Can Emissions Trading System Aid Industrial Structure Upgrading?—A Quasi-Natural Experiment Based on 249 Prefecture-Level Cities in China

Abstract

Emissions trading system (ETS) is a market-based policy tool that essentially provides economic compensation for corporate environmental measures. The Chinese government implemented pilot emissions trading in 2007. In order to evaluate the effect of the policy, we conducted a quasi-natural experiment to collect the data of 249 prefecture-level cities in China from 2001 to 2020 and applied the difference-in-difference method to explore the impact of ETS on regional industrial structure. The results show that the implementation of ETS can promote the upgrading of regional industrial structure but can hinder the rationalization of the upgrading. The results of regional heterogeneity regression suggest that the effects of ETS pilots on industrial structure upgrading in three regions of China are significantly different, with the strongest one being the western region, followed by the central and eastern regions. Finally, we put forward some policy proposals in terms of technological innovations, implementation of ETS in different regions and ETS improvement.