Deciphering the Mechanism: How Chinas Emissions Trading Scheme Enhances Urban Carbon Performance via Green Technology and Digital Transformation

Abstract

Chinas carbon emission trading scheme (ETS) serves as a pivotal environmental regulation instrument driving green, low-carbon transformation. This policy enhances urban carbon emission performance through dual pathways: cost-driven pressure and financing
mechanism enabling. Firstly, by establishing aggregate controls and market-based trading mechanisms, the ETS imposes cost constraints
that compel enterprises to optimize production processes, upgrade low-carbon equipment, and accelerate green technology innovation.
Concurrently, the financial asset attributes of carbon allowances provide enterprises with innovative funding channels, stimulating sustained emission reductions. The policy further catalyzes urban digital transformation at the municipal level. Leveraging technologies such
as Internet of Things and block chain, cities achieve: precise emission reduction targeting; amplified low-carbon transition benefits through
optimized resource allocation; and enhanced policy implementation via digital governance frameworks. This research provides theoretical foundations for refining carbon market mechanisms and in synergy advancing the integration of green technologies with digitization,
thereby contributing to Chinas dual carbon goals.