From grey to green: The role of emission trading schemes in China's urban transformation

This study explores the impact of China's pilot Emission Trading Schemes (ETS) on Urban Green Development Efficiency (UGDE). We compare the established crediting baselines of ETSs in six carbon markets from 2003 to 2020 with counterfactuals derived post-hoc using a quasi-experimental synthetic control method over the same period. Key findings include: First, the results strongly suggest that the ETS significantly enhance UGDE. The aggregate results show that in pilot regions, the ETS enhances UGDE by approximately 10 %–15 % compared to synthetic regions. Second, the extent of UGDE improvement due to the ETS varies significantly across regions. The UGDE improvements in these pilot ETS markets, listed in descending order of effectiveness, are Tianjin, Hubei, Shanghai, Chongqing, and Guangdong. Third, robustness tests such as the counterfactual and placebo tests confirm that ETS improves UGDE. Fourth, we identified two key mechanisms through which ETS boosts green comprehensive efficiency: technological innovation and industry restructuring. Overall, this study provides concrete policy insights for refining ETS design and for enhancing green development policies. • This study verifies the link between emission trading schemes(ETS) and urban green development efficiency(UGDE). • The ETS's UGDE improvement effects vary significantly across region. • ETS improve the efficiency of UGDE through two channels, technological innovation and industry reconstructing.