China's national emissions trading scheme (ETS), announced in 2017, has become the largest carbon market worldwide, operating alongside pre-existing regional pilots. However, detailed assessments regarding the newly constructed national ETS, particularly in comparison with the regional pilots, remain limited. Using unit-level monitoring data from China's power sector and combining intermediary and moderate models, this study investigates the carbon mitigation impact of China's national ETS relative to pilot ETSs. We find that while both the national and pilot ETSs significantly reduce carbon intensities, the effect was more pronounced in pilots. A mechanism behind this reduction is the improvement in fuel quality, as evidenced by a decrease in carbon content. Regional economic growth and a higher share of industrial activity appear to offset the policy's overall effectiveness. Heterogeneity analysis shows that the mitigation effects were greater in smaller and older units compared to their larger or newer counterparts. Our unit-level empirical evaluation of China's national ETS not only advances theoretical understanding of emissions trading mechanisms but also provides actionable insights for refining or establishing carbon market policies in emerging economies.

Publication:

Energy Economics

http://dx.doi.org/10.1016/j.eneco.2025.108829

Author:

Ziyu Qin

Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

University of Chinese Academy of Sciences, Beijing 100190, China

Ziyu Qin contributed equally to this work and should be considered co-first authors.

Jianhui Ruan

Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

University of Chinese Academy of Sciences, Beijing 100190, China

School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

School of Economics and Management, China University of Geosciences, Beijing, 100083, China

Jianhui Ruan contributed equally to this work and should be considered co-first authors.

Hui Yu

University of Chinese Academy of Sciences, Beijing 100190, China

School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

Jieyi Li

Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

Chen Lyu

Center for Carbon Neutrality, Chinese Academy of Environmental Planning, Beijing 100043, China

Corresponding author

lvchen@caep.org.cn

Bofeng Cai

Center for Carbon Neutrality, Chinese Academy of Environmental Planning, Beijing 100043, China

Shouyang Wang

Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

University of Chinese Academy of Sciences, Beijing 100190, China

School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

Ling Tang

University of Chinese Academy of Sciences, Beijing 100190, China

School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100190, China

Corresponding author at: University of Chinese Academy of Sciences, Beijing 100190, China.

E-mail addresses: tangling@ucas.ac.cn