Does the Pilot Emissions Trading System in China Promote Innovation? Evidence Based on Green Technology Innovation in the Energy Sector

The Chinese government promulgated a carbon emissions trading system (ETS) pilot in 2011 and gradually expanded its scope. Based on energy-related green patent applications in 285 Chinese cities from 2003 to 2018, this study investigates the impact of the ETS pilot on green technology innovation in the energy sector (GTIES). By employing a spatial difference in difference (SDID) model and multi-dimensional empirical tests, our results show, first, that the pilot policy has induced GTIES to a certain extent. Second, ETS has enhanced the green technology innovation ability of both pollution intensive industries and non-pollution intensive industries, and the effect of the pilot policy on pollution intensive industries is twice that on non-pollution intensive industries. Third, the pilot has promoted the development of GTIES in pilot locations but restrained GTIES development in the vicinity. This study provides empirical evidence for the evaluation of the pilot policy at the city-industry-regional level, providing enlightenment on industrial policy and the need for regional collaboration in the presence of spatial spillover effects