Co-Benefits of China’s Carbon Emissions Trading Scheme: Impact Mechanism and Spillover Effect

Abstract

Based on the panel data of 281 prefecture-level cities in China, from 2007 to 2017, we empirically explore the co-benefits of the carbon emissions trading scheme. We found that the carbon emissions trading scheme effectively achieved the coordinated control of carbon dioxide and air pollutants, by improving the green production level of the pilot areas, reducing the regional industrial output, and promoting the upgrading of the industrial structure. In terms of heterogeneity, the emissions trading scheme shows obvious urban location and level heterogeneity, in terms of coordinated control. The synergistic emission reduction effects of eastern and central cities are significantly better than those of cities in central and western regions and non-central cities. It has also had positive spillover effects on the surrounding cities of the pilot areas, but pollution levels in farther areas may have increased due to possible “pollution shelter problems”.