Impact of Chinese Carbon Emissions Trading Policy on Chongqing’s Carbon Emissions and Economic Development

Abstract

Balancing sustainable economic growth and environmental protection in developing countries is an important way to mitigate climate change. Based on panel data from nine provinces along the Silk Road Economic Belt between 2004 and 2021, this paper takes Chongqing, a pilot city for carbon trading rights, as the experimental group and the remaining eight provinces as the control group; we mainly analyze the impact of the carbon emissions trading policy on Chongqing’s carbon emissions and economic development after its implementation in 2013 using the difference-in-differences method (DID) and propensity score matching difference-in-differences method (PSM-DID). Then we use the synthetic control method (SCM) to test its robustness. The results showed that while maintaining the economic development speed, carbon trading helps to reduce carbon emissions. In addition, we also found that the economic activity effect and the energy intensity effect are the mediating effects of the carbon emissions reduction. Finally, taking the policy effect of the carbon emissions trading in Chongqing as a reference, this article confirmed the importance of aligning the carbon trading pathway with targeted green policies from the government. The government should drive the establishment of a regional carbon market in the nine provinces along the Silk Road Economic Belt, which could help to achieve sustainable development.