Has the pilot carbon trading policy improved China's green total factor energy efficiency?

This work empirically studies the effect of a carbon trading pilot policy (CTPP) on green total-factor energy efficiency (GTFEE) by using 280 China' prefecture-level cities from 2006 to 2017 as sample and adopting a difference-in-difference (DID) method. Results show that CTPP can significantly improve GTFEE after using an instrumental variable to overcome the endogenous problem. The impact mechanism test shows that CTPP can improve GTFEE by increasing the technological innovation level of enterprises. A heterogeneity test shows that the effect of CTPP on improving GTFEE in non-old industrial-based cities and non-resource-based cities is less than that in old industrial-based cities and resource-based cities. Compared with other carbon trading pilot areas, the Beijing carbon market is more prominent in improving GTFEE. The pilot areas' economic penalty exerts a positive effect on GTFEE in the pilot areas, if the pilot areas are strict in their reward and punishment systems for performance, then the situation will be conducive to the improvement of GTFEE.

Automated summary

This empirical study found that the carbon trading pilot policy has a significant impact on improving green total-factor energy efficiency in China's prefecture-level cities, especially in old industrial-based cities and resource-based cities. Furthermore, increasing the technological innovation level of enterprises is an important mechanism for CTPP to improve GTFEE.