The Impact of Carbon Emissions (CO2) Trading Policies on Energy Consumption: The Mediating Role of Digital Economy Transformation and Energy Consumption in China

Abstract

The growing threat of climate change necessitates urgent action to mitigate carbon emissions, particularly in major emitters like China, which has implemented significant carbon reduction policies, including a carbon emission trading policy. Simultaneously, the fast-paced expansion of the digital economy has prompted businesses to undergo digital transformation, serving as an important catalyst for economic growth, although its influence on energy consumption is still unclear. This study investigates whether the carbon emission trading policy influences energy consumption by facilitating this digital transformation. Analyzing data from 283 Chinese cities between 2006 and 2019, the research employs a multi-time-point difference-in-difference model to assess the policy's direct effects on energy consumption, with digital transformation measured through annual report analysis. The results demonstrate that the CO2 trading policy substantially increases urban energy consumption (UEC), with digital transformation playing a partial mediating role in this relationship. The study's novel use of a multi-time-point DID model enables a nuanced analysis of the heterogeneous impacts of the staggered carbon trading policy rollout on energy consumption across Chinese cities, providing robust insights to inform effective climate policy design. Furthermore, the regulatory effect analysis indicates that the higher the degree of digital transformation, the more significant the promotion effect of the carbon emission trading policy on energy consumption, suggesting that digital transformation amplifies the policy's impact. Notable regional disparities in science and technology, internet availability, and government involvement result in different effects of carbon trading policies on energy consumption. The study shows the important role of digital economy transformation in carbon emission policies and proposes that regional characteristics should be fully considered when formulating policies to achieve more effective carbon emission reduction and energy structure optimization.