Does carbon emission trading improve low-carbon technical efficiency? Evidence from China

With the growing severe challenges of the climate change, improving low-carbon technical efficiency (LTE) is considered as the most important way to facilitate the low-carbon development. Whether or not China's carbon emission trading (CET) can facilitate the LTE deserves deep exploration. Through the introduction of a more scientific semi-disposability assumption for undesirable output, this paper first calculates China's provincial LTE based on a non-radial and non-oriented data envelopment analysis (DEA) method and analyses the reasons for inefficiency. Furthermore, we explore the impacts and mechanisms of CET on the LTE using augmented difference in differences (augmented DID) model. The results show that China's provincial LTE is not satisfactory which presents a downward trend after experiencing a transient rise. The insufficient low carbon innovation output is the crucial impeding the LTE. The implement the CET pilots has improved the LTE and the promotion effect are mainly through strengthening innovation support and capital concentration, while the mediating effects of innovation synergy degree and talents concentration are not significant. Therefore, it is essential for the Chinese government to push forward the scientific construction of national carbon trading market rather than increase the inputs blindly, so as to stimulate the innovative vitality of enterprises as innovation subjects.