RESEARCH ON THE EFFECT OF CHINA’S CARBON EMISSION RIGHTS TRADING PILOT POLICY ON RESIDENTS’ INCOME INEQUALITY

Abstract

In recent years, environmental problems and income inequality have become two major problems hindering China’s economic development, and the carbon emission trading pilot is expected to become a good solution to promote the development in the coordinated way of the environment and economy, as well as an critical driving force to promote common prosperity. This paper’s data is from the China Family Panel Studies (CFPS) between 2010 and 2018, utilizing the deference-in-differences（DID）model to examine the effects of China's experimental program for trading carbon emission rights on residents ’income inequality, while also carrying out heterogeneity analysis, mechanism analysis and robustness test. The empirical results reveal that the policy in China can obviously reduce the degree of income inequality of the residents by 2.18%. At the same time, the impact of the policy on household income inequality is heterogeneous between urban and rural areas, different income groups, regions with different CO2 emission intensity and between different regions. The pilot policy can affect the income inequality of the population through five paths: carbon emission, industrial structure, technological innovation, employment structure and environmental pollution level. On the basis of the findings above, the paper offers policy proposal for the gradual development of a future national united carbon market.