Can China's carbon emissions trading scheme achieve a double dividend?

To ensure the realization of carbon neutrality and emission peak, the Chinese government promulgated the pilot policy for an emissions trading scheme (ETS) in 2011 and gradually expanded the range of the pilot program. However, it has not been systematically studied whether this policy can achieve double dividend and its transmission mechanism. Based on the Porter hypothesis, this paper explores the impacts of an ETS on macro emission reduction and microeconomic performance, verifies the influence of an ETS on double dividend, and analyzes its transmission mechanism using a difference in difference (DID) model and mediation model. The results indicate that an ETS can reduce CO emissions and remarkably improve the economic performance of the enterprises in the areas it is enacted. A double dividend has been realized, which verifies Porter's hypothesis. The mechanism test shows that from the macro perspective, the emission reduction effect of an ETS is mainly achieved by adjusting the energy structure and through local government regulations. In contrast, the mediation effect on the industrial structure is not apparent. From a micro perspective, an ETS mainly affects the economic situation of enterprises through cash flow and technological innovation. Moreover, the transmission effect of enterprises' low-carbon behavior is not apparent. Heterogeneity analysis shows that compared with Midwestern China, an ETS could reduce emissions by adjusting the energy structure in Eastern China. Also, compared with state-owned or large enterprises, an ETS helps improve the economic performance of small or non-state-owned enterprises through technological innovation. This paper provides empirical evidence from macro- and microperspective for evaluating an ETS, conducive to improving the top-level framework of China's future carbon market operation.