Journal of Public Economics· 2026Q1
Emissions abatement under a rate-based emissions trading system: facility-level evidence from China
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- Q1SCImago
- 2026year
Short summary
China's national ETS reduced CO2 emissions from regulated power units by 2.3%, primarily through output reallocation between facilities rather than internal efficiency gains.
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Key points
- China's national ETS reduced CO2 emissions by 2.3% from regulated power units.
- Abatement was driven by output reallocation between deficit and surplus units.
- Output substitution was more pronounced within regional grids or parent companies.
- The ETS policy resulted in substantial co-benefits by reducing air pollution.
AI-generated from the title and abstract; the full text is not read.
Abstract
As the world's largest emissions trading system (ETS) by covered emissions, China's national ETS uses an unconventional rate-based design to allocate allowances, which inherently creates "winners" (surplus units) and "losers" (deficit units). Utilizing a unique facility-level dataset and a continuous difference-indifferences framework, we show that the national ETS reduces CO2 emissions from regulated power units by 2.3%. Crucially, this abatement is mainly driven by reallocating output from deficit to surplus units instead of within-unit efficiency gains or fuel switching. Moreover, such output substitution is more pronounced among units within the same regional grids or parent companies. This policy also delivers substantial co-benefits by reducing air pollution from regulated plants. Our findings contribute ex-post evidence on the effectiveness of rate-based ETSs and offer insights for policymakers seeking to mitigate emissions on a broad scale while maintaining production levels.
The authors' abstract, as published at the source. Journal of Public Economics, 2026 · DOI ↗
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Field: Economics and Econometrics
Economics and EconometricsEconomics, Econometrics and Finance