How Does carbon emissions trading policy affect green poverty reduction? Evidence from China’s pilot quasi-natural experiment

Green poverty reduction, which integrates green development and poverty reduction, has become a vital foundation for long-term regional development. Given China’s role as the world’s largest emitter and its ongoing transition, the carbon emissions trading policy has a significant impact on regional environmental improvement and economic development. However, its effects on green poverty reduction in China remain underexplored. This study calculates the green poverty reduction index and investigates the influence of the carbon emissions trading policy on green poverty reduction by applying the difference-in-differences model using provincial data of China from 2006 to 2022. The results demonstrate that: (1) the carbon emissions trading policy significantly promotes regional green poverty reduction; (2) the heterogeneity analysis shows that this positive effect varies across allocation of carbon emission quotas modes, geographical locations and the degree of carbon trading market effectiveness; (3) the mechanism analysis identifies that improving green innovation efficiency and reducing fiscal decentralization are two critical channels through which carbon emissions trading policy to affects green poverty reduction. These findings provide empirical evidence for optimizing carbon market mechanisms to promote green poverty reduction more effectively, and offering practical insights for improving policy design and regional sustainable development strategies.