China's Carbon Market Lowers Power Emissions Significantly in Pilot Areas But Not Elsewhere

To address climate challenges, China implemented its National Emissions Trading System (ETS) in July 2021, initially targeting the power sector that accounts for 40% of national carbon emissions. While existing research has predominantly examined regional pilot programs, empirical evidence on the national market's initial effectiveness remains limited. This study fills this gap by analyzing provincial panel data (2019-2024) through a difference-in-differences (DID) approach to assess the ETS's nationwide emission reduction impact. Our methodology selects the six provinces with the lowest clean energy shares (Shanghai, Beijing, Tianjin, Anhui, Shandong, Shaanxi) as the treatment group, using others as controls, while employing a two-way fixed effects model to account for provincial and temporal heterogeneity - with rigorous verification of parallel trends via dynamic event studies and joint significance tests. Key findings reveal: (1) significant power sector emission reductions (average 0.252%) attributable to the national ETS, displaying dynamic "surge-then-adjustment" characteristics with an initial sharp decline followed by partial rebound; (2) heterogeneous impacts concentrated in carbon market pilot areas with negligible effects elsewhere, indicating path dependence in policy efficacy; and (3) economic development level and population size as core emission drivers. This research contributes novel insights by providing the first quantitative assessment of the national ETS's decarbonization impact on the power sector and validating the critical importance of prior pilot experience for policy effectiveness. The results highlight the need for differentiated policy reinforcement in non-pilot regions to achieve nationwide decarbonization goals.