Abstract
Carbon pricing mechanisms represent central instruments in global decarbonization governance, yet their architecture and sectoral efficacy diverge markedly across jurisdictions. This study provides a rigorous comparative analysis of the European Union Emissions Trading System (EU ETS) and the China National Carbon Emission Trading Scheme (China ETS), evaluating their influence on industrial decarbonization pathways across energy-intensive manufacturing and power generation sectors between 2018 and 2023. Employing dynamic panel econometric estimation coupled with sectoral Marginal Abatement Cost Curve (MACC) evaluations, we examine how differences between the EU’s absolute mass-based cap-and-trade architecture and China’s intensity-based benchmark model govern technological innovation, fuel switching, and capital allocation. Our findings reveal that the robust price signals of the EU ETS (averaging €65–€88/tCO2 in Phase IV) catalyzed significant structural transitions, accelerating industrial electrification and commercial deployment of green hydrogen in primary steelmaking, though raising concerns over carbon leakage addressed by the Carbon Border Adjustment Mechanism (CBAM). Conversely, China’s intensity-based framework (trading at ¥55–¥85/tCO2) generated measurable efficiency improvements in thermal power generation while maintaining industrial output flexibility, yet exhibited limited incentive for deep abatement technologies in heavy industry. The analysis underscores that while absolute caps deliver superior environmental certainty and foster breakthrough technological pathways, rate-based mechanisms offer macroeconomic resilience during industrial expansion. We outline policy harmonizations necessary to bridge regional carbon market dynamics and enhance global industrial mitigation coherence.
