Interactions between multiple environmental markets: addressing contamination bias in overlapping policies

To address the dual environmental challenges of pollution and climate change, China has established multiple environmental markets, including pollution emissions trading, carbon emissions trading, energy-use rights trading, and green electricity trading. Previous empirical studies suffer from known biases arising from time-varying treatment and multiple treatments. To address these limitations, this study adopts a dynamic control group design and combines Difference-in-Differences (DiD) and Artificial Counterfactual (ArCo) empirical strategies. Using panel data on A-share listed companies from 2000 to 2024, this study investigates the marginal effects and interactive impacts of multiple environmental markets implemented in staggered and overlapping phases. Existing pollution emissions trading mitigates the negative effects of carbon emission trading. Carbon trading suppresses (improves) financial performance (if implemented alongside energy-use rights trading). The addition of energy-use rights or green electricity trading in regions already covered by carbon or pollution markets has no significant effects. • Study four overlapping permit markets that affect energy use in China. • Decompose the interacting natural experiments to identify their impact. • Apply the Callaway/Sant’Anna correction to the Difference-in-Differences method. • Apply the ARtificial COunterfactual method for causal analysis.