Can the Energy-Consumption Permit Trading Scheme Curb SO2 Emissions? Evidence from a Quasi-Natural Experiment in China

Energy and environmental pollution are major global challenges. This paper aims to examine the impact of China’s energy-consumption permit trading scheme (ECPT) on environmental pollution and the influence mechanisms. The study constructs provincial panel data for China from 2006 to 2020 and uses the difference-in-difference (DID) method to investigate the issue. Our results demonstrate that ECPT significantly curbs SO2 emissions, as confirmed by a series of statistical robustness tests. Specifically, the ECPT has significantly reduced SO2 by approximately 30.4%. Furthermore, the ECPT reduces SO2 emissions mainly by optimizing the structure of energy consumption and promoting technological innovation. In addition, the impact of the ECPT on SO2 emissions is more pronounced in the central and western provinces of China, and in provinces with lower levels of industrial structure and high environmental regulation intensity. This study provides a perspective from a developing country and makes an important contribution to the existing research by exploring the curbing effect of energy policy on SO2 emissions.