How carbon trading in the power sector affects carbon emission efficiency: An empirical study based on Chinese provincial panel data

Although carbon trading in the power sector (CTIP) has been widely studied in terms of its effects on electric utilities and the industry as a whole, its regional economic impact remains insufficiently explored. To address this gap, this study adopts the stochastic frontier analysis (SFA) model. We select the implementation of CTIP in Chinese provinces in the 2014–2021 period as a factor that influences the model's inefficiency term for measuring and analyzing carbon emission efficiency (CEE). The results have several implications. First, implementing CTIP improves regional CEE, while technological progress, electricity production structure, and changes in the energy consumption structure can also contribute to regional CEE improvements. Second, implementing CTIP has enhanced the positive role of technological progress in improving CEE. At the same time, the implementation of the CTIP has made structural changes in electricity production structure a key factor in promoting regional CEE. However, the policy has not significantly strengthened the role of regional energy consumption structure in improving CEE. Third, despite an overall improvement in provincial CEE since 2014, significant regional disparities persist, with eastern and central provinces outperforming their western counterparts. The empirical results of this study suggest that overall, CTIP implementation has improved CEE. The study can therefore offer valuable insights and practical implications for optimizing regional emission reduction paths, promoting economic green transformation, and conducting subsequent related studies. • Confirms the positive effect of carbon trading in the power sector (CTIP) on carbon emission efficiency (CEE). • CTIP moderates tech progress, power structure, and energy structure's role on CEE. • Examines CEE and its changing trend in each Chinese province at macro level.