Shooting two hawks with one arrow: Could China's emission trading scheme promote green development efficiency and regional carbon equality?

China's carbon emission trading scheme (ETS) is an important market-based environmental regulation tool to achieve carbon neutrality targets. Numerous studies have identified the emission reduction and economic effects of the ETS, but quantitative evaluations of the ETS for regional carbon equality is rare. Based on provincial panel data and industrial enterprise panel data in China for the 1998-2017 period, this study explores whether China's ETS pilot policy brings the double dividends of green development efficiency and regional carbon equality by using the DID model and Malmquist-Luenberger (ML) index. The results show that the ETS significantly improves green development efficiency and regional carbon equality. The mechanism analysis further reveals that the ETS promotes regional carbon equality by improving green total factor productivity (GTFP) and reducing investments in carbon-intensive industries in the pilot provinces, confirming the Porter hypothesis and investment transfer effect. However, the mediating effect of carbon-intensive firm migration is statistically nonsignificant, which implies that the carbon pollution haven hypothesis may not be the reason for the improvement in regional carbon equality. In addition, heterogeneous effects exist under different degrees of command-and-control environmental regulation (CER) and across different regions. Finally, policy implications are highlighted with respect to establishing a unified national carbon emission trading market and exerting synergy between ETS and CER tools.

Automated summary

The study shows that China's carbon emission trading scheme significantly improves green development efficiency and regional carbon equality, by enhancing green total factor productivity (GTFP) and reducing investments in carbon-intensive industries. This confirms the Porter hypothesis and investment transfer effect, highlighting the need for a unified national carbon emission trading market and synergy between ETS and command-and-control environmental regulation tools.