The impact of emission trading system on clean energy consumption of enterprises: Evidence from a quasi-natural experiment in China.

Research on the ability of environmental regulations to achieve an innovation-offset effect by increasing clean energy use is required. This study aims to verify this by analysing the impact of market-incentive environmental regulation on enterprises' clean energy consumption. Using China's sulfur dioxide (SO) emission trading system (ETS) for 2007 as a quasi-natural experiment, the difference-in-differences model and data obtained from the Chinese Industrial Enterprises Database and Chinese Industrial Enterprises Pollution Database were used to determine whether an ETS affects enterprises' clean energy consumption. The results show that an ETS encourages enterprises to utilise clean energy and has a significantly positive impact on enterprises' clean energy consumption. Moreover, this study finds that an ETS promotes clean energy consumption by improving the production of enterprises. This study verifies the rationality of China's SO ETS design.