Does the Carbon Emissions Trading Scheme Improve Carbon Total Factor Productivity? Evidence from Chinese Cities

Abstract

Improving CTFP is required for China’s sustainable development, and the carbon emission trading scheme is crucial to achieving this goal. In this paper, we construct a staggered DID strategy to investigate the impact of regional ETS pilot policy on city-level CTFP using city panel data from 2008 to 2019. The main results show that the ETS pilot policy can increase CTFP by 3.3% in ETS cities compared to non-ETS cities. Mechanism tests suggest that the growth in CTFP mainly results from an increase in EC and BPC. Moreover, we use the CTFP calculated from the Solow residual instead of the CTFP obtained from the MML index. We also perform other robustness tests to exclude the interference of potential threats to the results.