Whether the ETS in China affects its regional Industrial GDP Increment

Abstract

Due to the intense global warming, many countries have formed their emission trading system (ETS) to limit carbon emissions. China also started its own ETS because it is believed to be the most effective system for limiting carbon emissions. In this research, I will examine the effect of the ETS on China using the difference-in-differences model, the parallel trend test, and the placebo test to ensure robustness. The result shows a negative impact on the increase in industrial production. Thus, more emissions should be allowed if industrial production needs faster growth.