The heterogeneous role of carbon emissions trading scheme in industrial carbon intensity: evidence from 284 Chinese cities

As a key market-driven mechanism for climate governance, emissions trading systems (ETS) are increasingly deployed to advance carbon peak and carbon neutrality. While previous studies have confirmed ETS’s role in reducing CO₂ emissions, its specific impact on industrial carbon intensity (ICI) of prefecture-level cities still hasn’t gotten enough notice. Using panel data from 284 Chinese cities (2007–2020) and a difference-in-differences (DID) model, this study assessed how ETS affected ICI and examined its institutional dividends for industrial development. The results revealed that ETS implementation significantly reduced ICI by 9% on average in pilot cities, with more pronounced reductions in the Midwest regions (-14%), resource-based cities (-76%), and heavy industrial cities (-27%). Conversely, it exhibited negligible effects on high-end service-oriented cities. Enhanced financial development partially mediated ICI increases, while migration of carbon-intensive enterprises showed no significant effect. Our findings reveal critical heterogeneity in ETS effectiveness across regions and city types for reducing ICI. Policy planners in developing countries should thus prioritize reducing energy intensity in carbon-intensive sectors and improving energy-use efficiency, tailored to cities’ socioeconomic attributes.