Has the Emissions Trading Scheme (ETS) promoted the end-of-pipe emissions reduction? Evidence from China's residents

The ETS has shown to be effective in reducing carbon emissions on the production side, but whether it has effectively facilitated the end-of-pipe emissions reduction remains to be answered. This paper contributes to the thin empirical studies on this issue from the perspective of China's residents. Specifically, we first extend the input-output (IO) tables by using the bi-proportional scaling method to form sequential IO tables (from 2002 to 2017). On this basis, employing the input-output analysis (IOA), we further calculate the residential carbon emissions, including direct and indirect residential carbon emissions. Then, we estimate the impacts of the ETS on the end-of-pipe emissions reduction with a double differences strategy. Empirical results provide evidence that the ETS does not significantly reduce the total residential carbon emissions, indicating that the terminal blockage effect exists in the emission reduction system. This is because although the ETS plays an important role in reducing carbon emissions from non-rigid consumption such as Culture, education and recreation services (CER) and Transport and Telecommunication services (TT), it has no obvious reduction effects on both rigid consumption emissions and direct emissions. More surprisingly, the consumer price index (CPI) in ETS pilot provinces did not increase, but decreased, which is contrary to the cost pass-through theory, indicating that China's intention to reduce emissions through the price transmission mechanism has not been achieved at present. Lastly, several policy implications are suggested according to the results.