Authors: He Tang, Helen X. H. Bao
Year: 2026
Status: Revised and Resubmitted
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Research line: Spatial analysis of environment and climate
Abstract
Here we examine whether the Emissions Trading System mitigates emission instability driven by political shocks, using a daily panel of 270 Chinese cities from 2013 to 2019. We document that local leadership turnovers increase air pollution while unannounced central inspections reduce it, and we show that the introduction of a carbon market substantially dampens both effects. This stabilizing dividend operates through two channels: reinforcing government regulatory consistency and disciplining firm-level opportunistic behavior. A higher carbon price further strengthens both emission control and the cushioning of political shocks.