Has China's Carbon Emissions Trading Policy Induced Energy Conservation and Emissions Reduction in the Power Sector?

Abstract

China's carbon emissions trading (CET) policy is a major market-oriented environmental policy that promotes energy conservation and emissions reduction. However, it is still in the initial stage of development, and its effectiveness is still highly controversial. Therefore, this article employs the difference-in-differences and event study methods to determine whether China's CET policy can promote energy conservation and emissions reduction in the power sector based on a comprehensive dataset containing power enterprise, power sectoral, and provincial data from 2005 to 2021. The results indicate that China's CET policy has significantly reduced CO ₂ emissions in the power sector by 12.4% during the sample period, but it has no significant effect on energy conservation; in addition, China's CET policy has not exerted an expectation effect on energy conservation and emissions reduction in the power sector but has a three-year lag effect; finally, investing in renewable power generation has become the primary measure for power sector to respond to CET regulations.