Is market mechanism a reasonable path for agricultural emission reduction? Evidence from China carbon emission trading scheme

Abstract

We examine the mechanism of the carbon emissions trading pilot to lower the ${\mathrm{CO}}_2$ emissions of agriculture using empirical data from China, from the viewpoints of market mechanisms and spatial spillover effects. We use the DID to assess the pilot program's effectiveness in curtailing GHG emissions. We find a significant advantage in limiting ${\mathrm{CO}}_2$ emissions, using carbon emission data from 30 Chinese provinces from 2011 to 2022. The results are as follows: (1) An inhibitory effect is detected, showing that introducing a carbon trading program could reduce agricultural carbon emissions by 0.167 %; this finding passed the robustness test. (2) The results of the intermediate impact model demonstrate that carbon emissions trading may play a role in influencing agricultural carbon emissions via technological innovation. (3) Meanwhile, regional resource allocation efficiency adjusts the carbon reduction effect. (4) Pilot regions demonstrate joint emission reduction effects with neighboring regions, which show a positive spillover effect. Therefore, scientific and agricultural technology innovation should be fostered to realize technological research, gradually form a market governance mechanism for agricultural soils, and comprehensively enhance the carbon sink capacity of agricultural soils. This will ensure the sustainable and steady development of food systems.