Emissions trading

Macroeconomics

Spillover effect

Ecology

Biology

Statistics

China

Archaeology

Economics

Beijing

Business

Economic geography

Natural experiment

Total factor productivity

Regional science

Shanghai china

Greenhouse gas

Mathematics

Geography

Productivity

Economic growth

Natural resource economics

Energy Economics

Improving green total factor productivity (GTFP) is required for China's economic catch-up towards the global frontier. As a vital market-driven environmental regulation instrument, China's carbon emissions trading scheme (ETS) plays a great role in achieving this task. In this paper, we constructed a Difference-in-Difference (DID) model to examine the impact of China's ETS pilot policy on city-level GTFP. The results show that the GTFP in ETS pilot cities is increased by 11.4% on average compared with non-pilot cities. However, the positive impact exists only in a short term and lasts five years since policy implementation. Heterogeneity analysis shows that, compared with non-industry-dominated cities, the GTFP in industry-dominated cities has been greatly promoted due to the ETS pilots. In addition, China's ETS pilots produce significant spatial spillover effects on neighboring non-pilot cities. Finally, several recommendations concerning China's ETS policy and GTFP improvement are put forward.

Do carbon ETS pilots improve cities' green total factor productivity? Evidence from a quasi-natural experiment in China