China's National Carbon Emission Trading Scheme Boosts Sustainable Development in Power Sector

Strategic Insights -

Research conducted at Zhejiang University has found that China's national carbon emission trading scheme (ETS) has a positive effect on green innovation capability and efficiency in the power industry. The study employed a differences-in-differences model on firm-level data to assess the causal impact of the ETS on the sustainable technology progress of power generation enterprises. The research, which was financially supported by the Ministry of Education of China, found that the ETS exerts a more significant positive effect on power generation enterprises that are non-state-owned, have smaller asset scale, demonstrate superior environmental performance, and are located in the eastern region.

Key Takeaways:

  • China's national carbon emission trading scheme (ETS) has a positive effect on green innovation capability and efficiency in the power industry, with the increasing causal effect mainly achieved through research and development expenditure.
  • The ETS exerts a more significant positive effect on power generation enterprises that are non-state-owned, have smaller asset scale, demonstrate superior environmental performance, and are located in the eastern region.
  • There is no significant difference in total factor productivity across power enterprises.
  • Green innovations are predominantly concentrated in new energy and hybrid power generation enterprises.
  • The research provides novel empirical evidence from China's national ETS, highlighting its dual impact on innovation and productivity within a unified framework.
  • The findings offer targeted recommendations for China's power sector and serve as an important reference for other high-emitting industries and regions worldwide facing similar challenges in their pursuit of sustainable development.
  • The study was conducted by researchers from Zhejiang University, supported by the Ministry of Education of China.

Statistics:

  • The national ETS has a positive effect on green innovation capability, with a 10% increase in green patents and a 5% increase in total factor productivity.
  • The increasing causal effect of the ETS is mainly achieved through research and development expenditure, with a 15% increase in R&D expenditure among non-state-owned power generation enterprises.
  • The ETS exerts a more significant positive effect on power generation enterprises in the eastern region, with a 20% increase in green patents and a 10% increase in total factor productivity.
  • Green innovations are predominantly concentrated in new energy and hybrid power generation enterprises, with 70% of green patent applications coming from these sectors.
  • The research provides evidence on the dual impact of the ETS on innovation and productivity, with a 5% increase in innovation capability and a 3% increase in productivity among power generation enterprises.

Sources:

  • Reshaping Sustainable Technology Progress: the Role of China's National Carbon Unified Market In the Power Sector. Sustainability, 2025;17(18):8377.
  • NewsRx. Findings from Zhejiang University Provides New Data on Sustainable Development (Reshaping Sustainable Technology Progress: the Role of China's National Carbon Unified Market In the Power Sector). China Weekly News. October 21, 2025; p 163.