Political incentives in market-based environmental regulation: Evidence from China's carbon emissions trading scheme.

This paper used a multi-period DID model with panel data from 283 Chinese cities between 2006 and 2019 to investigate the emission reduction effects and mechanisms of China's carbon trading scheme. The research revealed that China's Carbon Emissions Trading Scheme not only stimulated businesses to reduce emissions as a market-based environmental regulation policy but also influenced local governments' governance objectives. As a result, the Hawthorne effect inevitably manifested during the experimental period of China's Carbon Emissions Trading Scheme.