This study provides empirical evidence and policy inspiration for China to implement the energy use rights trading policy. Using 262 cities in China from 2005 to 2019 as samples, we employed the double difference method and mediation analysis to empirically measure the impact of energy use rights trading policy on environmental performance. First, energy use rights trading policy can improve urban environmental performance. This conclusion is valid as per the endogeneity test, parallel trend test, PSM-DID test, placebo test, and triple difference method. Second, heterogeneity analysis shows that the effect of the energy use rights trading policy on urban environmental performance will be different by the size of population. Energy use rights trading policy has the greatest effect on the environmental performance of resource-based cities. Meanwhile, compared to non-industrial base, the effect of the energy use rights trading policy on environmental performance is more pronounced in cities with older industrial base. Third, the mechanism test using the mediation effect model proved that the impact of energy use rights trading policy on environmental performance is achieved by improving the level of marketization and technological innovation.
Keywords: double difference method; energy policy; environmental performance; market development level; mediating effect; technological innovation.