The impact of carbon emission trading schemes on China’s economic inequalities between and within urban and rural areas based on the satellite data: a county-level analysis

Although China’s carbon emission trading schemes (CETS) garnered significant attention in the field of climate mitigation, limited data availability has hindered exploration into the impact of CETS on economic inequality at the county level in China. Given its potential to facilitate industrial upgrading and generate employment opportunities, the adoption of CETS holds promise for reducing economic inequality. To address data limitations, we employed a combination of gridded nighttime light data and land use data to estimate China’s county-level Dagum Gini coefficient and its components. Subsequently, we applied a difference-in-difference-in-difference method to examine how CETS affected economic inequalities between and within urban and rural areas in China. Our findings reveal that: (1) CETS significantly reduced overall economic inequality in counties with a high proportion of secondary industry output; (2) this reduction primarily occurred within urban and rural areas rather than between them. Further heterogeneity analysis demonstrates that while CETS effectively mitigated economic inequality between urban and rural areas in central and western regions, it did not achieve similar outcomes in the eastern region; (3) service industry development and rural GDP per capita served as important channels through which CETS reduced economic inequality within rural areas. Infrastructure development driven by CETS primarily addressed economic inequality within urban areas rather than rural areas.It is confirmed that China’s CETS made a significant contribution to mitigating economic inequalities within urban and rural areas. This empirical evidence provides new decision-making support for the future promotion of CETS at the county level.It is recommended to propose higher quotas for service industries in rural areas and allocate a portion of revenue from carbon emission trading markets to promote entrepreneurship among rural residents and support upgrades in the rural industrial structure.Considering that the infrastructure development driven by CETS has predominantly addressed economic inequality within urban areas rather than rural areas, it is imperative to allocate a greater proportion of revenue from CETS towards supporting rural infrastructure construction.