Emission Reduction Effect of Carbon Trading Policy Based on Multi-Period DID and Synergy Effect

This paper studies the emission reduction effects of carbon trading policies based on synergistic mechanisms from market-oriented incentives, cost pressure, technological innovation motivation, and energy consumption structure optimization. Using provincial panel data from 2002 to 2021 in China, it specifies a multi-period Difference-in-Differences (DID) model to evaluate the effects of carbon trading policies on carbon reduction. In addition, it develops a mediation effect model to check the specific impact mechanism of the carbon trading policies. The results indicate that carbon trading policy has a significant effect on carbon emission reduction within pilot regions, especially contrasted without such policies. Moreover, regarding the operational mechanism, the carbon trading policy achieves carbon emission reduction mainly through market-oriented incentives and optimization of the energy consumption structure. However, the effects of promoting carbon emission reduction through cost pressure and technological innovation are insignificant. In the synergistic mechanism, the greater the role of the market-oriented incentives and cost pressure, the stronger the effect of carbon trading through the optimization of energy consumption structures in promoting emission reduction. Third, the results of regional heterogeneity tests indicate that regional differences focus more on green development which leads to heterogeneous effects of the carbon trading policy in carbon emission reduction. The carbon trading policy indicates more pronounced emission reduction effects in regions with higher levels of green development attention and higher levels of green financial development.