Effects of emission trading system on green total factor productivity in China: Empirical evidence from a quasi-natural experiment

As a market-driven environmental regulation approach, emission trading system (ETS) has been given increasing attention worldwide, while the effect of ETS on green total factor productivity (GTFP) in China has not been comprehensively explored, which inspires us to fulfill this research gap. Based on the panel data of 281 prefecture-level and above cities from 2003 to 2017, this thesis employed the difference-in-differences (DID) model, propensity-score-matched difference-in-differences (PSM-DID) model, and spatial difference-in-differences (SDID) model to empirically investigate the direct and indirect effects of China’s ETS on GTFP at national, regional, and local (cities with different industrial feature) levels. The results indicate that ETS effectively and directly promoted GTFP in China at the national level, while the spatial heterogeneity of this effect is supported at regional and local levels, which highlights the importance and necessity of unified market construction and classified governance. The paper closes with a conclusion, some policy implications, and several promising research directions.