Carbon Trading, Energy Transition and Sustainable Energy Economic Development

Dear Colleagues,

This Special Issue will provide scholars, policymakers, and practitioners with evidence-based insights into designing more effective and equitable climate and energy policies, ultimately accelerating progress toward a sustainable energy economy.

1. Focus

This Special Issue focuses on the dynamic interrelationships between carbon market mechanisms, energy transition pathways, and sustainable economic development. It examines how carbon pricing instruments—particularly emissions trading systems (ETS)—accelerate the transition to low-carbon energy systems while maintaining economic vitality. This Special Issue emphasizes empirical evidence and policy analysis, with particular attention to China's national carbon market (the world's largest) and its global implications.

2. Scope

The scope of this Special Issue encompasses both theoretical and applied research across three interconnected domains:

- Carbon Market Design and Efficacy: Studies on national and international carbon pricing mechanisms and their architecture and performance. This includes allocation methods (free vs. auctioned permits), sectoral coverage expansion, market stability mechanisms, and price formation dynamics.

- Energy Transition Pathways: Analysis of how carbon signals drive changes in energy production and consumption. This includes fuel switching, renewable integration, energy efficiency improvements, and the phase-down of fossil fuels, with the power sector as a critical locus of change. Research exploring how carbon markets make clean energy investments more economically attractive.

- Socioeconomic Dimensions: Investigation of the distributional effects, competitiveness impacts, and equitable transition aspects of carbon pricing, especially its interaction with energy market reforms and industrial policies. This includes managing trade-offs between economic efficiency and social equity.

3. Purpose

The Special Issue aims to bridge significant knowledge gaps on how market-based carbon policies can effectively propel sustainable energy transitions. Its purposes are to

- Generate evidence-based insights into the real-world impacts of carbon pricing, moving beyond theoretical modeling to the empirical analysis of existing systems.

- Inform policy design by identifying the regulatory frameworks, market structures, and policy mixes that maximize carbon market effectiveness while minimizing economic disruption.

- Address interdisciplinary questions that span economics, energy policy, and environmental science, fostering integrated solutions to the climate–energy–economy trilemma.

- Support global climate goals by translating research into practical strategies for achieving the Paris Agreement targets, emphasizing the role of carbon markets in cost-effective decarbonization.

This Special Issue meaningfully supplements the existing literature in several crucial dimensions:

• Empirical Focus on Maturing Carbon Markets

While a substantial body of literature has projected the potential effects of carbon pricing, this Special Issue focuses on empirical evidence from implemented systems, particularly China's national ETS. It moves beyond hypothetical scenarios to analyzing actual market performance, policy interactions, and emission outcomes. For instance, contributions examine how China's ETS has contributed to a 10.8% reduction in the power sector's carbon intensity since 2018, providing valuable ex-post assessments.

• Integrated Analysis of Policy Interactions

This Special Issue addresses a critical gap by systematically examining how carbon markets interact with complementary policies, especially electricity market liberalization. Research demonstrates that combining ETS with power market reforms can reduce abatement costs by approximately 12% while increasing GDP by 0.06% under equivalent emissions constraints. This co-benefits perspective is largely absent from siloed literature that treats carbon pricing in isolation.

• Interdisciplinary Methodological Approaches

Contributions employ diverse methodological frameworks—including quantile autoregressive distributed lag (QARDL) models and computable general equilibrium (CGE) models—to capture nonlinear and heterogeneous effects across sectors, time horizons, and economic conditions. This reveals, for example, that carbon and crude oil prices have stronger long-term than short-term impacts on energy transition, with effects varying significantly across market conditions.

Prof. Dr. Jinliang Zhang
Dr. Xinyue Dong
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 250 words) can be sent to the Editorial Office for assessment.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Sustainability is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

• energy transition
• carbon market design
• energy production and consumption
• carbon policies