Working Paper: NBER ID: w30587
Authors: Jennie Bai; Hong Ru
Abstract: We study how the implementation of emissions trading systems (ETS) impacts emissions reductions and the usage of renewable energy using a panel sample of the largest 100 countries worldwide. Exploiting the cross-country variations in ETS implementations, we show that ETS adoption materially reduced greenhouse gas (carbon dioxide) emissions by 12.1% (18.1%). Moreover, ETSs reduced overall emissions by cutting fossil fuel usage, such as coal, by 23.70% while boosting the usage of renewable energy by 61.59%, on average. In contrast, the introduction of carbon taxes has a less effective impact on emissions reduction and fails to boost the usage of renewable energy.
Keywords: emissions trading systems; carbon emissions; renewable energy; climate change; carbon pricing
JEL Codes: E62; H23; Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Implementation of ETS (C87) | Reduction in greenhouse gas emissions (Q54) |
| Reduction in greenhouse gas emissions (Q54) | Increased usage of renewable energy (Q42) |
| Implementation of ETS (C87) | Shift towards renewable energy sources (Q42) |
| Implementation of ETS (C87) | Reduction in electricity produced from high-carbon fossil fuels (L94) |
| ETS effectiveness (C22) | Renewable energy usage (Q42) |