Study of Environmental Regulation on Industrial Energy Conservation and Emission Reduction

China has become the top emitter of carbon dioxide (CO2), since 2006 and continued to maintain a rapid economic expansion alongside rising energy conservation and emission reduction. China faces a deteriorating environment regulation and increased domestic and international pressure to reduce emissions. Methods: The Emission Trading Scheme (ETS) must be able to decrease emissions and promote energy conservation in developing countries in order for these countries to experience sustainable economic and environmental growth. The impact of China's carbon dioxide (CO2) ETS pilot law, which took effect in 2011, on energy efficiency and carbon reduction was examined in this article. To examine how the CO2 ETS affects energy efficiency and emission reduction, we employ the difference-in-differences (DID) model based on the panel data of the two-digit sector at the province level. Results: According to the findings, regulated industries in pilot areas use 22.8% less energy and emit 15.5% less CO2 than those in non-pilot areas. These reductions were the outcome of the CO2 ETS. According to additional analysis, boosting energy technical efficiency and modifying the industrial structure are the major factors driving the consequences of policy. Concluson: The CO2 ETS also functions better, according to our research, in regions with strong environmental regulation and marketization. According to our research, developing countries' attempts to conserve energy and reduce emissions have benefited from the CO2 ETS.