The impact of carbon trading on economic output and carbon emissions reduction in China’s industrial sectors

•The potential gains and carbon emissions reduction of carbon trading are detected.•Three scenarios of carbon trading schemes are considered and compared.•Sectoral trading may create potential gains of 268.02 trillion yuan in 2006–2015.•Carbon emissions may decrease by 17.17 billion tonnes under sectoral trading scheme.•Sectoral trading decreases industrial carbon intensity by 19.80% during 2015–2020. Carbon trading is an important market tool in driving growth and carbon dioxide emissions reduction in industrial sectors in China. This paper attempts to assess the impacts of carbon trading on economic output and carbon dioxide emissions reduction in China’s industrial sectors by employing the data envelopment analysis (DEA) based optimization models, based on three carbon trading schemes, i.e., no trading (NT), sectoral trading (ST), and sectoral-and-temporal trading (STT) during 2006–2015. Comparing with the no-trading scheme, the results indicate that, (1) the ST and STT schemes may create potential gains of 268.02 and 612.26 trillion yuan in the whole industrial during the study period, i.e., the industrial value-added would be increased by 55.17% and 73.76%, respectively; (2) the ST and STT schemes could reduce 17.17 and 19.22 billion tonnes of carbon dioxide emissions, respectively, accounting for 58.30% and 65.25% of emissions reduction in the whole industry; and (3) if carbon trading were adopted in China since 2006, its carbon intensity of industrial sectors would decrease by 34.89%, 47.44% and 19.80% under the ST scheme, and 58.93%, 31.50% and 10.25% under the STT scheme during the11th, 12th and 13th Five-Year Plan periods, respectively.