduction in the pilots, in which it needs to take the regional characteristics into account. The policy effect is still significant when eliminating some unobservable factors, which indicate that the policy is effective and can be replicated nationwide. The study comprehensively evaluates the effect of ETS from multiple perspectives, which can effectively avoid the misjudgment of the policy effectiveness caused by the single dimension evaluation, while it can also be used as a reference for the government to perfect the policies of energy management system and emission control system. Furthermore, the development of EQT is an important catalyst for policymakers to coordinate policies to accelerate the achievement of carbon-neutral targets and a more resilient low-carbon development model.

Automated summary

Climate change mitigation and adaptation are common global challenges, and accelerating carbon neutrality and green recovery is a major global issue. Market-oriented emission reduction policies are widely discussed, yet most current policies lack effective source reduction control. Energy quota trading (EQT) is an innovative approach to energy-saving and emission reduction, showing promising results in pilots. Its potential lies in achieving both total amount and intensity control in energy saving and emission reduction efforts, especially when considering regional characteristics. The policy has proven effective and could be replicated nationwide, providing a reference for government policy improvement towards carbon-neutral and low-carbon development goals.