Is carbon emission trading policy a panacea? The implications of promoting green total factor productivity

Abstract

Market-based environmental regulation is crucial in influencing environmental and socioeconomic development. Carbon emission trading (CET) policy in China has been implemented since 2012 to balance the environment and economy, especially the green total factor productivity (GTFP). Most previous studies have only conducted short-term investigations on the impact of CET on environmental and socioeconomic development. In this study, we investigated panel data from 30 regions in China during 2003–2019, adopted the Global Malmquist-Luenberger and Super-SBM methods to measure GTFP, and employed the propensity score matched difference in difference (PSM-DID) to investigate the effect of CET policy on the environment, GTFP, and secondary industry output. The results indicate that CET policy has a positive influence on carbon emission reduction, contributes to the improvement of GTFP, and provides economic value. Therefore, we believe that CET policy can effectively help China to achieve a win-win scenario of environmental protection and economic growth.