Does the pilot trading of carbon emission rights cause domestic or international pollution transfer?

The implementation of a carbon emission trading pilot policy has a positive impact on sustainable development but may lead to pollution transfer by enterprises, thereby affecting sustainability. In this study, based on the panel data of Chinese-listed companies from 2007 to 2017, the carbon emission trading pilot policy was treated as a quasi-natural experiment and the Difference-in-Differences model was used to analyze whether these companies engaged in pollution transfer under the policy shock. The results indicated: first, carbon emission trading pilots lead to pollution transfer within mainland China but not across international borders; second, the power and aviation industries exhibited significant pollution transfer phenomena, and the policy also encouraged pollution transfer by non-green transformation enterprises; third, regional heterogeneity further showed that the central region showed no signs of pollution transfer and instead experienced pollution inflow, while the eastern region exhibited significant pollution transfer. Therefore, in designing policy, we should fully consider the phenomenon of enterprise pollution transfer, promote technological innovation, and ensure that carbon emission trading policies achieve emission reduction goals and promote sustainable development.