Impact of Carbon Trading System on Green Economic Growth in China

Abstract

Whether China’s economy can maintain sustainable growth has been debated both in China and internationally, and the most representative critique has been summarized in the “Krugman Query”. Faced with such doubts, how to achieve a “win-win” for economic growth and environmental protection has become one of the central objectives of local government work while striving for the new vision of development. Taking China’s carbon trading pilot policy as an example, and based on panel data of 30 provincial administrative regions in China from 2001 to 2018, this paper uses the Data Envelopment Analysis-Malmquist index model and the Propensity Score Matching-Difference in Difference method to measure the level of green economic growth from two aspects: green development mode and economic growth effect, and further explore the impact of China’s carbon trading system on green economic growth. The results show that the implementation of the carbon trading system promoted both the green development level and economic growth of pilot cities, and positively affected green total factor productivity, refuting the “Krugman Query”. Finally, the study puts forward a series of recommendations in strengthening environmental regulation, improving green technology innovation, and developing low-carbon industries.