Energy and Environment Impact of Carbon Credit on Emission Reduction in China

Institute for Adavnced Studies, University of Malaya, 50603 Kuala Lumpur, Malaysia

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

Carbon credits serve as emission reduction certificates for projects that reduce GHG emissions, while carbon emission trading policies serve as a market-based carbon trading mechanism. This study is based on a quasi-natural experiment of carbon emission trading pilot programs in multiple regions of China. Using panel data from 30 provinces from 2005 to 2021, it examines the direct impact of carbon trading policies on carbon emission intensity. The policy effect was tested using a DID model, supplemented by a series of tests to verify the model's stability, and the heterogeneity of emission reduction in each pilot area was analyzed using the synthetic control method. The study found that carbon emissions trading policies work synergistically to reduce SO₂ and PM_2.5 emissions, but have little effect on nitrogen oxides. The carbon trading system has significant potential for carbon emission reduction in China, but it needs to strengthen price signals and market mechanisms to improve its effectiveness.