Does China's carbon emission trading reduce carbon emissions? Evidence from listed firms

As the largest carbon emitter, China has launched the emissions trading scheme (ETS) in 2013. Since then, whether ETS in China really help reduce carbon emissions has become a hot-button issue. By far, scholars tend to offer the macro-level empirical evidence, and the conclusions are at best mixed. Therefore, we try to reveal the effect of China's ETS from the micro level by focusing on the policy executors, herein the pilot firms. Based on the data of listed firms from 2009 to 2017, we employ the Propensity Score Matching-Difference in Differences method (PSM-DID) to estimate the causal effect of ETS. The results suggest that ETS has come into play to a certain extent (a reduction of 129.588 million tons' carbon emissions), but the effect attenuates over time. Meanwhile, the effect is more pronounced among small-scale firms and non-state-owned firms, as well as those pilot regions adopting systems of ex-post allowance allocation. Therefore, in the process of the national ETS, ex-post allowance allocation should be widely promoted, and more attentions should be given to effectively stimulating the emission reduction capacity of large-scale firms and state-owned firms. (C) 2020 International Energy Initiative. Published by Elsevier Inc. All rights reserved.