Abstract

China regards an emission trading scheme (ETS) as the most promising approach for reducing its carbon dioxide emissions. However, there are still disagreements about the effectiveness of China's ETS (CETS). To settle this issue, we test the impact of CETS on key mechanisms driving a low-carbon transition. We use the difference-in-difference method to analyze data for coal-power plants participating in China's carbon trading pilot. This involves the use of two variables based on life-cycle indicators, namely ‘energy return on energy invested’ (EROI) and ‘energy return on carbon invested’ (EROC). We obtain three main findings: (1) a mediating effect of supply-side reform is significant; (2) this effect is stronger for more intense technological innovation and government intervention; (3) the influence of CETS on a low-carbon transition is independent of the development of clean energy. Overall, we conclude that the scope of CETS should be extended to other emitters to fully unleash its potential for reducing carbon emissions.

Original languageEnglish
Article number107494
Number of pages12
JournalEnergy Economics
Volume132
DOIs
Publication statusPublished - Apr 2024

Keywords

  • Carbon pricing
  • Emission trading
  • Energy transition
  • EROC
  • EROI

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