Effects of Carbon Emission Trading Policy on the Low-Carbon Transition of Industrial Energy: Evidence from China

In the context of global climate change and promoting green development, the industrial sector’s significant contribution to carbon emissions necessitates effective policies for low-carbon energy transition. Understanding the role of carbon emission trading policy (CETP) in facilitating the low-carbon transformation of industrial energy (LTIE) is important. However, the effectiveness of CETP in driving LTIE and the mechanisms through which it operates remain underexplored. This study systematically examines the effects of CETP on LTIE and its underlying mechanisms across 30 Chinese provinces from 2005 to 2021. The findings show that first, CETP substantially facilitates LTIE, and the results remain consistent after undergoing parallel-trend, placebo, and other robustness tests. Second, CETP primarily facilitates this transformation through multiple channels, namely, energy-saving and carbon-reduction innovations, industrial structure transformation, and government support. Third, heterogeneous results indicate that the policy effect is highly pronounced in inland regions and areas with low levels of industrial governance investment. This study demonstrates that CETP is an effective tool for advancing China’s industrial energy transformation toward low-carbon models, whose effectiveness is influenced by regional characteristics and governance levels. These findings provide a scientific basis for formulating differentiated environmental strategies.