China’s Carbon Emissions Trading Scheme Improved the Land Surface Ecological Quality

The previous studies have suggested that the cap-and-trade carbon emissions trading scheme (ETS) was effective in reducing greenhouse gas emissions and atmospheric pollution. Are there other environmental benefits of this policy? This research question remains unanswered in the literature. Our study reports that China’s carbon ETS significantly improved the land surface ecological quality (LSEQ). The study analyzes the data of 328 Chinese cities during 2005–2020. A difference-in-differences (DID) regression model is used for quantitative policy evaluation. The land surface ecological quality is measured by a synthetic indicator of the remote sensing ecological index (RSEI). There are three main findings. (1) On average, the carbon ETS improved the land surface ecological quality index by 0.0113, which contributed 51% of the ecological quality improvement in ETS-implementing regions in the post-policy period. The positive effect of the policy increased over time. (2) The implementation of the carbon ETS reduced pollution emissions, promoted green innovation, and expanded the share of land with natural vegetation coverage. These phenomena provide explanations for why the policy improved the land surface ecological quality. (3) The policy effect exhibited some heterogeneities contingent on local climatic conditions. The effect was stronger in regions with more precipitation, shorter sunlight duration, and higher temperature.