The Analysis of the Effects of the Chinese Emissions Trading Scheme Pilot Project Using the Difference-in-Difference Model

With the expectation of a rise in compliance of carbon emission reduction target from the Paris Agreement, the Chinese central government implemented the nationwide Emission Trading Scheme(ETS) in early 2018 highlighting the importance of carbon emission reduction. This study investigates how effective the ETS pilot program is in reducing carbon intensity and emissions using DID(Difference-in-Difference) model. As a result showed that the ETS pilot program is effective in promoting reduction of carbon intensity and of carbon emissions. In addition, the data from pilot project was used including the seven pilot areas from 2013 to 2016. The result shows that the coefficient of Gross Regional Domestic Product(GRDP) was negative in carbon emissions at 0.01% of the significance level during the implementation of the pilot emission trading system which implies that as GRDP increases, the amount of carbon emissions reduces. Also, the comparative analysis was carried out to compare the result from the nationwide with that from the pilot areas. The result represents that decoupling the economic growth from carbon emission in the seven pilot areas began earlier than other areas, which infers that the emission trading system accelerates decoupling.