Abstract—The Emission Trading System (ETS) has become a widely adopted market-based instrument for controlling carbon emissions. This study applies a difference-in-differences (DID) approach, supplemented by a β-convergence analysis, to evaluate the impact of ETS policies in California and states in the Regional Greenhouse Gas Initiative (RGGI) on CO₂ emissions. The results reveal clear heterogeneity: While states such as Maine, Massachusetts, Maryland, New Hampshire, and New Jersey achieved significant reductions, the effects in California, Connecticut, and Delaware are limited, and New York, Rhode Island, and Vermont show no evidence of mitigation. These variations reflect differences in energy and industrial structures, allowance price dynamics, and policy implementation. The findings highlight that effective ETS design requires sufficient price stringency, broad sectoral coverage, and strong enforcement mechanisms, offering lessons not only for U.S. states but also for emerging carbon markets.

Keywords—Emissions Trading System, carbon pricing, CO₂ emissions, California, RGGI, Difference-in-Differences

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Cite: Zhuohong Shen, "Impact of California and RGGI's ETS Policies on Carbon Emissions Reduction ," International Journal of Environmental Science and Development vol. 17, no. 3, pp. 235-242, 2026.

Copyright © 2026 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).