When regulation meets the market: synergistic effects of municipal solid waste management and emissions trading scheme on carbon emission efficiency in urban China

When implemented jointly, different policy instruments do not necessarily produce additive effects; they may reinforce one another, but they may also involve trade-offs. Existing studies have largely evaluated the regulatory Municipal Solid Waste Management policy (MSW) and the market-based Emissions Trading Scheme (ETS) separately, leaving limited evidence on whether these two types of policy instruments are complementary or conflicting when implemented within the same city. Focusing on China’s dual policy pilot (DPP), where MSW and ETS are jointly implemented, this study employs a difference-in-differences design with panel data for 283 cities from 2000 to 2022 to identify the effect of joint policy implementation on carbon emission efficiency (CEE) and to examine its underlying mechanisms and conditional heterogeneity. The results show that the combined policy improves CEE and generates a synergistic effect. This effect is partly realized through increased fiscal expenditure on science and education and is more pronounced in cities with a higher share of secondary industry. These findings move beyond single-policy evaluation and provide useful implications for developing countries in Asia and Africa in designing coordinated environmental policy mixes.